Some notes when buying a house from an authorized person in Vietnam

Here is a typical case that has been ruled by the Court: Judgment 06/2017/DSST dated September 18, 2017 of the People's Court of Ba Dinh District, Hanoi on termination of the authorization contract. Specifically: 

"On November 22, 2013, Mr. Le Xuan H signed an authorization contract No. 1295/2013/HDCN at Quoc Thai Notary Public Office, authorizing his father, Mr. Le Xuan T with the content "full management, use,…, transfer, donate, lease, lend…” real estate at 54 Van Phuc Thuong.

On November 26, 2013, Ms. Pham Thi L and Mr. Le Xuan T had an agreement on the purchase and sale of a house and the transfer of land use rights at 54 Van Phuc Thuong for 4,000,000,000 (four billion) VND. When agreeing on the sale and purchase of Mrs. L's house, see the actual house, see the authorization contract between Mr. H and Mr. T; real estate documents at 54 Van Phuc Thuong and the construction permit in the name of Mr. Nguyen The Quang (the former owner of the house). Ms. L has received the house and Mr. T has received enough money to sell the house 4 billion VND assigned by Ms. L.

Mr. Le Xuan H said that during the management process Mr. T arbitrarily let strangers into the house, rented the house to collect money without informing him, did not hand over the rent. Therefore, he made a request to the Court to terminate the authorization contract No. 1295/2013/HDCN".

For authorization contract No. 1295/2013/HDCN:

The Trial Panel found that, when signing the authorization contract, Mr. H had full civil legal capacity and civil act capacity, had the full right to participate in and be responsible for civil transactions in accordance with the provisions of law. Therefore, the fact that he and Mr. T signed an authorization contract is completely in accordance with the provisions of the law.

The trial panel accepted the request to terminate the authorization contract No. 1295/2013/HDCN because during the implementation of the authorized work content between Mr. trust in the authorized person. The request to terminate this authorization contract complies with Clause 1, Article 588 of the 2005 Civil Code (now Article 569 of the 2015 Civil Code ).

For the transfer of land use rights between Mr. Le Xuan T and Ms. L:

The agreement to buy and sell real estate between Ms. L and Mr. T is done by Mr. T in accordance with the content of the authorization contract signed between Mr. H and Mr. T. The parties have handed over the house and paid for the house purchase and sale to Mr. T. together. However, the agreement to buy and sell houses and transfer land use rights between Mr. T and Ms. L is not consistent with the provisions of Article 450 of the 2005 Civil Code and Clause 3, Article 93 of the 2005 Housing Law of Vietnam

Article 450 of the 2005 Civil Code stipulates: “A house sale and purchase contract must be made in writing, notarized or authenticated, unless otherwise provided for by law.”

Clause 3, Article 93 of the 2005 Housing Law of Vietnam stipulates: “The housing contract must be certified by a notary public or certified by the district-level People's Committee for urban housing, and certified by the People's Committee of the district for houses in rural areas, except for cases…”

The court adjourned the trial and notified the involved parties of the time limit to continue performing the contract at a competent State agency, but the parties failed to perform. Therefore, the contract is formally invalidated, so the parties restore the original state and return to each other what they have received. 

Compared with current regulations, a house sale and purchase contract must still be made in writing, notarized or authenticated.

For the compensation for Ms. L - the home buyer from an authorized person:

Ms. L is completely unaware that Mr. H does not agree to authorize Mr. T and does not agree to transfer the above house. Ms. L and Mr. T made an agreement to buy and sell a house and transfer land use rights on November 26, 2013, until August 18, 2015, Mr. H submitted an application to the Hanoi Land Registration Office in Ba Dinh – Hoan Kiem – Dong Da area. Therefore, Ms. L does not know and is not required to know about Mr. H's application, so she is not at fault in this civil transaction. On the other hand, when Mr. H proposed to unilaterally terminate the performance of the authorization contract with Mr. T, Mr. H did not notify Ms. L.

According to Clause 1, Article 588 of the 2005 Civil Code: “… The authorizing party must notify in writing to a third party that the authorizing party unilaterally terminates the performance of the contract; if not, the contract with the third party will still be valid, unless the third party knows or ought to know that the authorization contract has been terminated.

Therefore, Mr. H and Mr. T are jointly responsible for repaying Ms. L 4 billion dong from the sale of the house to Ms. L in accordance with the law as well as the content agreed in the authorization contract.

Therefore, buying and selling a house from an authorized person faces many risks. If you buy a house in this case, you need to pay attention to the following:

First, the authorized person has the right to transfer the house or not.

Buyers need to find out in advance whether the house they are about to buy is bound by an authorization contract. Currently, the authorization related to real estate has been stored and connected in the system of notarial practice organizations. This will also make it easier to find information.

Second, the house sale and purchase contract must be made in writing, notarized or authenticated.

If the authorized person has the right to transfer the house, the house sale and purchase contract must be made in writing, notarized or authenticated, in order to ensure the interests of the home buyer.

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