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.

Vietnam Business Law