A plot of land being fraudulently sold to multiple investors
It’s a fact that no investor wants to be a victim of land fraud. So how does a landowner benefit from the sale of a plot of land to multiple investors? Let’s discover the answer to that question through this article!
Stages of Unused Land Project Development
In order to arrive at the correct answer, essential knowledge of the stages of unused land project development would be required as it points out the risks that many investors potentially encounter when investing in unused land. To be specific, for an unused land project to be developed and conducted, the landowner must proceed through these seven stages:
- Publicly announce new project information
- Receive reservation order
- Officially announce the details of the unused land (price, amount, circumferences, and position)
- Receive a deposit
- Completion Land levelling and infrastructure
- Division of land and transfer land use rights
- Transfer documents to clients and receive payment
Stages of Unused Land Project Development
What are the risks?
Being evaluated as a lucrative means of investment, many investors decide to risk investing in unused land, even when there are unfavorable conditions within the deposit agreement, promise to enter into land purchase agreement, or other equivalent documents. Probably, the belief that “the price will increase in the future”, is the motivation behind many investors’ bold actions. For most investors, the deal is considered successful upon the division of land and the engraving of their name on the documents proving their land use rights However, the risks of investing in unused land are beyond the imagination of the investors. The landowner would likely take advantage of the investor’s investments and investors are likely to fall into a state of insolvency or never to reclaim their deposited money. Even worse, the landowner could sell it to multiple people.
Chủ đất nhận tiền bán đất từ nhiều nhà đầu tư
And that isn’t even the worst thing to come:
The discovery that the purchased land is not solely yours is probably the worst nightmare for most unused landowners. However, this is naught but a start for the series of disasters that are yet to come. After such an elaborate plan to maximize the acquired money, the land owner would surely have counters for the investors’ complaints. So as to continue on taking advantage of scammed money, the landowner would make up a myriad of reasons to evade his responsibilities. Some of the activities that a landowner may engage in are:
- Prolonging the division of land and transfer of land use rights to investors
- Notify the investor of inability to divide the land, or
- Negotiate with investors on compensation
Landowner’s methods
The usual course of action of investors
As a matter of course, upon receiving this news, the investors would prioritize the return of their deposited money and hope for a appropriate amount of compensation, for example, a deposit penalty corresponding to the amount of money paid. Some others would file a lawsuit, others would report it to competent authorities, or even resort to taking serious measures.
The carefully laid out trap
However, all of these above-mentioned activities would be in vain as the landowners would use every available means at their disposal to delay the return of the deposited money, negotiate with the investors about an unfeasible repayment plan, or even in cases of both sides reaching an agreement, the landowner could simply violate said agreement without any repercussions. The purposes of these delays and obstacles are to (1) divide the land and transfer this divided land to their acquaintances, afterward (2) list these parcels of land on the market at an exorbitant price. After subtracting the deposited money and the cost of land division, the amount of money earned would still be more than enough for the landowners to reimburse the investors. In some cases, the money earned would be put into the development of other unused land projects.
Investors falling for the trap laid by the land owner
The bitter reality and the belated lesson
At this point, the investor gradually realizes the common knowledge of investing, which are:
- Investing in unused land is a risky venture
- Landowners are likely to be the ones to have the last laugh
- As more and more investors fall for this trap, the better it is for the landowner
- The land lot is likely to bait funding for the landowner’s own purposes
- The investor should take the information given by the landowner with a grain of salt
- The longer the time it takes to negotiate, the more time the land owner could have with the amount of deposit
- The cost of hiring legal practitioners is much smaller than the damages incurred by the investor due to the negligence in signing the deposit agreement
The investor gradually realizes the lesson on investing in unused land
The roles of legal practitioners:
To avoid disastrous outcomes, the investors should know that legal practitioners could:
- Prevent these disastrous outcomes by offering legal advice to investors
- Analyze and review legal provisions to predict the possibility of the division of land
- Evaluate the capabilities and experience of the landowners in developing the unused land
- Advise investors on the risks of entering into deposit agreements, or suggesting beneficial adjustments to the agreement. In many cases, the investors could purchase the land lot at an appropriate price at the time if not distracted by the “the indemnity amount is double the amount of deposit”.
- Advise investors on the approach to recover the deposit or to accept/deny the landowner’s suggestion.
- Directly negotiate, draft documents and letters, and ensure the legal validity with the landowner; or
- Directly perform the recovery of the deposit in an efficient, effective, and legal manner
For more information
CNC is honored to be able to accompany and support clients in resolving issues arising from land use rights transactions – especially those cases pertaining to unused coastal land. Requests for support may be submitted via either email or phone through the contact information provided below:
Le The Hung | Managing Partner
T: (+84-28) 6276 9900
CNC©| A Boutique Commercial Law Firm The Sun Avenue, 28 Mai Chi Tho, An Phu Ward, District 2, Ho Chi Minh City, Vietnam T: (+84-26) 6276 9900 | (+84) 916 545 618
cnccounsel.com | contact@cnccounsel.com
Disclaimer: This article is prepared or used for the purpose of introducing or updating client on information about matters and/or the developments of legal perspective in Vietnam. The information contained within this article does NOT constitute advice of any kind and could be subjected to changes without prior notice.
