Buying a house with a loan contract: Don't let the chickens out to chase you

Customers who sign loan contracts to have the right to buy a house often come from investors circumventing the law to sell future housing when the project is not yet eligible for sale. Buying a house in this way, the buyer will bear many risks.

From the story of Project 34 Cau Dien and B5 Cau Dien

While busy preparing for his wife to give birth to their third child, Mr. Tuan was also struggling with a plan to reclaim the money he had paid for a house he bought nearly 6 years ago at Project 34 Cau Dien (Nam Tu Liem District, Hanoi) in the form of a loan contract.

In 2011, when the real estate market was in a fever again, buying a 3-bedroom apartment for less than 17.5 million VND/m2 was almost a dream for both Mr. Tuan and his wife. Therefore, they quickly signed a loan contract with the investor to have the right to buy the house without paying any attention to the legal issues of the project.

Not only Mr. Tuan, hundreds of other customers also bought houses in this project under the form of loan contracts. Those who paid less contributed 30% of the total value of the apartment, those who paid more contributed up to 70% of the value of the apartment. Not to mention, many customers had to pay the difference without a receipt when they had to buy back from secondary investors, or through the floors.

However, after signing the loan contract, many customers learned that the project only existed on drawings and 3D models, had not been approved by the authorities, and the investor's status was also ambiguous.

Therefore, many customers have come to the capital mobilization unit to request to cancel the contract and demand their money back. However, after 6 years of going to the company to sign the loan contract many times but still not getting their money back, while the project is still an empty lot, with only a few foundation piles, overgrown with grass, showing no signs of starting.

Buying a house through a loan or capital contribution contract has many risks.

After many unsuccessful attempts to get their money back, the customers sent a petition to the authorities, asking them to intervene to look into the investor’s irregularities. However, to date, the case has not been resolved.

"The solution of suing the investor to court to claim the money is feasible, but according to the lawyer's advice, the dispute resolution process is often lengthy and the results are unpredictable, while we are tired of running around in the litigation process. Therefore, I still hope to resolve the matter peacefully and get the money back without having to drag each other to court," said Mr. Tuan.

Meanwhile, at the B5 Cau Dien Project, more than 700 customers also paid to buy houses in this project in the form of capital contribution contracts, loan contracts, and deposit contracts. However, after 8 years, the project has not yet been approved by competent authorities for implementation.

In the recent trial of the Fraudulent Appropriation of Property case related to Project B5, the Trial Panel declared the transactions between customers and Housing Group (a party in the project investor consortium) invalid, and the parties returned to each other what they had received. Even the customers' request to receive interest according to the signed agreement was rejected by the court, declaring that there was no basis for calculating interest, because this was an illegal transaction.

Thus, in case the project is restarted, previous customers have no right to demand Housing Group to return their houses. Meanwhile, getting money back from these customers is not simple at present.

According to lawyer Vu Ngoc Chi, to get the money back, each individual client must have a request for enforcement. Even if the judgment states that the client is entitled to get the money back, if they do not have a request for enforcement, the enforcement agency will not handle it. In addition, to be eligible for enforcement, it also depends on the assets of the party subject to enforcement. If, after verification, the party subject to enforcement no longer has assets, then the conditions for enforcement are not met.

Many people still voluntarily buy "risk"

Not only at Project 34 Cau Dien and B5 Cau Dien, many other customers are also "stuck" with projects at the same time such as AZ Lam Vien, AZ Van Canh, 99 Tran Binh... because of loan contracts.

With such a lesson, along with the market falling into a slump, there was a period when the market was almost “clean” of capital mobilization projects in the form of loan contracts and capital contributions. However, recently, when the real estate market developed again, this form reappeared.

Not long ago, the Real Estate Investment Newspaper hotline received a call for help from a reader named C. (from Thanh Hoa), a customer who placed a deposit to buy an apartment at a Dai Mo project (Nam Tu Liem district).

According to this customer's application, because of the need to buy a house to live in, he went to the trading floor that was distributing a project in Dai Mo. Here, he was advised by a broker to sign a money transfer agreement with the content that he would proceed to sign a loan contract directly with the investor to buy a house in the project. When wondering why it was a loan contract, why there was no round stamp..., Mr. C. was explained by the sales staff: "It's just an administrative procedure, when paying 30%, there will be a sales contract and it will be signed directly with the investor".

Not knowing the law, trusting the broker's advice, and seeing that the project had a reasonable price, Mr. C. agreed to sign the money transfer agreement. However, when he held the loan contract and contacted several banks to borrow money to buy a house, no bank accepted this form of contract to lend. Afterwards, Mr. C. contacted the sales staff to ask to withdraw the money he had paid, but was refused by the brokerage.

Frustrated by the broker's attitude, Mr. C. hired a lawyer to file a petition to the authorities and the media. After nearly 6 months of fighting, the distribution floor agreed to refund the money to Mr. C. However, according to Mr. C., in that project, only his case was asking for the money back, while many other customers still accepted to buy houses and pay money according to this form of loan contract.

Lawyer Tran Duc Phuong, Ho Chi Minh City Bar Association, said that it is not possible to fully assess the reasons why loan contracts recur and why home buyers, despite knowing the risks, still agree to buy houses and pay money in this form. Perhaps, because the prices of projects "opened for sale" under loan contracts are often lower than the general level, while house prices have increased quite strongly, many people accept to buy houses in this form.

However, along with the low price comes the risk that can easily occur when the project is not licensed by the authorities, the investor uses the mobilized money for other purposes. Even if the project has been implemented, the risk is still easy to occur, because the loan contract is not for buying a house, so the investor's responsibilities will not be clear. By the time the project is eligible to be converted into a sales contract, many of the project's utilities, functions, areas, etc. may have changed in a different direction.

From another perspective, according to lawyer Phuong, the form of buying and selling houses under loan contracts has revived due to the participation of many secondary investors. These people buy houses under loan contracts to get cheap prices, then transfer them to others to enjoy the difference, so they do not pay much attention to the later developments of the project.

According to Investment Newspaper