PROTECTING THE RIGHTS OF REAL ESTATE BUYERS UNDER CRIMINAL LAW (Please note that this image is not related to the specific case being discussed)
PROTECTING THE RIGHTS OF REAL ESTATE BUYERS UNDER CRIMINAL LAW
Nguyễn Thị Thanh Bình
Ph.D., Faculty of Law – University of Saigon
ABSTRACT
The article analyzes the role of criminal law in protecting real estate buyers, pointing out common criminal acts that infringe on the rights of real estate buyers. The article also focuses on analyzing the provisions of criminal law, specifically the provisions of the Criminal Code, on the two offenses most frequently applied by courts when the rights of real estate buyers are infringed, including Fraudulent Appropriation of Property and Customer Deception. Through several criminal cases related to real estate, the article also points out existing issues in the application process of these two offenses and proposes recommendations to improve the law and enhance the effectiveness of protecting the rights of real estate buyers from the perspective of criminal law.
Keywords: real estate, real estate buyer rights, criminal law, customer deception offense, fraudulent appropriation of property offense
I. INTRODUCTION
Real estate is a valuable and important sector in the national economy. Real estate transactions not only require transparency but also must ensure the rights of participating parties, especially buyers. However, many cases of fraud and deceit occur during real estate transactions, causing significant damage to buyers. Preventing and handling violations, while protecting the rights of real estate buyers in such cases, requires the application of criminal law. However, in practice, the process of applying criminal law to protect the rights of real estate buyers still faces many inadequacies and limitations. Therefore, researching and proposing recommendations to improve criminal law to enhance the effectiveness of protecting the rights of real estate buyers is essential.
II. ROLE OF CRIMINAL LAW IN PROTECTING REAL ESTATE BUYERS
Using criminal law to protect the rights of real estate buyers is an important aspect that contributes to ensuring transparency and fairness in real estate transactions. In protecting real estate buyers, criminal law plays the following roles:
(i) Identifying and acknowledging criminal acts: Criminal law plays an important role in protecting the rights of real estate buyers by addressing and punishing violations of the law in real estate transactions. By recognizing crimes, criminal law defines actions considered as crimes in general and in real estate transactions in particular. From the perspective of protecting the rights of real estate buyers, some actions include fraud in real estate transactions to appropriate property or deceiving real estate buyers.
(ii) Providing severe sanctions: Criminal law provides strict measures against violators, from fines to imprisonment, to protect real estate buyers. Additionally, in some cases, violators may be required to compensate the victims for their losses. This gives buyers a chance to be reimbursed for the damages they have suffered.
(iii) Deterring and preventing crimes: Criminal law not only addresses violations of the rights of real estate buyers but also serves to deter future criminal acts. The existence of severe penalties helps prevent potential offenders from committing violations. Public trials of real estate-related cases, as well as media coverage of these cases, not only raise community awareness about the risks involved in real estate transactions but also create vigilance, effectively preventing crimes.
III. OFFENSES IN THE CRIMINAL CODE CONTRIBUTING TO THE PROTECTION OF THE RIGHTS OF REAL ESTATE BUYERS
The rights of real estate buyers are often violated by two groups of actions: fraud to appropriate property and deception of real estate buyers, corresponding to two offenses recognized in the Criminal Code (CC) as Fraudulent Appropriation of Property (Article 174 CC 2015, Amended and Supplemented 2017) and Customer Deception (Article 198 CC 2015, Amended and Supplemented 2017).
(i) For Fraudulent Appropriation of Property, the CC provides as follows:
1. Any person who, by fraudulent means, appropriates another’s property valued between 2,000,000 VND and under 50,000,000 VND, or under 2,000,000 VND but falls into one of the following cases, shall be subject to non-custodial reform for up to 03 years or imprisonment from 06 months to 03 years:
a) Having been administratively sanctioned for property appropriation but still committing the violation;
b) Having been convicted of this crime or one of the crimes specified in Articles 168, 169, 170, 171, 172, 173, 175, and 290 of this Code, without yet being cleared of the criminal record but still committing the violation;
c) Causing adverse effects on security, order, and social safety;
d) The property is the main means of livelihood for the victim and their family.
2. Committing the crime in one of the following cases shall be subject to imprisonment from 02 years to 07 years:
a) Organized;
b) Professional nature;
c) Appropriating property valued between 50,000,000 VND and under 200,000,000 VND;
d) Dangerous recidivism;
đ) Abusing one’s position, authority, or the name of an agency or organization;
e) Using cunning means;
3. Committing the crime in one of the following cases shall be subject to imprisonment from 07 years to 15 years:
a) Appropriating property valued between 200,000,000 VND and under 500,000,000 VND;
b) Exploiting natural disasters or epidemics.
4. Committing the crime in one of the following cases shall be subject to imprisonment from 12 years to 20 years or life imprisonment:
a) Appropriating property valued at 500,000,000 VND or more;
b) (Repealed)
c) Exploiting wartime, emergency situations.”
Additionally, offenders may be fined from 10,000,000 VND to 100,000,000 VND, prohibited from holding certain positions, banned from practicing certain professions or performing certain jobs for 01 year to 05 years, or have part or all of their property confiscated.
According to Article 174 of the CC, fraudulent appropriation of property is defined as the act of using deceitful means to appropriate another’s property. In real estate transactions, fraudulent acts may include using false information to deceive others into transferring money or property, deceitfully selling non-existent plots of land or apartments, or selling properties not owned by the seller. The perpetrator is aware that the provided information is false but still uses deceitful means to make the buyer believe and proceed with the transaction. The deceitful act must aim to appropriate property.
Penalties for Fraudulent Appropriation of Property can range from non-custodial reform to life imprisonment, depending on the severity of the act and the value of the appropriated property. Offenders may also face additional penalties ranging from 10,000,000 VND to 100,000,000 VND, be prohibited from holding certain positions, banned from practicing certain professions or performing certain jobs for 01 year to 05 years, or have part or all of their property confiscated.
(ii) For Customer Deception, the CC provides in Article 198 as follows:
“1. Any person who, in the purchase, sale of goods, or provision of services, manipulates measurements, weights, quantities, or uses other deceitful means in one of the following cases, shall be subject to a warning, a fine ranging from 10,000,000 VND to 100,000,000 VND, or non-custodial reform for up to 03 years:
a) Having been administratively sanctioned for this act or having been convicted of this crime, without yet being cleared of the criminal record but still committing the violation;
b) Gaining illicit profits from 5,000,000 VND to under 50,000,000 VND.
2. Committing the crime in one of the following cases shall be subject to a fine ranging from 100,000,000 VND to 500,000,000 VND or imprisonment from 01 year to 05 years:
a) Organized;
b) Professional nature;
c) Using cunning means;
d) Gaining illicit profits of 50,000,000 VND or more.”
3. Offenders may also be subject to a fine ranging from 20,000,000 VND to 100,000,000 VND, banned from practicing certain professions or performing certain jobs for 01 year to 05 years.
In real estate transactions, customer deception can include providing false or misleading information about products or services to deceive and illicitly profit from customers. For instance, investors, real estate businesses, or brokers may use false advertisements to entice and lure customers into investing in projects, not fully disclosing project information and changes during the investment process, the quality of the project, or delivering real estate that does not meet the promised features, legal documents, or ownership conditions as committed in the transaction or as required by law.
Penalties for Customer Deception can range from a fine of 10,000,000 VND to 500,000,000 VND, non-custodial reform for up to 3 years, or imprisonment from 1 year to 5 years.
Unlike fraudulent appropriation of property, customer deception is considered less dangerous in nature. The legal consequences of these two acts are also different. Customer deception occurs in the process of buying and selling goods (i.e., real estate), where the customer (i.e., the real estate buyer) still receives the real estate, and the customer may not even know they are being deceived. In contrast, fraudulent appropriation is identified as deceit aimed at appropriating property. In fraudulent real estate transactions, buyers often do not receive the property and are not guaranteed any rights. Particularly, in fraudulent acts, the intent to appropriate property is usually predetermined by the fraudster. Deceptive acts are the means to realize the intent of appropriating property.
IV. SOME SHORTCOMINGS IN APPLYING CRIMINAL LAW TO PROTECT THE RIGHTS OF REAL ESTATE BUYERS
Protecting the rights of real estate buyers through criminal law, specifically by applying the CC, is essential to ensure fairness and social safety. In reality, many violations of the law in real estate transactions have occurred, but very few have been prosecuted. Research indicates that using the CC to protect the rights of real estate buyers still has some shortcomings, specifically:
(i) The law does not yet stipulate criminal responsibility for fraudulent appropriation of property by commercial legal entities.
One example is the transfer of land use rights by the Alibaba Real Estate Corporation. According to the first-instance trial, Alibaba Real Estate Corporation, established by Nguyễn Thái Luyện, engaged in real estate business. Nguyễn Thái Luyện founded 22 legal entities, assigning them to relatives and employees, including 12 companies acting as investors in 58 fictitious real estate projects in Đồng Nai, Vũng Tàu, and Bình Thuận.
Nguyễn Thái Luyện directed accomplices to illegally subdivide and separate lots and used fraudulent advertising to sell to thousands of people. To appropriate an especially large amount of property, Luyện developed a business method based on fictitious projects not approved by local authorities, self-naming and mapping them on agricultural land.
Nguyễn Thái Luyện also used a trick of committing to repurchase at a higher price by 30% after 12 months or 38% after 15 months from the date of payment or renting back at a rate of 2% per month from the signing date, paying 95% of the contract value. Using this method, most customers receiving land plots from Alibaba did not receive the promised land use rights certificates.
Through these tricks, Nguyễn Thái Luyện and his accomplices appropriated nearly 2,500 billion VND from 4,560 customers. In the first-instance criminal judgment No. 607/2022/HS-ST dated December 29, 2022, the People’s Court of Hồ Chí Minh City convicted Nguyễn Thái Luyện and his accomplices of Fraudulent Appropriation of Property and Money Laundering.
Nguyễn Thái Luyện was sentenced to life imprisonment for fraudulent appropriation of property. In this case, although the fraudulent appropriation of property was clear, the investigation agency could not prosecute and sanction Alibaba as a legal entity because, under the 2015 CC, legal entities are not liable for fraudulent appropriation of property; only individual members of Alibaba who committed fraud are held liable. In reality, however, Alibaba employees’ activities were hidden behind the company facade (Lê, 2019).
(ii) The interpretation of “deceitful means” and the act of “deception” in the Customer Deception offense is not consistent.
“Deceitful means” mentioned in the Customer Deception offense under Article 198 of the 2015 CC lacks specific details on what these deceitful means are, and whether the act of deceiving customers into signing contracts in real estate transactions constitutes “deceitful means” is not yet addressed in any documents. Moreover, the “deception” behaviors currently recorded in this law, including “manipulating measurements, weights, quantities,” do not fully reflect the existing behaviors in practice. The goods brought into transactions are very diverse, thus deceptive behaviors are also diverse, not just limited to measuring, weighing, counting, etc. Such a listing can lead to missing actual deceptive behaviors towards customers.
In practice, proving deceitful acts to make customers sign contracts is extremely difficult. The manifestations of customer deception are not always apparent, nor can they always be identified or gathered as physical evidence. Even if proven, the responsibility often remains at the level of civil liability. As a result, deceptive acts to make customers enter into real estate purchase contracts are mainly subject to administrative sanctions or resolved in civil disputes, making it difficult to handle criminal liability. This leads to legal loopholes and even missing criminal acts in cases where information is deliberately concealed, and customers are deceived into signing real estate purchase contracts.
(iii) The determination of damage for criminal liability is not consistent.
Real estate cases often intertwine with criminal, civil, and economic elements. Even the perspectives between judicial authorities, especially concerning proving the intent to appropriate and determining damages, are not consistent, leading to significant difficulties and delays for functional agencies in handling violations (Đặng, 2024). For example, in the case of Mr. Lê Thanh Thản being prosecuted for “Customer Deception,” the investigation took 3 years.
In July 2019, the Hanoi City Police Department initiated the case and prosecuted Mr. Lê Thanh Thản, Chairman of Mường Thanh Group. After 3 years of investigation, on April 23, 2023, the Hanoi City People’s Procuracy issued an indictment against Lê Thanh Thản for “Customer Deception.” In this case, Mr. Lê Thanh Thản directed advertisements and provided false information about the project’s legality to sell unlawfully created apartments. Buyers of apartments in his project received their houses and used them for residence, but the apartments were not eligible for land use rights certificates due to illegal construction not matching the approved planning (Phạm & Nguyễn, 2023).
According to the investigation conclusion, when implementing the project, Mr. Lê Thanh Thản organized illegal construction not in accordance with the approved planning. On August 10, the Hanoi City People’s Court brought the case to trial under point d, clause 2, Article 198 of the 2015 CC. However, during the trial, the court found some issues that could not be clarified, leading to a declaration to return the file for additional investigation (Đình, 2024). Thus, after 4 years from the initiation, the case returned to the investigation phase and remains unresolved. The prolonged resolution of the case significantly affected the rights of apartment buyers in this real estate project.
Additionally, in current real estate transactions, contracts are often signed with the seller as a legal entity. However, under Article 76 of the CC, similar to the fraudulent appropriation of property offense, commercial legal entities are not yet subject to criminal liability for Customer Deception. This is a shortcoming in the CC.
V. SOME RECOMMENDATIONS FOR IMPROVING THE LAW AND ENHANCING THE EFFECTIVENESS OF PROTECTING THE RIGHTS OF REAL ESTATE BUYERS FROM THE PERSPECTIVE OF CRIMINAL LAW
To enhance the effectiveness of protecting the rights of real estate buyers from the perspective of criminal law, the author proposes the following improvements to the CC:
(i) Currently, the subjects of the fraudulent appropriation of property and Customer Deception offenses are only individuals, not commercial legal entities. The lack of regulations on the criminal liability of commercial legal entities in real estate transactions creates a gap in criminal law. This allows organizations and companies to commit fraudulent acts without facing criminal liability. To address these shortcomings, it is necessary to research and expand the scope of subjects committing crimes (Customer Deception and fraudulent appropriation of property) to include commercial legal entities.
(ii) Clarifying the details of “deceitful means” and supplementing regulations on the act of “deception” in the Customer Deception offense. There should be a document guiding what constitutes “deceitful means” in this offense, as well as adjusting and supplementing the regulations on “deception” to include acts such as: hiding or deliberately not providing important information about products or services that could affect consumer decisions; providing false or inaccurate information or causing confusion about the characteristics, features, quality, or price of products or services. Supplementing these additional behaviors helps create a solid legal basis for addressing violations related to customer deception in general and real estate buyers in particular.
(iii) It is necessary to issue guidelines on determining damages for criminal liability in Customer Deception offenses. For example, in the case of Mr. Lê Thanh Thản mentioned above, accurately determining the amount of damage for criminal liability is unprecedented. In reality, the apartments were delivered to buyers according to the purchase contracts, and buyers in the real estate project received the apartments and resided normally. Therefore, researching and determining damages for criminal liability in real estate-related cases like this need guidance to hold the correct individuals accountable, commensurate with their actions, to effectively protect the rights of real estate buyers.
Alongside improving the provisions of criminal law to enhance the effectiveness of protecting the rights of real estate buyers, authorities should also implement additional measures such as:
(i) Stringent and timely handling of violations:
Fraudulent acts in real estate transactions need to be handled strictly according to criminal law. Prosecuting and strictly judging fraudsters will create a deterrent effect, preventing similar acts in the future.
(ii) Strengthening supervision of real estate projects and transactions:
In real estate-related cases, it is evident that the management and supervision by authorities are still limited, failing to timely detect and prevent fraudulent acts. Many non-existent projects are openly advertised and attract thousands of investors before being discovered. This highlights the need to improve the management and supervision of the real estate market. State management agencies need to enhance inspection and supervision of real estate projects, ensuring that investors and brokers comply with legal regulations.
(iii) Increasing awareness to prevent violations and protect the rights of real estate buyers:
Fraudulent acts are becoming increasingly sophisticated in creating fictitious projects with fake documents and legal contracts. Many unscrupulous real estate businesses circumvent the law, making agreements with customers under forms such as “Investment Contribution Contracts,” “Agreements on Real Estate Transfer Conditions,” “Promise of Transfer Contracts,” “Deposit Contracts,” “Reservation Contracts,” and promises that appeal to investors’ greed to establish transactions. The sophistication of these acts leads many people, despite efforts to verify information, to be deceived.
Warnings need to be issued to real estate buyers that the relationship between buyers and sellers established under these contracts follows the principle of “gain and loss,” so when discovering a non-existent project, it is difficult to pursue criminal charges. Proving the intent to appropriate property by these project owners is very challenging. Even if authorities initiate a prosecution, investigate, and prove the fraud, recovering the buyers’ money is not easy, as fraudsters may have dissipated the assets or spent them on personal expenses, leaving no means to recover and return to the victims (Đình C & Thái D, 2024).
Therefore, it is necessary to increase awareness and warn of deceptive tactics to help real estate buyers remain vigilant when engaging in real estate transactions. Buyers should be advised to keep all important evidence to prove the transaction between the parties. In case of discovering fraud, buyers should immediately report the act to the local polic
VI. CONCLUSION
Real estate is a valuable asset. Transactions involving real estate need to ensure the safety of all parties involved. However, fraudulent acts in real estate transactions are becoming increasingly sophisticated, causing significant damage to buyers. These acts not only impact the financial situation of real estate buyers but also erode trust in the real estate market. Criminal law plays an important role in protecting the rights of real estate buyers by identifying and handling criminal acts, creating deterrence mechanisms, and preventing criminal behavior. By holding offenders criminally liable for legal violations, criminal law not only protects real estate buyers but also contributes to creating a transparent and safe real estate transaction environment.
REFERENCES
- First-instance criminal judgment No. 607/2022/HS-ST dated December 29, 2022, People’s Court of Hồ Chí Minh City on the offense of Fraudulent Appropriation of Property and Money Laundering against defendant Nguyễn Thái Luyện and accomplices.
- Appellate criminal judgment No. 300/2023/HS-PT dated May 19, 2023, People’s Court of Hồ Chí Minh City on the offense of Fraudulent Appropriation of Property and Money Laundering against defendant Nguyễn Thái Luyện and accomplices.
- Đặng N. T (2024) Why is it difficult to handle the criminal offense of customer deception? Retrieved from https://www.nguoiduatin.vn/vi-sao-kho-xu-ly-hinh-su-toi-lua-doi-khach-hang-204663122.htm
- Đình C & Thái D (2024), Identifying fraud tactics through capital mobilization and business cooperation, Legal Electronic Journal, retrieved from https://phaply.net.vn/nhan-dien-nhung-thu-doan-cua-toi-pham-lua-dao-thong-qua-hinh-thuc-huy-dong-von-hop-tac-kinh-doanh-a257363.html
- Đình C (2024) Customer deception in business is rarely prosecuted: Practical research and recommendations, retrieved from https://phaply.net.vn/hanh-vi-lua-doi-khach-hang-trong-kinh-doanh-it-bi-truy-cuu-trach-nhiem-hinh-su-nghien-cuu-tu-thuc-te-va-kien-nghi-a256761.html
- Lê V. M (2019), From 3 shocking real estate fraud cases: Recommendations to close legal loopholes, Legal Electronic Journal, retrieved from https://phaply.net.vn/tu-3-vu-an-lua-dao-trong-kinh-doanh-bat-dong-san-gay-chan-dong-kien-nghi-bit-cac-lo-hong-phap-luat-a213165.html
- Phạm D & Nguyễn H (2023), How was Mr. Lê Thanh Thản accused of deceiving 500 homebuyers? Retrieved from https://vnexpress.net/vi-sao-ong-le-thanh-than-bi-cao-buoc-lua-doi-gan-500-nguoi-mua-nha-4597018.html
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