What are the requirements of giving guarantees for off-plan houses? What are the regulations on the implementation of housing guarantee?
What are the requirements of giving guarantees for off-plan houses?
Pursuant to Clause 3 Article 1 of Circular 13/2017/TT-NHNN of Vietnam on the requirements of giving guarantees for off-plan houses:
A guarantee for sale or hire-purchase of off-plan houses (hereinafter referred to as the “guarantee for off-plan houses”) is considered as a bank guarantee whereby the commercial bank undertakes to act on behalf of the investor to fulfill their financial obligations to the purchaser or the hire-purchaser (hereinafter referred to as the “purchaser”) in the event the investor fails to transfer the house to the purchaser on the agreed-upon schedule without returning or insufficiently returning payment sums and others paid according to the signed contract for purchase or hire-purchase of house to the purchaser. The investor must take on their debt obligations and repay the commercial bank.
A commercial bank shall consider issuing guarantee to the investor when:
- The investor has satisfied all of requirements stated in Article 10 herein (excluding the cases where a commercial bank issues guarantee for the investor on the basis of counter guarantee);
- The investor's project has satisfied all of requirements for off-plan property to be put on the market as prescribed in Article 55 of the Law on Real Estate Business.
As we can see, the enterprise's transactions for off-plan houses must be guaranteed by a commercial bank with the buyer and in order to be issued with this guarantee, the enterprise must meet the above requirements.
Guarantee for off-plan houses
What are the procedures for issuing guarantee for off-plan houses?
* Application for issuance of guarantees under Article 13 of Circular 07/2015/TT-NHNN of Vietnam includes:
- Written request for guarantee;
- Materials related to customers;
- Materials on guaranteed obligations;
- Materials on security (if any);
- Materials related to other parties (if any).
* Procedures for issuing guarantee for off-plan houses are conducted according to Clause 3 Article 1 of Circular 13/2017/TT-NHNN of Vietnam:
- Based on the request of the investor or the counter-guarantee issuing party, the commercial bank shall consider, appraise and decide to issue guarantee to the investor;
- The commercial bank and the investor shall conclude a contract for guarantee for off-plan houses in accordance with regulations in Article 56 of the Law on Real Estate Business. To be specific:
+ A contract for guarantee for off-plan houses shall be made in the form of a guarantee agreement as prescribed in Clause 11 Article 3 and Article 14 of this Circular and include contents in conformity with regulations in Article 56 of the Law on Real Estate Business;
+ The guarantee sum for an off-plan housing project shall not exceed the sum of total amount which the investor is allowed to receive from the purchaser in accordance with regulations in Article 57 of the Law on Real Estate Business and others which the investor is obliged to return to the purchaser under provisions of the signed contract for purchase or hire-purchase of house in the event the investor fails to transfer the house to the purchaser on the agreed-upon schedule;
+ A guarantee agreement shall come into force from the date on which it is signed to the date on which the validity of guarantee obligations is terminated as regulated in Article 23 of this Circular.
- The commercial bank shall give guarantee commitment to each purchaser. To be specific:
+ Within 10 working days from the signing date of the contract for purchase or hire-purchase of house which stipulates the investor's obligations to return payment sums and others received from the purchaser to the purchaser in the event the investor fails to transfer the house to the purchaser on the agreed-upon schedule, the investor must send such contract for purchase or hire-purchase of house to the commercial bank;
+ within 5 working days from the receipt of the contract for purchase or hire-purchase of house, the commercial bank shall base on the received contract for purchase or hire-purchase of house and the guarantee agreement to make and send the guarantee commitment to the purchaser's address;
+ The guarantee commitment is given in the form of a letter of guarantee in accordance with regulations in Point a Clause 12 Article 3 and Article 15 of this Circular to each purchaser;
+ A guarantee commitment shall be valid from the issued date and remain valid at least 30 days after the date of house being transferred to the purchaser as agreed upon in the contract for purchase or hire-purchase of house.
What are the rights and obligations of the obligor for off-plan houses?
Rights and obligations of the obligor are stipulated in Article 31 of Circular 07/2015/TT-NHNN of Vietnam as follows:
- The obligor shall exercise the following rights:
+ Refuse requests of the guarantor, the counter-guarantee issuing party and the guarantee-confirmation issuing party which are in breach of terms and conditions set in the guarantee agreement or commitment;
+ Request the guarantor, the counter-guarantee issuing party to obey their agreed-upon obligations or liabilities;
+ File a lawsuit in accordance with laws if the guarantor or the counter-guarantee issuing party is in breach of their agreed-upon obligations;
+ Exercise their rights or fulfill their obligations in accordance with laws when involved parties transfer their guarantee rights and obligations to guarantee items;
+ Check the authenticity of the guarantee commitment;
+ Exercise other rights under the agreement between parties in conformity with legal regulations.
- The obligor shall fulfill the following obligations:
+ Provide correct, sufficient and genuine information or materials on guarantee items and assume legal liabilities for the accuracy, authenticity and sufficiency of provided information or materials;
+ Fulfill agreed-upon obligations or liabilities and adhere to terms and conditions stipulated in the guarantee agreement in a sufficient and timely manner;
+ Repay the guarantor, the counter-guarantee issuing party a sum paid by these entities to fulfill their obligations stipulated in the guarantee agreement or commitment between parties as well as other costs incurred from fulfillment of guarantee obligations;
+ Be subjected to inspection or supervision of the guarantor, the counter-guarantee issuing party as to the process of fulfillment of guaranteed obligations. Be obligated to report on the operating condition concerning the guarantee transaction to the guarantor or the counter-guarantee issuing party;
+ Collaborate with the guarantor, the counter-guarantee issuing party and other relevant parties in treating collateral (if available);
+ Fulfill other obligations under the agreement between parties in conformity with legal regulations.
Thus, when selling off-plan houses, enterprises must be guaranteed by commercial banks according to regulations. Enterprises that hope to be issued with a bank guarantee must meet the requirements and carry out the dossiers and procedures for applying for a guarantee according to regulations. When being issued with a guarantee from a commercial bank, an enterprise has the rights and obligations as prescribed.
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