What are the regulations on guarantee for sale or lease purchase of off-plan housing in Vietnam?
What are the regulations on guarantee for sale or lease purchase of off-plan housing in Vietnam?
Pursuant to the provisions of Article 26 of the Law on Real Estate 2023, guarantee for sale or lease purchase of off-plan housing is implemented as follows:
- Before selling or offering off-plan housing for lease purchase, the real estate project investor shall be required to obtain a guarantee, from a Vietnamese commercial bank or a foreign bank branch lawfully operating in Vietnam, ensuring the investor's fulfillment of financial obligations towards the buyer or tenant-buyer in the event of failure to hand over the housing as agreed upon in the signed contract for sale and purchase or lease purchase of off-plan housing (hereinafter referred to as “guarantor”).
The investor's financial obligations towards the buyer or tenant-buyer in the event of failure to hand over the housing as agreed upon in the signed contract for sale and purchase or lease purchase of off-plan housing include the amount received in advance from the buyer or tenant-buyer and other amounts (if any) as agreed upon in the signed contract which the investor is obliged to pay to the buyer or tenant-buyer when the investor fails to hand over the housing according to the agreed-upon schedule.
- If the guarantor agrees to grant guarantee to the investor, the guarantor and the investor shall enter into a guarantee agreement which covers the contents specified in clause 1 of this Article.
Based on the signed guarantee agreement, the guarantor shall provide the investor of the real estate project with a written commitment affirming that it will issue letters of guarantee to all buyers or tenant-buyers of housing within the guaranteed project. The investor shall give a copy of this commitment to the buyer or tenant-buyer upon the conclusion of the contract for sale and purchase or lease purchase of off-plan housing.
- The buyer or tenant-buyer is entitled to decide whether or not to request the investor to provide guarantee for the investor’s financial obligations as a requirement for entering into the contract for sale and purchase or lease purchase of off-plan housing. If the buyer or tenant-buyer does not require guarantee for the investor’s financial obligations, the provisions of clauses 4 through 8 of this Article shall not apply. The fact that the buyer or tenant-buyer does not to require guarantee for the investor’s financial obligations must be established in written agreement when the parties enter into the contract for sale and purchase or lease purchase of off-plan housing.
- Based on the contract for sale and purchase or lease purchase of off-plan housing signed by and between the investor and the buyer or tenant-buyer furnished by the investor, the guarantor shall issue a letter of guarantee in favor of the buyer or tenant-buyer that has signed the contract for sale and purchase or lease purchase of off-plan housing with the investor in accordance with regulations of law on bank guarantee, and send it to the investor for transfer to the buyer or tenant-buyer.
- Scope, conditions for fulfillment of obligations, contents and guarantee fee shall be agreed upon by the parties as long as the guarantor’s responsibilities set out in clauses 1 and 2 of this Article are to be discharged, and specified in the guarantee agreement signed by and between the guarantor and the investor.
The validity period of the guarantee agreement signed by and between the guarantor and the investor and of the letter of guarantee issued by the guarantor in favor of the buyer or tenant-buyer must be clearly indicated thereon.
- The investor shall provide the letter of guarantee to the buyer or tenant-buyer within a maximum duration of 10 working days from the day on which the contract for sale and purchase or lease purchase of off-plan housing or by another deadline as agreed upon by the parties in the contract. The investor may only receive payments from the buyer or tenant-buyer under terms and conditions of the signed contract for sale and purchase or lease purchase of off-plan housing after the investor has actually delivered the bank’s letter of guarantee to the buyer or tenant-buyer.
- In the event the investor cannot hand over the housing as agreed upon in the signed contract for sale and purchase or lease purchase of off-plan housing but fails to fulfill, or only fulfills part of, financial obligations towards the buyer or tenant-buyer as prescribed in clause 1 of this Article, the guarantor shall, at the request of the buyer or tenant-buyer, fulfill such financial obligations on behalf of the investor according to commitments in the letter of guarantee.
- The guarantee for sale or lease purchase of off-plan housing must comply with regulations of law on bank guarantee. Regulations on guarantee for sale or lease purchase of off-plan housing in this Article shall not apply to sale or lease purchase of social housing.
- The State Bank of Vietnam (SBV) is responsible to provide guidelines on guarantee for sale or lease purchase of off-plan housing.
What are the regulations on guarantee for sale or lease purchase of off-plan housing in Vietnam?
What are off-plan housing and building to be put on market in Vietnam?
Pursuant to the provisions of Article 22 of the Law on Real Estate 2023, the off-plan housing and building to be put on market include:
- Off-plan housing of various types, except those considered as public property as prescribed by the Law on Real Estate 2023.
- Off-plan buildings as prescribed in clause 2 Article 5 of the Law on Real Estate 2023.
- Floor areas of the Off-plan buildings prescribed in clause 3 Article 5 of the Law on Real Estate 2023.
Vietnam: What is guarantee?
According to the provisions of civil law, a guarantee is considered one of the measures to ensure the performance of obligations.
Pursuant to Article 335 of the 2015 Civil Code, guarantee means an undertaking made by a third person (hereinafter referred to as the guarantor) to an obligee (hereinafter referred to as the creditor) to perform an obligation on behalf of an obligor (hereinafter referred to as the principal debtor) if the obligation falls due and the principal fails to perform or performs incorrectly the obligation.
Law on Real Estate 2023 comes into force from January 1, 2025.
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