07 steps to transfer apartment purchase contracts

Transfers of apartment purchase contracts are no longer uncommon occurrences and can occur when the seller is unable to continue to maintain financial obligations with the bank. Such transfers may also occur when the buyer desires practical ownership of a house or houses instead of simply ownership on paperwork.

The majority of those who transfer an apartment purchase contract for the first time, will find the process challenging and cumbersome for all parties involved.  Many instances include a lack of understanding of the procedures, in which each party will encounter many disadvantages and incur risks.

Therefore, it is important to have a have a grasp of the sequence, procedures, time limits, and notes when transferring an apartment purchase contract. Understanding this issue, CNC’s lawyers provide readers with 7 detailed steps to transfer apartment purchase contracts to help all parties throughout the process.

Flowchart 1 –  7 steps for transferring an apartment purchase contract  without pink book

 

Step 1: Carefully review the legal status of the apartment building

Checking and evaluating relevant information about the apartment building plays an important role in limiting risks when receiving or transferring an apartment purchase contract.

The relevant information about the apartment, as well as the apartment purchase contract that the parties need to review, includes two main types and include information relative to the:

• Type 1: asset status (apartment building or project) and
• Type 2: seller/owner of the apartment building.

 

Flowchart 2 – Types of information to be checked and evaluated when transferring an apartment sales contract

 

Accordingly, the information related to the apartment building or project has many types, each of which depend on the needs and purposes of the buyer when buying the apartment. In fact, buyers often focus on checking, evaluating, and clarifying the following questions:

• When (in what year) was the apartment building or project completed?
• Does the apartment building or project have any negative information (for example, the feasibility of obtaining pink books for apartment buildings, apartment quality, evaluation of residents, online community)?
• Why hasn’t the apartment building or project been issued a pink book yet (is it due to difficulties in determining the financial obligations of the Investor, planning, or disputes with the Contractor)?
• Does the apartment building have any restrictions on the transfer of ownership (for example, resettlement houses)?
• Is the apartment building currently mortgaged at a bank from which the seller has borrowed money?
• Is the design of the apartment building optimal (area of each room, traffic access, balcony, terrace, and utilities)?

 

Similarly, the information related to the seller/transferor that the buyer/transferee usually carefully investigates includes:

• Why the seller needs to sell the apartment.
• How many co-owners there are.
• Do the owners and co-owners have a mutual desire to sell the apartment?
• Have owner tax obligations been satisfied to the state or not?
• Whether or not the expected payment term that the Seller sets is suitable for the buyer’s capital arrangement?

 Flowchart 3 – 2 Types of information to check when receiving apartment transfer

 

Step 2: Request confirmation about pink book unavailability

Upon being satisfied with the apartment and not seeing any legal issues related to the apartment or the transferor, that would inhibit the transfer, the transferor must request a confirmation letter from the Employer, which clearly states that the apartment HAS NOT had its pink book issued by the Employer.

Requesting confirmation of the apartment’s legal status usually takes about 1-2 days, depending on the cooperation of the Employer (for example, whether the legal representative of the Employer is on a business trip or not, whether the Employer facilitates the confirmation for transfer or not).

Employers often do not charge a fee for this procedure, however, the Employer may charge a confirmation fee for some projects, usually in the amount of 500,000 VND per confirmation.

 

Step 3: Deposit

To demonstrate the intention and commitment of the parties to the transfer of the sales contract, the buyer usually advances a deposit to the seller.

Although there is no specific regulation regarding the deposit, the deposit ratio is agreed upon by the parties. However, based on CNC’s experience, the deposit ratio depends on many factors such as the:

• Deposit value usually does not exceed 30-percent (30%) of the value of the apartment.
• Seller’s capital requirements.
• Buyer’s ability to secure
• Expected time for the parties to sign the sales contract and transfer.
• Situation (liquidity) of the market.

 

Special case

Special circumstances (for example, the Employer refuses to support the confirmation of the apartment pink book status) are of little concern. The parties may still sign a promise to buy and sell contracts and once the apartment is granted a pink book, the seller/transferor is obligated to transfer the contract to the buyer/recipient.

The promise to buy and sell contracts can be signed at the notary public’s office. However, there are 3 major disadvantages that the parties will encounter:

• Ability to change or adjust the content of promises to buy and sell contracts is often limited whenthey are signed at the notary public’s office.
• Signing of promises to buy and sell contracts will incur fees for each party and are based on a percentage of the value of the apartment. Most often, the parties pay between 5,000,000 VND to 7,000,000 VND.
• If the buyer does not fulfill the obligation on the due date, the seller/transferor will definitely encounter many legal challenges.

Therefore, it is best that the parties agree on the content and sign the promise to buy and sell contracts and avoid the notary public’s office.

 

Flowchart 4 – Cases of signing the promise to buy and sell contract

 

Just as the promise to buy and sell contracts signed at the notary public’s office, the promise to buy and sell contracts is signed between the parties and is also valid and recognized by law. However, the parties are advised to make a detailed and specific promise to buy and sell contract to anticipate any unforeseen circumstances that may arise.

In this third step, the most important thing that the buyer needs to answer is:

• Whether or not the apartment currently mortgaged;
• Duration (term) of the mortgage/loan and the remaining loan amount;
• Does the seller have the right to settle the loan before the due date;
• What is the earliest time that the seller is allowed to settle the loan prior to the due date;
• Are there any penalties from the bank that the seller or buyer is obligated to pay when settling the loan prior to the due date;
• How long after the seller settles the obligation will the bank release the mortgage.

 

 

Flowchart 5 – issues to note when the apartment is mortgaged for a loan

 

The aforementioned questions are the content that will determine how the parties will proceed with transactions, deposits, or payments.

Whenver the apartment is being used as collateral for a loan, the procedures outlined in Flowchart 1-7 for transferring the apartment purchase contract will commence as follows:

 

Transferring ownership of an apartment when the certificate of ownership has not been issued (still under mortgage)

 

Flowchart 6 – 8 steps to transfer an unsold apartment sales contract under mortgage.

 

Procedures for resolving the apartment mortgage at the bank.

The mortgage resolution process at the bank depends on the bank. Some banks resolving mortages before the minimum loan period, will require the parties to pay a penalty of about 1.5-percent (1.5%) of the loan value to the bank.

At that time, the bank will also need to sign with all three parties. The time for the bank to complete its obligations after the selling party has completed its obligations takes about 3 working days.

At that time, the procedures for resolving the asset mortgage will commence as follows:

At the same time, not only the buyer is concerned about the mortgage resolution at the bank, but the seller also needs to understand the sequence and procedures at the bank in case the buyer does not have the financial capacity and has to use the apartment as collateral for a loan.

At that time, the procedures for transferring the apartment purchase contract in Flowchart 1-7 for transferring the apartment purchase contract will be adjusted as follows:

 

Transfer procedures for the sale and purchase contract of an apartment in the absence of a certificate (used as mortgage):

Flowchart 8 – 10 Steps for Transferring a Purchase Agreement for an Unsold Apartment (Used for Mortgage)

Note

Concerning the flowchart above, it is also important to note that:

• The documents that the buyer needs to provide to the bank include the information listed in Flowchart 3-2, the typeof information that needs to be verified when receiving the apartment transfer. The bank usually only provides preliminary information to the buyer about the possibility of granting a credit limit to the buyer as a basis for negotiating with the seller on related issues.
• Upon signing the apartment purchase contract transfer document, the seller will keep the records and only hand over the records of the apartment after the bank has notified the disbursement of the loan amount to the seller’s account.
• The amount of money that the bank disburses into the seller’s account may be frozen or withheld until the Developer signs the apartment purchase contract transfer document for the buyer.

 

Step 4: Sign and notarize the apartment purchase contract transfer

When performing this step, the parties need to note:

• Prerequisites for signing apartment purchase contract transfers at the notary office requires that the parties have the original apartment purchase contract and the apartment purchase contract transfer document (for previously transferred apartments), and identifying information for each party.
• A valid power of attorney is required whenever the seller is a co-owner.

At the same time, to facilitate the signing of the apartment purchase contract transfer, the parties also need to:

• Discuss and agree on a date to sign the purchase contract and transfer document
• Prepare relevant documents and materials related to the apartment, including the transfer of minutes, the purchase contract, the confirmation of payment to the Developer, the confirmation of the Developer that the apartment has not submitted documents for issuing the pink book, etc.
• Prepare personal documents and power of attorney, if necessary.
• Schedule an appointment with the notary office and prepare the content of the purchase contract and transfer document (if possible).

Step 5: Transferor fulfills tax and fee obligations

The obligation of each party will be agreed upon by the parties. Typically, the transferor will be responsible for paying taxes, fees, and charges, such as:

• Personal income tax (if any)
• Notary fees
• Brokerage fees (if any)
• Costs payable to the Developer, if any
• Miscellaneous

Fulfilling tax and fee obligations of the transferor is the basis for the Developer to sign the transfer confirmation document for the buyer. However, it should be noted that in some cases, the Developer can still confirm the transfer document when the transferor has not yet fulfilled tax and fee obligations.

Therefore, the buyer needs to receive evidence that the transferor has fulfilled tax and fee obligations. If not, the receiving party may be restricted from transferring in the future if taxes, fees (and late payment penalties) arise.

 

Step 6: New contract transfer contract confirmation is signed

Ideally, the transferor will complete this step as soon as possible, because only after the Developer has signed the transfer confirmation contract can the transferor receive the final payment (if any) that the buyer has not yet paid.

Of course, the content of the confirmation document for the transfer may vary depending on the specific Developer. However, in essence, this document needs to :

• Identify the apartment that the transferring party and the receiving party are aiming for.
• Announce the time when the transferor’s obligation concludes.
• Announce the time when the receiver’s obligation commences.

 

Step 7: Transaction completion

At this step, usually the parties will settle all remaining financial obligations (if any), surrender the keys, elevator access cards, and utilities for use.

Simultanesously, the parties may need to sign a transfer agreement for (i) the electricity and water meters up and until the handover date; (ii) obligations regarding taxes, fees, and miscellaneous charges that the seller may still owe the Management Board; (iii) cancel the car card that the previous owner has registered, etc.

 

Conclusion

Transfer of apartment sales contract involves many different steps and stages, and there are potential legal risks. Therefore, if you are not familiar with these types of transfer procedures, it is advised that you have a lawyer to assist you. During the transfer process, there are 3 important aspects to be keenly aware of:

• Is the apartment mortgaged as collateral;
• Whether or not to sign a promise to buy and sell contract;
• Has the transferring party fulfilled tax, fee, and charge obligations.

 

Contact

We hope that this article, describing the 7 step process of transferring apartment sales contracts, is helpful. Please contact us at your earliest convenience for further assistance.