The 30-70% payment ceiling is not really removed
The draft revised Real Estate Business Law is introducing notable changes to payment when buying real estate formed in the future.
According to Article 25 of the Real Estate Business Law 2023 currently in force, payments are made in multiple installments. The first time, the investor is allowed to collect no more than 30% of the contract value, including the deposit.
The following times must be consistent with the construction progress, but the total amount of money collected by the investor when the real estate has not been handed over does not exceed 70% of the contract value. In case the seller is an economic organization with foreign investment capital subject to legal regulations, the total amount collected does not exceed 50%.
If the buyer has not been granted a certificate of land use rights, ownership of assets attached to land, usually called a pink book, the investor is not allowed to collect more than 95% of the contract value. The buyer pays the remaining 5% after being granted the book.
Meanwhile, Article 20 of the draft revised Real Estate Business Law only stipulates that payments are made many times according to the agreement of the parties, not directly showing the 30% and 70% limits as in current law.
This change may lead to the understanding that homebuyer protection limits have been abolished, thereby allowing investors to collect more money from the early stages of the project.
However, according to Lawyer Nguyen Van Dinh, the above understanding does not fully reflect the draft law dossier.
The draft amended law only changes legislative techniques, not changing the nature of regulations," Lawyer Nguyen Van Dinh commented.
According to the lawyer's analysis, Article 20 of the draft law stipulates assigning the Government to provide detailed guidance. In the draft decree submitted with the draft law dossier, the current payment limits are still inherited.
The first payment is still proposed to not exceed 30% of the contract value, including the deposit. The subsequent payments must be consistent with the construction progress, but the total amount paid before real estate handover does not exceed 70% of the contract value.
For cases where the seller is a foreign-invested economic organization subject to regulations, the total amount collected before handover does not exceed 50% of the contract value.
Thus, according to the current draft dossier, the 30% and 70% marks are not completely removed but are transferred from the law to the decree detailing regulations.
Lawyer Nguyen Van Dinh called this the "legislative authorization" technique, according to which the law only stipulates framework issues, which are principled; contents that need flexible adjustment are assigned to the Government to regulate.
This construction method is consistent with the general orientation of the draft revised Real Estate Business Law. The Ministry of Construction said that the draft is designed in the direction of reducing the number of articles, promoting decentralization and only keeping in the law principles under the authority of the National Assembly.
However, at the preliminary appraisal session, the National Assembly's agency still requested an overall assessment of the impact of the payment ratio limit, the freezing account mechanism and bank guarantees on the protection of buyers of real estate formed in the future.
The appraisal agency also noted that the contents directly affecting property rights, contract freedom and protection of vulnerable parties need to be fully legalized, instead of just being stipulated in sub-law documents.
Buyers no longer directly hold the last 5%
A more notable change in the draft lies in the way 5% of the remaining contract value is handled when the buyer has not been granted a pink book.
According to the current mechanism, investors are only allowed to collect a maximum of 95% of the contract value. The last 5% is still kept by the buyer and will only be paid after the competent authority issues the pink book.
The draft law continues not to allow investors to directly receive more than 95% when buyers do not have a book. However, buyers may have to transfer the remaining 5% to a freeze-off account opened at a credit institution or use other forms of security as agreed.
This amount of money has not been handed over to the investor and the investor is also not entitled to use it. The account is only cleared and transferred to the investor after the buyer is issued a pink book.
According to Lawyer Nguyen Van Dinh, the new mechanism aims to handle the situation that some customers have received and used stable houses but have not coordinated to carry out procedures for issuing land use right certificates because they do not have the need to buy, sell, donate or mortgage real estate.
Not being issued a certificate means that the buyer is still allowed to retain 5% of the contract value, although the reason for the slow completion of procedures may not completely belong to the investor.
This regulation will ensure harmony of interests between parties, both binding the responsibility of investors, having to submit dossiers and complete procedures soon for state agencies to issue pink books to buyers, and binding the responsibility of buyers, avoiding delays due to no need to issue pink books," Lawyer Nguyen Van Dinh analyzed.
According to the lawyer, when the money is transferred to a frozen account, the rights of the buyer are still protected because the investor has not been able to use this money. Meanwhile, the investor has a basis to receive sufficient contract value after completing the necessary obligations to issue the certificate.
In principle, after the investor has handed over the house and completed all procedures for the state agency to issue a pink book to the buyer, the investor has completed 100% of the obligation, so it is necessary to automatically pay 100% of the contract value without depending on the buyer's will," Mr. Dinh stated his opinion.
However, for the freezing mechanism to be applied, the guiding regulations will need to clarify who is the account holder, which party bears bank fees, how to handle arising interest, dossiers used as a basis for clearance and handling plans if buyers and investors have disputes.
The revised draft Law on Real Estate Business is still in the process of appraisal and completion. Therefore, the payment limits and the handling plan for the last 5% may continue to be adjusted before being submitted to the National Assembly for consideration.
