Is it possible to mortgage or pledge houses to be built?

What is the future-built housing?

Future-built housing is a house in the process of investment and construction and has not been tested and put into use, a type of future-forming real estate that is becoming increasingly popular in today’s real estate transaction market. Transactions backed by future assets are becoming more popular and easier to execute than in previous years. As a result, relevant legal documents on mortgage and pledge activities are also regulated in greater detail and clarity to keep up with that development. However, many issues remain regarding whether future home buyers can mortgage or pledge their property.

Mortgage of future-built houses

In accordance with Articles 105, 107, 108, and 317 of Civil Code 2015 on assets to be formed in the future, as well as regulations on mortgage of property, mortgaging property is a legal transaction that is protected by law.

According to Clause 2, Article 147, and Article 148 of the Housing Law 2014, as well as guiding documents, individuals purchase future-built houses in housing investment projects, the investor has the right to mortgage this house at a credit institution in order to raise capital.

Conditions for mortgage of future-built houses

A future-built house is a specific type of collateral, legislators have added separate legal conditions to avoid risk problems. Individuals purchasing future houses formed by housing developers must meet the following conditions when performing mortgage transactions with credit institutions:

  1. signing a contract for the purchase and sale of a home with the project developers;
  2. having a written transfer agreement of the purchased houses in case of transfer;
  3. having proof that the buyers have paid the purchased price according to the agreed-upon schedule in the house purchase and sale contract;
  4. not being subject to complaints, lawsuits, or disputes regarding the house purchase and sale contract or the transfer of this house purchase and sale contract;
  5. not being subject to foreclosure of properties in accorandance with enforcement agencies’ decisions; and
  6. not being subject to a decision on land recovery or a notice of house clearance or demolition issued by a competent state agency.

Pledge of a future-built house

Under the Housing Law 2014, there is no rules regulating the mortgage of future-built houses. Whle Civil Code 2015 only stipulates mortgage of property in general. However, property governed by in articles 105, 107, 108 of Civil Code 2015 includes immovable property formed in the future. Therefore, it is understood that mortgage is also applied to future-built houses.

In short, mortgages or pledge of future-built houses are allowed under Vietnamese law, but buyers need to satisfy the required the above conditions to make transactions.

Disposal of mortgaged property

Disposal of mortgaged property is performed when the mortgagor fails to properly perform the obligations agreed upon in the mortgage contract. The handling of mortgaged housing properties formed in the future is very complicated. Civil Code, the Law on Credit Institutions, the Land Law, the Housing Law govern this issue, but these are only general provisions. Therefore, in this case, we must refer to Circular 16/2014/TTLT-BTP-BTNMT-NHNN guiding some issues on handling security assets. Specifically, in Article 8 of this Circular, the form of collateral is specified in detail and depends on the type of property mentioned in this Circular.

Accordingly, collaterals are divided into 3 separate types as follows:

  1. in case the mortgaged property is a commercial house to be formed in the future
  2. in case the mortgaged property is a social house to be formed in the future
  3. in case the security property is a type of property that is not in the case of the above-mentioned types of houses.