Buying A “Eligible To Sell” Home Is Still Risky Because Of The Wrong Project

Buying a project being on the list of eligible to sell housing projects approved by the Department of Construction does not mean that the buyer will not run the risk.

According to the Law on Real Estate Business 2014, when being offered for sale, it must have documents on land use right (project), project dossiers, design drawings already approved by competent authorities. The construction license, documents on the completion of construction of technical infrastructures according to the project progress; In the case of an apartment or mixed-use building intended to be in the future, there must be a check and take over the report that has completed the foundation of the building.

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Before selling or leasing the future houses, investors shall have to notify in writing the provincial-level house management bodies of the eligible houses for sale or lease-purchase.

The risk of buying a home is wrong

However, in fact, even if the Department of Construction announces eligibility to sell housing in the future, the risk that customers have to face in case the project is under the mortgage.

Lawyer Tran Duc Phuong, HCMC Bar Association said that Clause 2, Article 19 of Decree 99/2015 / ND-CP, if the projector housing (each apartments mortgages, it just need the written agreement between the parties (banks, investors, buyers) about not having to mortgage and buy. In cases where the projector house is not mortgaged, the investor must clearly state his/ her commitment in the documents of the Construction Service.

The Department of Construction (DOC) is the authority to inspect and announce eligible projects for transactions, but the Department is not responsible for if the project being mortgaged or not.

If both of two cases have failures, the collateral agreement shall be invalid in accordance with the regulations on secured transactions.

For case 1, under the regulations on secured transactions, this is the transfer of the ownership of the mortgaged property upon disposal of the mortgaged property according to the provisions of the Decree on secured transactions. If the transaction occurs, the mortgage transaction will end and reduce the obligations of the investor with the bank.

There is a contradiction that the parties have agreed on the transaction before the Department of Construction has qualified, so the transactions are not correct, in other words, the apartments are no longer affected. The bank collects money and reduces the responsibility of the investor. Under current regulations, it will be confused and disputed at the stage of project handling (if any), as there is still a gap between ownership and mortgages.

If the house purchase and sale transactions comply with the provisions of Clause 2, Article 19 of Decree No. 99/2015 / ND-CP, the mortgage of the project or dwelling house that obeys the strictness of the Law on Housing, it still cannot be resolved under the law on secured transactions. So, there is the ambiguity that the buyer is still “buy but still under mortgaged”, therefore, they themselves can borrow from the bank by guaranteeing the apartment itself.

On the same point, lawyer Truong Thanh Duc, Chairman of Basico Law Firm, said that investors borrow bank capital to implement the project is normal. If the investor borrows bank capital in the form of mortgaging land and property and has registered mortgage information at the Department of Natural Resources and Environment, the customer is completely assured. Because of that project has issued the certificate of land use right by the State. Legal of the project has been guaranteed by the State. Buyers will definitely be issued red books as prescribed.

However, for projects that are under construction, investors have not been issued a land use right certificate, but take the project to mortgage the bank in the form of mortgaging the right to execute the project, the client will be at risk.

Currently, most investors choose to mortgage the right to implement the project at the bank (the right to implement the project can be the right to exploit, the right to conduct business projects …). Because most real estate projects have not been issued red books, so if the bank loan can only be mortgaged in this form.

Buying a qualified home is still risky

Another advantage, if the investors loan in this form, they do not have to register information mortgage in the Department of Natural Resources and Environment. Therefore, customers cannot check whether the project information was mortgaged or not.

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Despite the State’s request, mortgage investors have to register transaction information at the Department of Registration of Secured Transactions (Ministry of Justice), the investors do not voluntarily register. So many projects have been mortgaged by banks but still sold to buyers. In a nutshell, an apartment is sold twice.

Therefore, according to lawyer Truong Thanh Duc, when buying a house under construction and have mortgaged the right to implement the project, customers will face many risks, especially when the bank default investors.

According to the reporter, in fact, it is not difficult to see many projects on the list but slowly in terms of progress. For example, the Hanoi Landmark Project is being questioned about the closure of licensing and mortgage financing of the Song Da 1.01 and Vinafor. Song Da 1.01, Vinafor and Ecoland are also being questioned in the process of deploying and raising bank loans and mortgages at the Ecolakeview project listed before.

A list of 191 projects announced by the Hanoi Department of Construction was updated include projects that are in the finalization phase, even those that have been handed over are still in the list of 191 projects that in conditions of “selling paper houses” such as high-rise mixed-use residential project – Dong Phat in Vinh Tuy Industrial Park, Vinh Hung Ward, Hoang Mai District invested by Dong Phat Investment Joint Stock Company; Investment project on construction of mixed housing, office and commercial services in Trung Hoa Ward, Cau Giay District of Vimeco Joint Stock Company.

This fact makes many people skeptical about the significance and importance of publishing the list of projects eligible for home sales “on paper” of the Department of Construction.

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