Legal loophole causes land auction deposits to be abandoned again in Hanoi

Linh Trang |

Hanoi - The situation of abandoning deposits after land auctions continues to recur, causing instability in the real estate market.

The situation of deposit cancellation recurred

Regarding the auction of 27 plots of land in Ha Dong district at the end of October 2024, recently, a representative of the Ha Dong District Investment and Construction Project Management Board (under the People's Committee of Ha Dong district, Hanoi) said that only 5 people had paid the full land use fee, the remaining 22 cases had abandoned their deposits.

Accordingly, this auction recorded the highest winning price of more than 262 million VND/m2, the lowest winning lot was priced at nearly 132.8 million VND/m2. This level is much higher than the land price level in inner-city districts of Hanoi such as Ba Dinh, Hai Ba Trung...

22/27 nguoi bo coc vu dau gia dat Ha Dong len 262 trieu dong/m2. Anh: Linh Trang
22/27 people abandoned their deposits in the Ha Dong land auction to 262 million VND/m2. Photo: Linh Trang

Right from the end of 2024 and the first days of 2025, right after incidents related to "inflating" prices and then abandoning deposits in Thanh Oai, Hoai Duc, Soc Son districts... The Hanoi People's Committee has taken drastic action, taking many strong measures to tighten discipline. The clearest orientation for departments, districts and towns related to auctions is Decision No. 61/2024/QD-UBND dated September 27, 2024 of the Hanoi People's Committee on developing a plan for auctioning land use rights to allocate land with land use fees or land lease... However, up to now, the situation of deposit cancellation continues to cause instability in the real estate market.

Speaking with Lao Dong, lawyer Nguyen Van Dinh - Real estate legal expert commented that according to current regulations, Article 159 of the 2024 Land Law stipulates that the starting price for auctioning land use rights for plots of land with invested in technical infrastructure will be according to the land price list. Because the current land price list is relatively low compared to the market price, the starting price for organizing the auction is very low, creating great attraction for people, many people feel the opportunity to "gear big" if they win the auction.

In addition, the current deposit to participate in the auction is also very low, accounting for 20% of the starting price, leading to a large number of people registering. At the auction, many investors are willing to pay high prices and accept losing their deposit (due to the value of the deposit being much lower than the opportunity to "change the world" if they win the auction).

The fact that many people win the auction at a very high price and then abandon their deposit is not necessarily a sign of price inflation, but it can be a sign of initial recognition of a crime or another illegal act. If the land auction is for a plot to inflate prices, causing market disruption, the investigation agency will consider that specific act, not the act of abandoning the deposit. That is, abandoning the deposit can be a sign of a certain violation of the law, but if the deposit is only abandoned because the buyer no longer wants to buy, there is no other plot, it is a normal act, not a violation of the law.

Proposing solutions to prevent deposit cancellation

Real estate legal expert Nguyen Van Dinh commented that the most effective sanctions that can be applied is that the State seizes the deposit without returning it, which is satisfactory because the nature of the auction is an economic relationship in which all parties have rights and obligations to each other. The act of people winning the auction but not paying the money is a violation of their obligations and suffered the corresponding legal consequences, which are the loss of the deposit. In addition, Hanoi also applied an additional solution of publicizing the identity of the person who bids higher than the market to win the auction but does not pay (a form of "name-namecation").

Currently, there are opinions proposing to ban auction winners and then abandoning their deposits from participating in the auction for 5 years. However, the Law on Property Auction only stipulates this sanctions for cases where enterprises participate in auctions to implement projects, and does not apply to individuals auctioning land, so this proposal cannot be implemented, except in cases of amending the Law on Property Auction.

"In the long term, I think that to prevent auctions and abandonments, it is necessary to limit auctions to allocate land to individuals to build their own houses along with measures to tax real estate," said Mr. Nguyen Van Dinh.

Hanoi's policy of limiting the organization of auctions to allocate land to individuals to build their own houses; prioritizing auctions with organizations to implement investment projects is reasonable. Auctioning under new projects helps invest in synchronous infrastructure and overcome the phenomenon of speculation and land holdings.

In the long term, a more fundamental solution is needed to implement real estate tax to combat speculation. This solution has been successfully applied in many countries after experiencing land fevers and is the most fundamental solution to curb house and land prices, help regulate cash flow into production and business and eliminate the mentality of "nothing is richer than land".

Linh Trang
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