(1) Clearly define the rights and obligations of the parties in the real estate sale and purchase deposit agreement
Pursuant to Clause 1, Article 328 of the 2015 Civil Code, a deposit is the act of one party (the depositor) handing over to the other party (the depositor) an amount of money or precious metals, gemstones or other valuable objects (collectively referred to as the deposit property) for a period of time to ensure the signing or performance of the contract.
In addition, Clause 2, Article 328 of the 2015 Civil Code specifically stipulates as follows:
In case the contract is signed and implemented, the deposited assets shall be returned to the depositors or deducted to fulfill the payment obligation; if the depositors refuse to sign and execute the contract, the deposited assets shall belong to the deposit recipient; if the deposit recipient refuses to sign and execute the contract, he/she shall return the depositors the deposit assets and an amount equivalent to the value of the deposited assets, unless otherwise agreed.
Accordingly, the obligations of the parties when signing a real estate sale and purchase deposit contract are as follows:
Case 1: Contract signed and implemented
In case the contract is signed and implemented, the deposited assets shall be returned to the depositor or deducted to fulfill the payment obligation. Usually this amount will be counted as the purchase price.
Case 2: Contract not signed or implemented
- If the depositor refuses to sign or perform the contract, the deposited property belongs to the deposit recipient.
- If the deposit recipient refuses to sign or perform the contract, he/she must pay the depositor the deposited property and an amount equivalent to the value of the deposited property (return the deposit and be "imposed" an amount equivalent to the deposit).
Note: In case the two parties can reach another agreement (if the parties have another agreement that is not contrary to the law or social morality, then follow that agreement).
(2) Deposit amount for real estate sale
The 2015 Civil Code does not specifically stipulate the deposit amount, so the parties have the right to negotiate. However, to limit risks, the parties should agree on a deposit level not exceeding 30% of the value of the house or land transfer or sale contract.
The assessment of the risks and obligations of the parties when the contract is not signed or not implemented depends on which party violates the commitment. Specifically: if the deposit recipient violates, they must return the deposit and compensate an equivalent amount; on the contrary, if the deposit recipient violates, the deposit amount will belong to the deposit recipient.
(3) Must notarize or certify real estate sale and purchase contracts
According to the 2015 Civil Code, the 2024 Land Law and the 2023 Housing Law, the law does not require deposit contracts to be notarized or certified; this regulation only applies to contracts for transferring or donating land use rights and assets attached to land.
However, to ensure legality and avoid disputes, the parties should notarize or certify the deposit contract with the competent authority.
(4) Can use "prepaid" instead of "deposit" in real estate sale and purchase contracts
Pursuant to Clause 2, Article 328 of the 2015 Civil Code, if one of the parties refuses to sign or does not perform the contract, the violator will be subject to a deposit, unless otherwise agreed.
However, in case the parties agree to pay in advance instead of "deposit", the legal obligations of the parties when violating will not be the same as the deposit. Department payment is understood as a part of the payment for contract performance. When the sale or transfer contract is not implemented, this amount will be handled as follows:
- If the buyer refuses to sign or execute the contract, the advance payment will be refunded and not subject to penalty, unless otherwise agreed.
- If the transferor refuses to sign or execute the contract, they only have to refund the deposit and are not subject to a deposit, unless otherwise agreed.
Thus, when the parties use the term "pre-payment" instead of "deposit", if one party does not continue to sign or execute the contract, it is only necessary to return the received amount, the deposit will not be applied, unless otherwise agreed in accordance with the provisions of law and social ethics.
