Refund guarantees for residential house buyers in a real estate project in Vietnam

To protect buyers in a residential house project, the Law on Real Estate Business 2014 requires the developer to provide a buyer with a bank refund guarantee. If the developer fails to deliver the house within the agreed schedule, the buyer could get back its advance payment from the refund guarantee. However, there are several ways which a developer may use to water down the protection provided by law. For example,

· A developer may encourage a buyer to “waive” the right to be issued with a bank refund guarantee (e.g., by offering a discount on the sale price);

· A developer may only procure a refund guarantee for the obligations to return the advance payment made by the buyer but not the obligations to pay the penalty or interests accrued on such amount;

· For buyers of villas, the developer may only procure a refund guarantee for the value of the construction part of the villas (but not the value of the land); and

· A developer may put onerous documentary conditions for the buyer to be able to claim a repayment from the bank refund guarantee. This is because the law does not make clear whether the refund guarantee should be a demand guarantee.

This post is written by Nguyen Quang Vu.

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New guidance on registration of mortgage of land use right and construction works - Part 1

New guidance on registration of mortgage of land use right and construction works - Part 1

On 25 November 2019, the Ministry of Justice (MOJ) issued Circular 7 guiding some contents of mortgage of land use right and asset attached to land (Circular 7/2019). Circular 7/2019 will take effect from 10 January 2020 and replace Joint Circular 9 of the MOJ and Ministry of Natural Resources and Environment (MONRE) dated 23 June 2016 (Joint Circular 9/2016) on the same subject matter. In general, Circular 7/2019 only provides some guiding and supplementing provisions for Decree 102 of the Government dated 1 September 2017 (Decree 102/2017) rather than providing detailed guidance as Joint Circular 9/2016.

Competent authority managing the registration of mortgage

Previously, the document detailing the registration of mortgage over land use right and asset attached to land is usually a joint circular of the MOJ and MONRE. However, since joint circular is no longer legislative document (văn bản quy phạm pháp luật) under Law on Laws 2015. Accordingly, the unified authority to manage the security interest registration is vested in MOJ. Under Decree 102/2017, the MOJ now has the authority to issue or to submit for the Government to issue legislative documents on the registration of security interest, which includes Circular 7/2019.

New Decree on Vietnam Competition Law Sanctions

In September 2019, the Government issued new Decree 75/2019 providing administrative sanctions regarding violation of the Vietnam new competition law. Decree 75/2019 details violation in competition including violation of (a) competition-restricting agreements, (b) abuse of a dominant market position or monopoly position; (c) economic concentration; and (d) unfair competitive practices. Set out below are some notable changes in Decree 75/2019:

Treatment of a Board Chairman with related interests in a Vietnamese company

To control contracts between a Vietnamese joint stock company (JSC) with its related persons, the Enterprise Law 2014 requires such a contract to be approved by the Board or the Shareholders Meeting of the JSC. If the related party contract is to be approved by the Board, the law prohibits a Board member with related interests from voting on such contract. However, if the Board Chairman is the Board member with related interests, the law does not make clear that the Board Chairman should also not involve in other steps relating to approval of the related party contract. These other steps include preparing the draft Board resolutions, convening and chairing the Board meeting to consider the contract. These steps could be key to decide whether the related party contract could be approved.

Vietnam Business Law