CHANGING SUBJECTS IN REAL ESTATE SALE CONTRACTS 2025

PROTECTING THE RIGHTS OF REAL ESTATE BUYERS ACCORDING TO THE LAW ON CHANGING SUBJECTS IN REAL ESTATE PURCHASE AND SALE CONTRACTS FROM THE PRACTICE IN HỒ CHÍ MINH CITY

Vũ Thị Hồng Yến

Associate Professor, PhD, Head of Law Department, Sài Gòn University

Dương Quốc Thái

Professor, PhD, Director, Institute of Economics and Business Development, Hồ Chí Minh City Branch

ABSTRACT

Changing subjects in real estate purchase and sale contracts is a common legal event throughout the process from the commencement of real estate projects until completion. In this article, the authors focus on analyzing the change of subjects in real estate project transfer transactions and the transfer of future housing purchase and sale contracts according to the provisions of the 2015 Civil Code, the 2023 Law on Housing, the 2023 Law on Real Estate Business, and the 2024 Law on Land. The article builds solutions to perfect the shortcomings of the law from the perspective of best protecting the rights and interests of real estate buyers.

Keywords: transfer of claims, transfer of obligations, transfer of real estate projects, transfer of real estate business contracts.

I. INTRODUCTION

A real estate project is formed until the objective of transferring ownership of the real estate project or its related products to other subjects is completed. This process often involves various contracts, with the most fundamental being the contract for the purchase and sale of future housing (CP&S FH), followed by transfer contracts related to the change of subjects in this contract.

The nature of the CP&S FH is a standard contract, where the buyer of future housing (FH) is typically in a weak position from the moment the contract is signed. When there is a change of subjects, does this position become stronger, equal, or weaker compared to the initial state? This article will answer this question in the context of the currently bleak real estate market, along with the onset of the effectiveness of new legal documents in this field, from the perspective of protecting the rights and interests of real estate buyers.

II. LEGAL PROVISIONS ON CHANGING SUBJECTS IN REAL ESTATE PURCHASE AND SALE CONTRACTS AND THE ISSUE OF PROTECTING THE RIGHTS OF REAL ESTATE BUYERS

Provisions on the transfer of claims and the transfer of obligations

The 2015 Civil Code (CC 2015) provides for the change of subjects holding rights through the transfer of claims and the change of subjects holding obligations through the transfer of obligations. The legal consequence of changing the subject holding rights or the subject holding obligations is that a new subject replaces the position of the original subject with the remaining subject. The entire content of the contract with the change of subjects remains unchanged, except the subject transferring the right or obligation is released from their position in the contract, no longer holding the right or having to perform the obligation with the remaining subject, unless otherwise agreed.

However, replacing only the party holding the right or the party holding the obligation according to the CC 2015 must comply with different conditions:

(i) In the case of the transfer of claims (from Article 365 to Article 369): the transferor only needs to notify the remaining subject in writing that another subject has taken over the right, so the obligor knows to perform the obligation with the new subject. If the claim has security measures (such as pledge, mortgage), the security measures are also transferred to the new subject holding the right;

(ii) In the case of the transfer of obligations (from Article 370 to Article 371): it must have the consent of the party holding the right. If the transferred obligation has security measures, these measures terminate unless otherwise agreed upon regarding the transfer along with the security measures, or the parties agree to replace the security measures between the subject holding the obligation and the party holding the right.

Thus, the CC 2015 only provides for the transfer of claims or the transfer of obligations, meaning that in a contractual relationship, there is only one party holding rights and only one party holding obligations. This is usually applied to unilateral contracts such as loan contracts. For bilateral contracts like the contract for the purchase and sale of future housing (CP&S FH), when changing subjects, it means transferring both rights and obligations to the new subject, which is the case of contract assignment. When assigning a contract, it is necessary to meet the requirements of both the transfer of claims and the transfer of obligations according to the CC 2015.

Provisions on changing the seller in the CP&S FH

Changing the seller in the CP&S FH means changing the investor. The transfer of real estate projects is a form of changing the investor and changing the seller in the CP&S FH. This means that the investor transfers the real estate project to another subject at the time after the CP&S FH has been signed.

When transferring a real estate project, i.e., transferring ownership of the real estate project, it will result in the transfer of all other contracts related to the real estate project that the transferring investor is implementing. These may include capital contribution contracts not establishing new legal entities, joint venture cooperation contracts to implement the real estate project, construction contracts, guarantee contracts for the investor’s financial obligations to customers, and most notably, a large number of CP&S FH.

The 2023 Law on Real Estate Business (the 2023 Law on REB) stipulates principles, conditions, authority, procedures, rights, and obligations of the parties in transferring all or part of the real estate project (from Article 39 to Article 43 of the 2023 Law on REB) with contents affecting customers in the CP&S FH such as: the principle of transferring real estate projects ensuring the lawful rights and interests of related parties (Clause 2, Article 39 of the 2023 Law on REB);

the land use rights of the real estate project are not in dispute (Point e, Clause 1, Article 40 of the 2023 Law on REB); if the real estate project has been mortgaged before, it must be released (Point e, Clause 1, Article 40 of the 2023 Law on REB); the transfer of rights and obligations of the investor concerning the real estate project to the receiving investor, inheriting the rights, and performing the obligations of the transferring investor has transferred (Point a, Clause 1,2 Article 43 of the 2023 Law on REB);

promptly, fully, and publicly notifying and satisfactorily resolving the rights and interests of related parties concerning the transferred real estate project (Point b, Clause 1, Article 43 of the 2023 Law on REB).

Provisions on changing the buyer in the CP&S FH

Changing the buyer in the CP&S FH is the form of transferring real estate business contracts as stipulated in the 2023 Law on Real Estate Business (the 2023 Law on REB). The buyer who signs directly with the investor of the real estate project under the CP&S FH is called the first buyer. If the subsequent buyer (who may be one or more individuals until the investor transfers ownership of the house to the buyer) replaces the position of the first buyer, it is considered a contract transfer of the CP&S FH.

The change of the buyer in the CP&S FH is stipulated in the 2023 Law on REB with the following basic contents:

– The stage of submitting the application for the Land Use Rights Certificate, the ownership of assets attached to the land, has not yet been reached.

– The CP&S FH is not in dispute.

– The house in the purchase and sale contract is not subject to enforcement actions.

– In the case the house is mortgaged, it does not need to be released if the mortgagee agrees.

Regarding the rights and obligations of the parties, the 2023 Law on REB stipulates:

– The transferee of the CP&S FH inherits and continues to perform the rights and obligations of the transferor with the investor and is granted the Land Use Rights Certificate and ownership of assets attached to the land.

– The investor is responsible for facilitating the parties in transferring the contract and is not allowed to charge any fees related to the contract transfer.

The transfer of the CP&S FH was previously regulated by the 2014 Law on Housing but is now governed by the 2023 Law on Real Estate Business (the 2023 Law on REB). The approach of the 2014 Law on Housing considered the transfer of the CP&S FH as the purchase and sale of future housing, with the only difference being the subject (i.e., between buyers where the first buyer swaps their position to become the seller).

Thus, it was named differently from the CP&S FH (where the subject is the investor and the first buyer). The regulations on the purchase and sale and transfer of future housing were specified in Articles 123 and 124 of the 2014 Law on Housing.

Currently, the 2023 Law on REB governs the transfer of the CP&S FH in a separate section under Chapter 6 (named Section 2: Real Estate Business Contracts) and includes the transfer of the CP&S FH as one of the real estate business contracts (CP&S REB) as per Point l, Clause 1, Article 44 of the 2023 Law on REB.

So, is the transfer of the CP&S FH considered a CP&S REB? According to Clause 8, Article 3 of the 2023 Law on REB, the CP&S REB does not include the transfer of the CP&S FH. In essence, the transfer of the CP&S FH does not meet the definition of a CP&S REB as per Clause 8, Article 3 of the 2023 Law on REB.

Approaching from the real estate business activity, the replacement of the buyer in the CP&S FH is merely a contract amendment and thus not a real estate business contract. However, from the perspective of the relationships between the parties in the transfer of the CP&S FH, it bears the nature of a CP&S FH between subjects, where the first buyer (F1) swaps their position to become the seller for the new buyers (F2, F3).

Author Nguyễn Minh Oanh (2018) also asserted that the essence of this contract is a purchase and sale contract but is named uniquely by law to differentiate it from purchase and sale, lease-purchase contracts as “transfer of the CP&S FH lease-purchase contract” when commenting on the 2014 Law on Housing.

III. SHORTCOMINGS IN THE LEGAL PROVISIONS ON PROTECTING THE RIGHTS OF REAL ESTATE BUYERS RELATED TO CHANGING SUBJECTS IN REAL ESTATE PURCHASE AND SALE CONTRACTS

Regarding the requirement to release the mortgage when transferring real estate projects

The following issue arises in practice regarding the condition to release the mortgage when transferring real estate projects, which has not been regulated in the 2023 Law on Real Estate Business (the 2023 Law on REB). Before signing the CP&S FH, investors must release the real estate project previously mortgaged to credit institutions. After signing the CP&S FH with customers, instead of being unable to mortgage the real estate project as before, the investor switches to mortgaging the claim/payment request arising from the CP&S FH to the credit institution.

So, now if the investor transfers the real estate project, is it necessary to release the mortgage of this claim?

The 2023 Law on Real Estate Business (the 2023 Law on REB) stipulates that releasing the mortgage is a necessary condition for transferring real estate projects but not for transferring the CP&S FH. Point c, Clause 1, Article 50 of the 2023 Law on REB states: “Houses… under purchase and sale or lease-purchase contracts are not subject to enforcement actions or mortgages to ensure the performance of obligations as prescribed by law, except when agreed by the mortgagee.” Thus, if the mortgagee agrees, the mortgage measures can also be transferred to the transferee.

This is reasonable because, when transferring a claim, the security measures are automatically transferred to the new holder of the right (Article 368 of the 2015 Civil Code); when obligations secured by security measures are transferred, those security measures are terminated unless otherwise agreed (Article 371 of the 2015 Civil Code). Applying this provision of the 2015 Civil Code to the case of transferring the CP&S FH in the 2023 Law on REB, the solution of the 2023 Law on REB is appropriate; that is, the mortgage measures can also be transferred if agreed by the mortgagee.

Similarly, based on this principle and considering fairness, when transferring real estate projects with mortgage measures for property rights/claims, it is not required to release the mortgage. Instead, the mortgage measures can be transferred to the transferee of the real estate project if the mortgagee agrees. This regulation also reduces transaction costs for the parties when the mortgage release is not mandatory.

Regarding the transfer of security measures associated with the CP&S FH

In addition to addressing the legal consequences of mortgage measures when transferring real estate projects and transferring the CP&S FH, the 2023 Law on Real Estate Business (the 2023 Law on REB) currently lacks provisions regarding the “legal fate” of guarantees for the investor’s financial obligations when transferring real estate projects and the deposit measures in the CP&S FH.

According to the principle analyzed in Section 2.1, guarantees can also be transferred if agreed upon by the guarantee recipient when the investor transfers the real estate project. Regarding the deposit contract guaranteeing the conclusion of the CP&S FH, whether it can be transferred depends on the agreement between the parties and the consent of the deposit recipient, which is the real estate project investor.

In reality, if the buyer, for any reason, does not purchase the future housing, the consequence is the loss of the deposit according to Clause 2, Article 328 of the 2015 Civil Code. To avoid this adverse consequence, the buyer seeks a subject who wants to buy the house, and the parties agree to transfer the deposit contract to each other.

Regarding the consent of customers when the investor transfers real estate projects and vice versa when transferring the CP&S FH

According to the current regulations in the 2023 Law on Real Estate Business (the 2023 Law on REB), when transferring real estate projects as well as transferring the CP&S FH, the consent of the remaining subject is not required. The transfer of bilateral contracts (in essence, both the transfer of real estate projects and the transfer of the CP&S FH are bilateral contracts) includes both the transfer of claims and the transfer of obligations, thus requiring the consent of the remaining subject.

Applying in each specific case based on the principle stipulated in Clause 4, Article 3 of the 2015 Civil Code: the parties have the right to freely agree but must not affect the legitimate rights and interests of others; if there is a negative impact, the consent of the affected party is required.

In the case of transferring the CP&S FH, although theoretically, it may affect the investor’s interests, in reality, it does not or only minimally affects the investor’s interests, so the consent of the investor is not required according to the current regulations of the 2023 Law on REB. However, in the reverse case, the transfer of real estate projects by the investor significantly affects the customer’s rights. Author Nguyễn Trung Tín, Trương Văn Quyền (2021) also noted that if compared with the practical application of legal provisions on protecting customers and related parties in the transfer of real estate projects, the principles and legal provisions do not achieve the expected effectiveness and only serve to formalize administrative procedures.

Although Point b, Clause 1, Article 43 of the 2023 Law on REB stipulates the obligation of the investor when transferring real estate projects, which is to promptly, fully, publicly notify and satisfactorily resolve the legitimate rights and interests of the parties related to the transferred real estate project, authors Quách Minh Trí, Trần Minh Pháp (2023) argue that such a regulation is not enough to protect customers and related parties in the transferred real estate projects.

In other words, the law is pushing the responsibility of control onto the people to stimulate the “self-protection” mechanism, which is very dangerous as it can lead to many disputes arising between customers and investors, causing social insecurity and putting pressure on judicial authorities. We can refer to the 2016 Real Estate Law of India as follows: “The investor shall not transfer their rights and obligations regarding the real estate project to a third party without written consent from 2/3 of the house buyers in the real estate project (excluding the investor) and written approval from the real estate regulatory authority” (Clause 1, Article 15).

In the USA, according to the Federal Code – Section 24 – Subpart B – Chapter IV – Part 401 – Article 401.480 “Sale/Transfer of Real Estate Projects” (dated March 22, 2000, amended November 26, 2007): the transferee of the real estate project shall submit documents including ballots, petitions proving the consensus of 51% of residents to the US Department of Housing and Urban Development as a component of the transfer application. Author Đỗ Xuân Trọng (Đỗ, 2019) also suggested that “Obtaining residents’ consent helps avoid future conflicts and disputes, and respects their rights in the relationship with the former investor”.

Regarding the condition of non-disputed real estate projects

Point d, Clause 1, Article 40 of the 2023 Law on Real Estate Business (the 2023 Law on REB) mentions the condition that the land use rights of the transferred real estate projects are not in dispute, but it does not mention the condition that the rights and obligations related to the real estate projects are not in dispute.

If the buyer transfers the CP&S FH, they must comply with the condition of non-dispute. However, if the seller transfers the CP&S FH (which is the case when the investor transfers the real estate project), this condition is not required. This does not ensure fairness in the contract, or in other words, does not protect the rights of real estate buyers.

In reality, many real estate projects are brought to court by customers requesting the declaration of deposit contracts, escrow contracts, and the CP&S FH as invalid because the investor did not meet the conditions to put the real estate project into business. The investor, as the defendant, and the case being in the process of litigation, without legal provisions restricting the investor’s right to transfer the real estate project, is inappropriate and inconsistent with the general principles of the law.

IV. RECOMMENDATIONS FOR IMPROVING THE LAW ON CHANGING SUBJECTS IN THE CP&S FH TO PROTECT THE RIGHTS OF REAL ESTATE BUYERS

Regarding economic benefits and transaction costs

There should be specific regulations to protect the rights of real estate buyers concerning transaction costs related to the transfer of the CP&S FH. Specifically, currently, the transfer of the CP&S FH is subject to the same tax rates as the purchase and sale contracts for already-formed houses. That is, a 2% income tax (if it is the second house owned by the transferor) and a 0.5% registration fee on the value of the house.

This tax calculation is unreasonable because the law considers the transfer of the CP&S FH similar to the CP&S FH between buyers. As analyzed in Section 1.3 of this article, the transfer of the CP&S FH is merely an amendment to the CP&S FH. Therefore, only when the transferor earns a profit on the amount paid to the investor should tax be calculated. Similarly, the 0.5% registration fee when the transferor has not been granted the Land Use Rights Certificate and ownership of assets attached to the land is also unreasonable.

Regarding legal compliance, safety, and convenience in transferring the CP&S FH

The 2023 Law on Real Estate Business (the 2023 Law on REB) needs to supplement Clause 1, Article 40 of the 2023 Law on REB with the condition for transferring real estate projects as follows: In cases where the investor mortgages property rights or claims arising from the contracts related to the transferred real estate project, the mortgage on property rights/claims must be released, except when agreed upon by the mortgagee.

The 2023 Law on REB needs to include regulations on the transfer of deposit contracts without requiring the investor’s consent because, in principle, it does not affect the ongoing business activities of the investor and aligns with the principle of protecting the weaker party, which is the buyer of future housing.

The 2023 Law on Real Estate Business (the 2023 Law on REB) needs to clearly stipulate the condition that the consent of the customer (i.e., the buyer) is required when transferring real estate projects (i.e., changing the seller) because this affects the buyer’s rights. Point b, Clause 1, Article 43 of the 2023 Law on REB should stipulate that the investor transferring the real estate project must notify each customer in writing and seek their consent; subsequently, they must amend the CP&S FH with each customer.

The 2023 Law on REB also needs to supplement the condition for transferring real estate projects, which is, in addition to the absence of disputes over the land use rights of the real estate project (Point d, Clause 1, Article 40), it must also meet the condition that: there are no disputes concerning any contracts related to the transferred real estate project. In reality, the former investor has received the transfer money and withdrawn, while the receiving investor does not resolve the disputes with customers.

As a result, customers have no choice but to sue the new investor in court. Most of these cases involve CP&S FH contracts being declared invalid because the real estate project investor did not meet the conditions for selling future housing at the time of signing the CP&S FH. The invalidity is assessed at the time of signing the CP&S FH, while the new investor only inherits the rights and obligations from the time of transfer. Therefore, most courts find it difficult to hold them accountable without clear and specific legal provisions.

The 2023 Law on Real Estate Business (the 2023 Law on REB) needs to clarify the relationship between the CP&S FH and the transfer of the CP&S FH while placing the transfer of the CP&S FH in Section 2 under the group of real estate business contracts. The CP&S FH is a real estate business contract (CP&S REB), but the transfer of the CP&S FH is merely a legal event changing one subject. Therefore, it is merely an amendment to the CP&S FH.

From this, it can be understood that the form of amending the CP&S FH must comply with the original form of the CP&S FH. In other words, the form of transferring the CP&S FH under the 2023 Law on REB does not need to be notarized or authenticated according to the provisions of the 2014 Law on Housing.

Although Clause 5, Article 44 of the 2023 Law on Real Estate Business (the 2023 Law on REB) does not stipulate that the transfer of the CP&S FH must be notarized (only purchase and sale contracts, lease-purchase contracts where the parties are individuals need to be notarized), Decree No. 96/2024/ND-CP dated July 24th, 2024, detailing certain articles of the 2023 Law on REB, specifies in Point b, Clause 2, Article 13 that this type of contract needs to be notarized. This generalization of all cases, as stated in Article 3 of Decree 96/2024/ND-CP, is contrary to Clause 5, Article 44 of the 2023 Law on REB.

According to us, Decree 96/2024/ND-CP should clearly state:

(i) If the house is the object of the CP&S FH that has been handed over (i.e., it has been accepted for use according to Clause 4, Article 37, and Clause 23, Article 2 of the 2024 Law on Housing), it is considered an existing house. Therefore, when buyer F1 transfers to buyer F2, it is essentially a purchase and sale contract between individuals, so notarization is required. However, since the ownership certificate has not been issued, the form of execution will be the transfer of the CP&S FH;

(ii) If the house is the object of the CP&S FH that has not been handed over, it is merely a change of subjects in the CP&S FH, so notarization is not required if the contract signed with the project investor was not notarized.

V. CONCLUSION

In the current context, important legal documents such as the 2023 Law on Housing, the 2023 Law on Real Estate Business (the 2023 Law on REB), and the 2024 Law on Land have greatly impacted the rights and obligations of parties in transactions involving real estate. The study of these documents related to the change of one subject in the CP&S FH aims to clarify the content of the regulations, identify shortcomings, and build legal solutions to protect real estate buyers, who are the weaker party in these transactions.

The consequence of changing subjects in the CP&S FH leads to an overall resolution of the relationship between the investor and the customer with other related parties such as the guarantee recipient (the mortgagee, the guarantor, the deposit recipient), and the new subjects replacing the seller and the buyer based on the key transaction between the customer and the investor.

REFERENCES

United States Federal Code. Source: http://www.ecfr.gov/cgi-bin/text-idx?SID&node=pt24.2.401&rgn=div5. Accessed on July 20th, 2024.
Đỗ Xuân Trọng (2019). Transfer of Real Estate Investment Projects: Inadequacies of the 2014 Law on Real Estate Business. Industry and Trade Magazine. Retrieved from https://tapchicongthuong.vn/chuyen-nhuong-du-an-dau-tu-kinh-doanh-bat-dong-san-nhung-bat-cap-tu-luat-kinh-doanh-bat-dong-san-2014-64929.htm.
2016 Indian Real Estate Law. Retrieved from: http://www.aaptaxlaw.com/real-estate-act-2016/section-15-real-estate-act-2016-obligations-of-promoter-in-case-of-transfer-of-a-real-estate-project-to-a-third-party-section-15-the-real-estate-regulation-and-development-act-2016.html.
Nguyễn Minh Oanh (2018). Commentary on the 2014 Law on Housing, Labor Publishing House, p. 424.
Quách Minh Trí, Trần Minh Pháp. (2019). Improving Legal Regulations on the Transfer of Real Estate Projects. Retrieved from: https://phaply.net.vn/hoan-thien-quy-dinh-phap-luat-ve-chuyen-nhuong-du-an-bat-dong-san-a257228.html.
Trần Linh Huân, Lê Thị Châu Giang. (2024). The Legal Status of Real Estate Business Contracts and Some Recommendations for Improvement. Law and Practice Journal, Issue 58/2024, p. 59.
Võ Trung Tín, Trương Văn Quyền (2021). Improving Laws on the Transfer of Real Estate Projects. Legislative Research Journal, Issue 03+04 Feb 2021, p. 92.

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