Question: Does Vietnamese law prohibit a property developer from entering into a Deposit Agreement before a real estate project satisfies the legal conditions for commercial sale?
Answer
Vietnamese law does not expressly prohibit a property developer from entering into a Deposit Agreement before a project becomes eligible for commercial sale.
Under Article 328 of the Civil Code 2015, a deposit is a security measure intended to secure the conclusion or performance of a future contract. Accordingly, a Deposit Agreement is not a sale and purchase agreement or a transfer of real property.
The validity of a Deposit Agreement is determined under Article 117 of the Civil Code 2015. Therefore, the fact that a project has not yet met the statutory conditions for commercial sale does not automatically render the agreement invalid.
This approach is also reflected in Official Letter No. 1083/VKSTC-V9 dated 26 March 2024 issued by the Supreme People’s Procuracy. The guidance states that the validity of a Deposit Agreement should be assessed based on the requirements for a valid civil transaction and the possibility of performing the subject matter of the transaction, rather than automatically considering every Deposit Agreement relating to an ineligible project to be invalid. However, this Official Letter serves only as a reference and is not a legally binding normative document.
In practice, the legal risk does not arise solely because the Deposit Agreement is signed before the project is eligible for commercial sale. Instead, it depends on the actual substance of the transaction, the intended use of the deposit funds, and the manner in which the parties perform the agreement.
Conclusion
A property developer may enter into a Deposit Agreement before a project becomes eligible for commercial sale, provided that the agreement satisfies the validity requirements under the Civil Code 2015. Nevertheless, each transaction should be assessed based on its specific terms and implementation to properly identify and manage potential legal risks.
If you require legal advice on Deposit Agreements, real estate transactions, or other real estate legal matters in Vietnam, please contact SB Law. Our experienced lawyers are ready to provide practical, comprehensive, and business-oriented legal solutions tailored to your needs.
