Solving the case of buying a mortgaged house in Vietnam

One of the big risks when buying a house is not knowing that the house you intend to buy is mortgaged, because at this time the purchase will not be legally recognized.

For example, at Judgment 456/2017/DS-ST dated September 27, 2017 on the dispute over the house purchase and deposit contract of the People's Court of Thu Duc District, Ho Chi Minh City for the first-instance trial:

On November 27, 2016, she and Mr. Tran Van L signed a deposit contract to buy and sell house number M, street T, neighborhood S, ward B, district T, Ho Chi Minh City. The form of the contract is that the two parties sign a paper deposit to each other, not through notarization. According to the agreement in the deposit contract, the selling price of the house above is VND 865,000,000 (eight hundred and sixty five million), including a deposit of VND 40,000,000 (forty million) and within 30 days from the date of deposit, the two parties will go to the notary office to complete the purchase and sale procedures. If the buyer changes his mind and does not buy, the deposit will be forfeited, and if the seller changes his mind and does not sell, he must compensate for the amount of 120,000,000 dong (one hundred and twenty million) plus a deposit of 40,000,000 million dong (forty million). On the same day, November 27, 2016, she made a deposit for Mr. Tran Van L of 40,000,000 VND (forty million), she did not see the original certificate of house ownership and land use rights, Mr. L only provided her with a certified copy of the certificate of house ownership and land use rights but she did not see and I don't know that at the time of signing the deposit contract, the house on Mr. L was mortgaged at the bank, she only saw the content that the mortgage registration had been deleted. At the end of the agreement period, but Mr. L did not sign a notarized contract with her, she contacted Mr. L but to no avail. Because Mr. L violated the agreement with her, he did not release the property within the agreed period so that he could sign a house sale contract with her. Besides, on January 19, 2017, Mr. L sold his house to another person, and so far Mr. L is no longer able to perform the agreement to sign a house sale and purchase contract with her." Mr. L only provided her with a certified copy of the certificate of house ownership and land use rights, but she did not see it and did not know that at the time of signing the deposit contract, the house on Mr. L was in place. mortgage at the bank, she only saw the content that the mortgage registration was removed. At the end of the agreement period, but Mr. L did not sign a notarized contract with her, she contacted Mr. L but to no avail. Because Mr. L violated the agreement with her, he did not release the property within the agreed period so that he could sign a house sale contract with her. Besides, on January 19, 2017, Mr. L sold his house to another person, so so far Mr. L is no longer able to perform the agreement to sign a house sale and purchase contract with her." Mr. L only provided her with a certified copy of the certificate of house ownership and land use rights, but she did not see it and did not know that at the time of signing the deposit contract, the house on Mr. L was in place. mortgage at the bank, she only saw the content that the mortgage registration was removed. At the end of the agreement period, but Mr. L did not sign a notarized contract with her, she contacted Mr. L but to no avail. Because Mr. L violated the agreement with her, he did not release the property within the agreed period so that he could sign a house sale contract with her. Besides, on January 19, 2017, Mr. L sold his house to another person, so far Mr. L is no longer able to perform the agreement to sign a house sale and purchase contract with her."

Mr. Tran Van L and Ms. Nguyen Thi H do not have the right to sell the house No. M, street T, neighbourhood S, ward B, district T, Ho Chi Minh City to another person without being mortgaged by a Joint Stock Commercial Bank B- branch T agrees. Therefore, on November 27, 2016, Ms. Chu Thi Hang N and Mr. Tran Van L signed a deposit contract to buy and sell house number M, street T, neighbourhood S, ward B, district T, Ho Chi Minh City without having the consent of Joint Stock Commercial Bank B- branch T is a violation of the law as prescribed in the 2005 Civil Code (The Civil Code takes effect at the time the parties sign the deposit contract). Clause 4, Article 348: Not to sell, exchange or donate mortgaged property, except for the cases specified in Clauses 3 and 4, Article 349 of this Code. Clause 4 Article 349: To be sold, exchanged or given as a gift to the mortgaged property which is not a circulating commodity in the course of production or business, if so agreed by the mortgagee.

Compared with the law provisions in Article 122, Article 128, Article 137 of the 2005 Civil Code of Vietnam:

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;

2. The forms of civil transactions shall be the conditions for such transactions to be effective in cases where it is so provided for by law.

Article 128. Civil transactions which are invalid due to violation of prohibitory provisions of law or contravention of social ethics

Civil transactions with purposes and contents violating prohibitory provisions of law or contravening social ethics shall be invalid.

Prohibitory provisions of law mean the provisions of law which do not permit subjects to perform certain acts.

Social ethics are common standards of conduct among people in social life, which are recognized and respected by the community.

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

From there, the establishment determined a deposit contract for the purchase and sale of house No. M, street T, neighbourhood S, ward B, district T, Ho Chi Minh City between Ms. Chu Thi Hang N and Mr. Tran Van L on 27/02. 11/2016 is invalid, so it does not give rise to, change or terminate the civil rights and obligations of the parties from the time of establishment. The parties restore the original condition, and return to each other what they have received, that is, Mr. L returns to Ms. N 40,000,000 (forty million) dong. The party at fault for causing damage to compensate

Regarding the determination of the fault of the parties making the civil transaction invalid: According to Ms. Chu Thi Hang N, when signing the deposit contract, Mr. Tran Van L provided her with a certified copy of the certificate. received house ownership and residential land use rights of house number M, street T, quarter S, ward B, district T, Ho Chi Minh City. She did not see and did not know that at the time of signing the deposit contract, the house on Mr. L was mortgaged at the bank, she only saw the content that the mortgage registration had been deleted. At the court hearing, Ms. N's authorized representative presented that Ms. N was partly at fault in this, that she did not carefully consider the certificate of house ownership and residential land use rights, because he saw Mr. L selling the house at a cheap price, he signed a deposit to buy a house. Mr. Tran Van L is the owner of the property that is being mortgaged at the bank but still gives the property to participate in the transaction but does not notify Joint Stock Commercial Bank B - branch T as the mortgagee. Considering that, in this transaction, both parties are at fault, making the transaction invalid, so the damage caused by the parties must be borne by Ms. N.

Because of the above reasons, the court declared the deposit contract between the above parties invalid, the two parties must return to each other what they have received. Specifically, Mr. L must pay Ms. H the amount of VND 40,000,000 that Ms. H had previously deposited.

Thus, to avoid unfortunate situations similar to the above case. When making transactions on real estate purchase, sale and transfer, buyers need to pay attention and learn carefully about the actual condition of the real estate as well as some important contents of the relevant contracts.

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