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Case Study: Losing a VND10 Billion Deposit on an Unlicensed Project

12 min readFLAT LAW FIRM
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Case Study: Losing a VND10 Billion Deposit on a Project Without a Construction Permit

Note: the scenario below is a hypothetical constructed from patterns commonly seen in the real estate market. Names of individuals, businesses and places have been anonymised; any resemblance is coincidental.

Mr B. — an individual investor in Ho Chi Minh City — was introduced by a broker to a shophouse project in a southern province, advertised as "prime location, early-bird pricing, guaranteed 8%/year rental yield". After two "site visits" (in fact, viewing the scale model and 3D renderings at the sales office), Mr B. signed a deposit agreement of VND10 billion to reserve 5 future-formed shophouses, with the next 20% payment due in 30 days.

Six months later, the project was still an empty plot. Digging deeper, Mr B. discovered: the project had no construction permit, nor any document in the list of conditions for trading future-formed real estate. The developer — Company A — offered excuses, then asked Mr B. to "wait a little longer" or switch to another of its projects. When Mr B. demanded the deposit back, the company replied: "the money has gone into project development costs; we will repay gradually".

VND10 billion — nearly the family's entire savings — was stuck. This is not a rare story. This article dissects the case to show: where the mistakes were, how the law protects buyers, and how not to become the next Mr B.

Contents

1. Reconstructing the timeline: where the money went, where it went wrong

Month 1: Mr B. saw the advertisement and visited the sales office. The broker showed: the land use right certificate for the plot (urban residential land, in Company A's name), the investment policy approval decision, 3D renderings. Nobody showed a construction permit — and Mr B. never asked.

Month 2: Signing the VND10 billion "deposit agreement" for 5 units (VND2 billion deposit each on a projected price of VND12 billion each). The money went to a personal account of a Company A executive — not the company account. The agreement stated: "the buyer forfeits the deposit if not proceeding; the seller pays double if not performing" — standard deposit penalty terms under Article 328 of the 2015 Civil Code, but placed in a transaction where the seller had no standing to sell.

Months 3–6: When the second payment (20%) came due, Mr B. visited the site and found the land still empty. Asked about the construction permit, the company said it was "finalising procedures". Mr B. stopped paying.

Month 7: Mr B. sent a written demand for the deposit's return. Company A responded evasively. Mr B. found a lawyer.

The first — and gravest — mistake was already in month 1: Mr B. never checked the legal conditions for trading future-formed real estate before signing anything or transferring a single dong.

The 2023 Law on Real Estate Business (No. 29/2023/QH15, effective 01/8/2024) tightens "selling homes on paper" with three layers of barriers:

Layer 1 — Trading conditions (Article 24). Future-formed homes and structures may only be traded once all conditions are met, including: land use right documents; a construction permit (or substitute documents as prescribed); the commencement notice; acceptance documents for completed technical infrastructure… Company A's project had no construction permit and no substitutes — i.e. it did not qualify for trading. Any capital mobilisation from customers as deposits, reservations, investment cooperation… at this stage is unlawful.

Layer 2 — Deposit cap (Article 23(5)). Even when qualified, a developer may only collect deposits of up to 5% of the sale price, and the deposit agreement must state the sale price. In the case, the VND10 billion deposit on a projected total price of VND60 billion (5 units × VND12 billion) equals 16.7% — far above the 5% cap (maximum VND3 billion). This is an independent violation regardless of the permit issue.

Layer 3 — Payment caps and payment channels (Article 25, Article 48(2)). First payment no more than 30% of contract value (including deposit); total instalments no more than 70% before handover (50% if the seller is foreign-invested). And all money a project developer receives from customers must go through accounts at credit institutions — Mr B.'s transfer to an executive's personal account was a red flag he missed.

3. Dissecting the buyer's 5 mistakes

Mistake 1 — Trusting the scale model, not checking documents. The land use right certificate and investment policy approval the broker showed only prove Company A holds the land and may study the project — not that the project may be sold. The two document types have entirely different legal weight.

Mistake 2 — Never asking about the construction permit and the eligibility-for-sale notice. By regulation, before selling future-formed homes the developer must have the Department of Construction's written notice of eligibility. Buyers have the right to demand to see it — and should demand it in writing.

Mistake 3 — Transferring money to a personal account. All payments must go through the company account at a bank (Article 48(2)). Transfers to a personal account both breach the rules and make proving cash flows and recovering money later harder — and signal fund misappropriation.

Mistake 4 — Depositing above the 5% cap without realising it evidences the developer's illegality. Buyers often think "the bigger the deposit, the safer the unit". In reality, a deposit above 5% evidences the developer breaking the law — and the excess is the first amount recoverable.

Mistake 5 — No lawyer reviewed the agreement before signing. The VND10 billion deposit agreement was signed in 30 minutes at the sales office with no independent legal check. A lawyer's review fee (a few tens of millions of dong) is negligible against a VND10 billion risk.

4. The developer's violations: what the law prohibits

From Company A's side, the violation chain is fairly clear:

  1. Mobilising capital without trading eligibility (breach of Article 24): collecting a VND10 billion deposit with no construction permit and unmet trading conditions — an act subject to administrative sanctions in real estate business, with compulsory return of unlawfully collected money.
  2. Collecting deposits above 5% of the sale price (breach of Article 23(5)): 16.7% against a 5% cap.
  3. Receiving money outside the enterprise's bank account (breach of Article 48(2)): into a personal account.
  4. Providing misleading information about the project's legal status during marketing — signs of deceiving customers, potentially attracting heavier handling depending on gravity.

Each violation is an independent legal basis for the buyer to demand a refund and compensation.

For Mr B., three parallel routes exist:

Route 1 — Negotiate, demand direct return. Basis: the developer collected money unlawfully and must return everything collected; plus the deposit penalty clause (the deposit-taker in breach returns the deposit and bears an equal penalty). The demand letter must cite the legal basis (Articles 23 and 24 of the 2023 Law on Real Estate Business; Article 328 of the Civil Code), set a return deadline, and warn of routes 2 and 3 if uncooperative. In many real cases, the developer pays — part or all — once the buyer has a lawyer and solid legal grounds.

Route 2 — Sue in court. Seek: a declaration that the deposit agreement is invalid for violating a legal prohibition (Article 123 of the Civil Code — a civil transaction violating a legal prohibition is invalid), an order to return the VND10 billion, and damages (interest, opportunity costs, lawyer fees). Attach a request for interim urgent measures (account freezing, asset distraint) to prevent asset dissipation during proceedings.

Route 3 — Report the administrative violation. File with the Department of Construction, the construction inspectorate, and the provincial People's Committee where the project sits, seeking administrative handling of the developer. The sanctioning decision (recording unlawful capital mobilisation and over-cap deposit collection) will be powerful evidence for the civil suit in route 2.

In the case study, the typical outcome of similar real cases: the developer returns part to "calm things down"; the rest requires litigation. What decides the recovery speed is not "being right" — but evidence (bank transfer records, the deposit agreement, message exchanges, advertising materials) and speed of action (early distraint before assets are dissipated).

6. A 7-point pre-deposit checklist

This is the most important part of the article — a checklist anyone can run before paying:

  • [ ] 1. The project's land use right documents: see the original or certified copy; cross-check the developer's name, land purpose, term. The land must be residential (for housing projects) or fit the project type.
  • [ ] 2. The construction permit (or substitutes under Article 24): demand the original. No permit = not for sale. No exceptions for "coming soon" or "being applied for".
  • [ ] 3. The Department of Construction's notice of eligibility for sale: this is the official "pass" for selling future-formed homes. Without it, every developer promise is worthless.
  • [ ] 4. The bank guarantee letter: the developer must have a bank guaranteeing its financial obligations to customers. Ask for the guarantor bank's name and verify directly with that bank.
  • [ ] 5. The developer's legal entity: look up the business registration (tax code, operating status, legal representative); check for tax enforcement or major lawsuits.
  • [ ] 6. The detailed 1/500 plan and actual progress: compare the approved plan with advertising; visit the actual construction site, don't just look at the scale model.
  • [ ] 7. The model contract: read carefully before signing; check the price includes VAT, the 2% maintenance fund (for apartments), payment schedules within the 30%/70% caps; never sign "reservation slips", "cooperation agreements" or "capital contribution contracts" to dodge the law — all are disguised capital mobilisation.

And two golden rules: never transfer money to a personal account; deposits never exceed 5% of the sale price.

7. Already "stuck": a 5-step action plan

If you are in Mr B.'s position — money transferred, project in trouble — follow this plan, the sooner the better:

Step 1 — Collect and preserve evidence. Bank statements proving the transfer (even to a personal account — it further evidences the developer's violation); the deposit agreement/contract; all messages, emails, advertising materials, recordings of consultations (if any). Photograph, back up in multiple places.

Step 2 — Send a written refund demand. State the legal basis, the amount demanded, the deadline (15–30 days). Send by registered post to create evidence.

Step 3 — Report the administrative violation. File with the Department of Construction/construction inspectorate and the provincial People's Committee. Goal: a sanctioning decision as evidence, plus pressure to bring the developer to the negotiating table.

Step 4 — Sue and seek interim urgent measures. Don't hesitate if negotiation stalls — every month increases the risk of asset dissipation. Seek account freezing and asset distraint as soon as you file.

Step 5 — Enforce the judgment thoroughly. Winning is only halfway; follow the enforcement process, distraint and asset auction to actually recover the money.

Frequently Asked Questions

May a project without a construction permit collect deposits? No, if the project has not met the conditions for trading future-formed real estate under Article 24 of the 2023 Law on Real Estate Business (including a construction permit or substitute documents as prescribed). Developers may only collect deposits of up to 5% of the sale price once homes or structures meet the conditions for trading (Article 23(5)). Collecting deposits before the conditions are met is a violation subject to administrative sanctions.

What is the maximum deposit a developer may collect? No more than 5% of the sale or hire-purchase price of future-formed homes, structures or floor area — and only once the conditions for trading are met (Article 23(5) of the 2023 Law on Real Estate Business). The deposit agreement must state the sale price clearly.

I already deposited on a non-qualifying project — can I get the money back? There is a basis to recover it. Collecting money before the project qualifies for trading is unlawful; the buyer may demand a full refund plus the deposit penalty per the agreement or damages. If the developer refuses, the buyer may sue in court or report the violation to state authorities.

Is a deposit agreement for a 'ghost' project valid? A deposit agreement is in principle a valid civil transaction if it meets Article 117 of the 2015 Civil Code. But where its purpose is trading future-formed real estate that does not qualify for trading, the buyer has grounds to seek a declaration of invalidity for violating a legal prohibition, and to demand a refund plus damages.

What are the maximum payment caps for future-formed homes? First payment no more than 30% of contract value (including deposit); subsequent payments follow construction progress but total no more than 70% before handover — 50% if the seller is a foreign-invested enterprise (Article 25(1) of the 2023 Law on Real Estate Business). All project receipts from customers must go through bank accounts (Article 48(2)).

What documents should I check before depositing on a future-formed home? Seven groups: (1) the project's land use right documents; (2) the construction permit (or substitutes under Article 24); (3) the Department of Construction's notice of eligibility for sale; (4) the bank's guarantee of financial obligations; (5) the developer's enterprise registration certificate (real estate business line included); (6) the detailed 1/500 plan; (7) the registered model contract. If any of (1)–(3) is missing, do not pay.

When to work with counsel

Buying future-formed real estate is a transaction where the buyer faces absolute information asymmetry against the developer — and where one mistake can cost billions of dong. Engage counsel at two moments: before depositing (legal review of the project — small cost, large preventive effect) and when money is already stuck (assessing evidence, choosing the optimal recovery route, conducting litigation and enforcement). Don't wait until the developer "disappears" to find a lawyer — by then much of the assets may be gone.

FLAT Law Firm advises and represents clients in deposit and future-formed real estate disputes — from refund negotiation to litigation and enforcement. Contact our hotline at 0988424851 for advice on your specific case.

References

  1. Law on Real Estate Business No. 29/2023/QH15 dated 28/11/2023, effective 01/8/2024 (Articles 23, 24, 25, 48).
  2. Civil Code No. 91/2015/QH13 dated 24/11/2015, effective 01/01/2017 (Articles 117, 123, 328).