Risks when buying and selling houses with handwritten paper in Vietnam

It is undeniable that many benefits brought from buying and selling houses by hand paper were simple, easy buying and selling procedures and "avoiding" taxes in the past. However, buyers and sellers would also face many legal risks, such as when there is a dispute, the Court does not recognize the legal value of that type of transaction or when being scammed or forged...

Typically, judgment 497/2017/DS-ST dated September 29, 2017 on a dispute over a house purchase and sale contract with the following contents:

On June 26, 2004, Ms. and Mr. Tran Minh T signed a handwritten contract on the sale and purchase of real estate No. H, D street, T ward, district T with the agreed price of 350,000,000 VND, area of ​​land. The land area is 120 m2, the house area is 56 m2. On the same day of June 26, 2004, she made a deposit to Mr. T with the amount of VND 100,000,000. Meanwhile, the house above has not been issued a certificate of house ownership and land use rights, the two parties agreed that after 02 months Mr. T would complete the house and land paperwork to sign an official transfer contract with her. If the buyer changes his mind and does not buy, he will lose deposit and if the seller changes his mind not to sell, he must return the deposit and compensate for the amount of VND 100,000,000. However, Mr. T did not do the paperwork and did not sign a legal house sale contract with her, since then, she also does not know where Mr. T is and Mr. T has not yet handed over the house to her".

The court declared: the house sale and purchase contract dated June 26, 2004 between Ms. Le Hoang Tu A and Mr. Tran Minh is void according to the provisions of Articles 443 and 139 of the 1995 Civil Code.

Article 443. Form of house purchase and sale contract

The house sale and purchase contract must be made in writing, certified by the State Notary Public or certified by the People's Committee of the competent level.

Article 139. Civil transactions are invalid due to failure to comply with regulations on form

In cases the law stipulates that a civil transaction is invalid if it is not expressed in writing, is not certified by the State Notary Public, is not authenticated, registered or permitted, then at the request of one or more of the parties, the Court or other competent state agencies shall decide to force the parties to comply with regulations on the form of the transaction within a time limit; If the time limit is exceeded, the transaction will be void. The party at fault making the transaction invalid must compensate for the damage.”

Currently, the Civil Code 2015 has detailed this issue in a way that is more favourable for the purchase and sale by handwritten paper, so if the two parties have performed at least two-thirds of the contractual obligations, the contract shall not be considered void. Specifically:

Article 129. Invalid civil transactions due to failure to comply with regulations on form

A civil transaction violating conditions for validity pertaining to form shall be invalid, except for any of the following cases:

1. If the form of a civil transaction, required to be established in writing, does not comply with regulations of law, but a party or the parties has/have fulfill at least two third of the obligations in the transaction, a court, at his/her/their request(s), shall issue a decision on recognition of the validity of such transaction.

2. If the form of a civil transaction, required to be established in writing, violates against regulations on notarizing or authorization, but a party or the parties has/have fulfill at least two third of the obligations in the transaction, a court, at his/her/their request(s), shall issue a decision on recognition of the validity of such transaction. In this case, the parties need not perform the notarizing or authorization.

In addition, in Clause 3, Article 93 of the 2005 Housing Law, it also stipulates:

3. House contracts must be certified by public notaries or authenticated by district-level People’s Committees for  urban  houses,  authenticated  by  commune-level  People’s  Committees  for  rural houses, excluding the following cases:

a/ Individuals lease their houses for less than six months;

b/ The house sellers, lessors are organizations having the function to deal in houses;

c/ Rent-purchase of social houses;

d/ The house donors are organizations.

4. Either of the parties shall, according to their mutual agreement, pay taxes and fees according to provisions of law.

In addition, Point a, Clause 3, Article 167 of the 2013 Land Law of Vietnam stipulates that Land users may exercise the rights to exchange, transfer, lease, sublease, inherit, donate, mortgage land use rights and to contribute land use rights as capital in accordance with this Law.

Although the new law has more favourable regulations, buying and selling houses by handwritten paper still contains many risks. The buyer has the possibility of losing everything if a dispute arises and is sued. Turn-around trading will not be accepted by the Court as a legal transaction, so it will be considered an invalid transaction. Therefore, when buying and selling a house, you should have a notarized and authenticated purchase and sale contract.