How to settle the deposit to buy land under the planning in Vietnam?

A typical example is in Judgment 128/2018/DS-ST dated July 27, 2018 on the dispute over the deposit contract for the transfer of land use rights, whereby:

“On March 20, 2016, Mr. Le Van K made a deposit for Ms. Pham Thi Bich V in the amount of VND 80,000,000 to receive the transfer of the land part of plot 710 at the price of VND 1,280,000,000. On March 21, 2018 , he contacted the Urban Management Office of District B and was told that this land plot belongs to the function of planning backup intersections. He asked Ms. V to return the above deposit, but Ms. V did not agree. Now he asks the Court to cancel the deposit receipt dated March 20, 2016 between him and Ms. V, forcing Ms. V to return the amount of VND 80,000,000 to Mr. and Ms. Pham Thi My L.

Defendant Ms. Pham Thi Bich V presented: The two sides have an agreement that if she does not sell, the deposit will be doubled, and if Mr. K changes his mind and does not buy, he will lose the deposit. After a week, Mr. K and his wife came to her house to say that this land was planned, so the State did not allow transfer, purchase and sale and asked her to return the deposit. She said that if there is a plan, she can still split the plot, but Mr. K and his wife do not agree and ask her to return the deposit. According to the agreement, on April 7, 2016, she went to the Notary Office, but Mr. K and his wife were not present. Now, she does not agree to return the deposit of VND 80,000,000 to Mr. and Mrs. K.

The court said: When the two parties transacted, Mrs. V knew that this land was in the planning and informed Mr. K (shown in the self-declaration of Ms. V on June 6, 2016), and Mr. K does not consider the legal status of the transferred land. Both Mr. K and Mrs. V are at fault, leading to the deposit transaction being invalid, so neither party is obliged to compensate the other. Therefore, we accept Mr. K's lawsuit request to ask Ms. V to refund the deposit of VND 80,000,000. "

The trial panel based on Clause 2, Article 49 of the 2013 Land Law of Vietnam, Point b, Clause 2, Article 122 of the 2005 Civil Code to declare the contract invalid because the content of the transaction in this case violated the prohibition of the law, specifically, the above provisions stipulate: 

Article 49. Implementation of master plans and plans on land use

...

2. If the land use master plan has been publicized but the annual district-level land use plan is not yet available, land users may continue using land and exercise the rights of land users as prescribed by law.

If the land use master plan and the annual district-level land use plan are available, land users for whom the land use purposes are to be changed or whose land is to be expropriated in accordance with the plans may continue exercising the rights of land users, but may not build new houses or construction works or plant perennial crops. They shall apply for permission from competent state agencies before repairing or renovating existing houses or construction works.

Article 122.- Conditions for civil transactions to become effective

1. A civil transaction shall be effective when it meets all the following conditions:

a/ The persons participating in the transaction have the civil act capacity;

b/ The purpose and contents of the transaction do not violate prohibitory provisions of law and are not contrary to social ethics;

c/ The persons participating in the civil transaction act completely voluntarily;...

Therefore, for the above transaction, because the land plot is already included in the land use plan, the annual land use plan of the district, it will not be transferred, Ms. V's transfer to Mr. K is against the law. void.

Article 137 of the 2005 Civil Code provides:

Article 137. Legal consequences of invalid civil transactions

1. Invalid civil transactions shall not give rise to, change or terminate any civil rights and obligations of the parties from the time of establishment thereof.

2. When a civil transaction is invalid, the parties shall be restored to the original status and shall return to each other what they have received; if the return cannot be made in kind, it shall be made in money, except for cases where the transacted property, gained yields and/or profits are confiscated under the provisions of law. The party at fault, which caused damage, must compensate therefore.

So, before we decide to buy a certain piece of land, we need to carefully find out information about that piece of land such as: origin, documents as well as the actual status of that land to avoid unnecessary risks like in the case.

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