Are investors allowed to receive deposits from customers before signing the house purchase and sale contract?

Recently, VSE Lawyers has witnessed a long debate on whether investors are allowed to receive deposits from customers before signing the house purchase and sale contract (which is considered as off-plan immovable property legally).

The side supporting the “allowing to receive” view bases on the provisions of the Civil Code and argues that enterprises are allowed to do anything that is not prohibited by law. Specifically, clause 1 Article 328 of the Civil Code stipulates that Deposit is an act whereby one party transfers to another party a sum of money or precious metals, gemstones or other valuable things for a period of time as security for the entering into or performance of a contract.

However, opponents argue that the housing law limits the types of contracts that investors can sign with customers, in which there is no provision on deposit contracts, so signing a deposit contract is not appropriate. In addition, clause 5, Article 8 of the Law on Real Estate Trading 2014 prohibits the illegal mobilization of funds; illegal use of mobilized capital of organizations or individuals and option fee of off-the-plan real estate buyers or lessees for improper purposes.

Obviously, if based on both of these regulations, the boundary on legitimacy in real estate business is quite thin. However, from the perspective of the Ministry of Construction based on the Official Letter No. 153/BXD-QLN dated July 5, 2019 sent to Sunbay Ninh Thuan Joint Stock Company:

(i) The deposit of an off-plan immovable real estate projects is an ordinary civil transaction and the law does not require organizations and individuals to consult before depositing;

(ii) Investors shall commit not to use the deposited property for improper purposes and to raise capital.

Even though the Official Letter No. 153/BXD-QLN is only the guiding document for a single investor, it is still considered as a legal reference reply expressing the views from the Ministry of Construction in determining the legality of the deposit for off-plan real estate projects.

Below is the original version of this article and the Official Letter No. 153:

https://drive.google.com/file/d/1Ha01KkCrqNkSRRny9vXdYU9fz78daIQ0/view?usp=sharing