Disputes Over Deposit Agreements in Real Estate Transactions: What Does Vietnamese Law Say?

In real estate transactions, a deposit agreement often becomes the “hot spot” that leads to disputes. If the deposit terms are vague or poorly drafted, a single party’s breach can derail the entire transaction and lead to lengthy legal complications. Below are the latest legal updates in Vietnam (as of 2025) and practical guidance on how to handle disputes over deposit agreements in real estate transactions.

1. Legal Nature: A Deposit Dispute Is a Civil Contract Dispute, Not a Land Dispute

According to Clause 47, Article 3 of the 2024 Land Law, a land dispute is defined as a disagreement over rights and obligations in land-related relations. However, a real estate deposit contract—which serves as a commitment to enter into or perform a transfer contract—is not considered a “land dispute.” Instead, it is classified as a civil contract dispute.

Therefore, when a dispute arises, it must be resolved under the Civil Code 2015, the Civil Procedure Code 2015, and relevant guiding regulations to determine the rights, obligations, and procedures of the parties.

2. Legal Provisions on Deposits and Forfeiture of Deposits

2.1 What Is a Deposit?

According to Clause 1, Article 328 of the Civil Code 2015:

“A deposit is the act of one party (the depositor) giving the other party (the deposit recipient) a sum of money or property of equivalent value within a certain period to ensure the conclusion or performance of a contract.”

Hence, a deposit is a security measure, not a transfer contract itself.

2.2 Penalties and Forfeiture Rules

If a party breaches the agreement, they may be liable for a deposit penalty, depending on the terms agreed upon by both parties. The law does not impose a specific limit on the penalty.

If the contract contains no clause about the penalty, Clause 2, Article 328 provides default rules:

• If the buyer (depositor) refuses to conclude or perform the contract → the deposit is forfeited to the seller (deposit recipient).

• If the seller (deposit recipient) refuses to conclude or perform the contract → they must return the deposit plus an amount equal to the deposit (i.e., double the amount) unless otherwise agreed.

Example: If a deposit of 100 million VND is made and the seller unilaterally cancels the deal, the seller must return 200 million VND (100 million deposit + 100 million penalty).

Note: If the agreement labels the payment as an “advance” rather than a “deposit,” the remedy upon breach differs—it typically requires repayment only, without a penalty, unless otherwise stated.

2.3 When Is a Deposit Contract Invalid?

A deposit contract may be declared invalid if it:

• Violates prohibitions of the law or social ethics;

• Is made under fraud, coercion, or mistake;

• Is executed by a person lacking legal capacity.

When a deposit contract is invalid, it is handled under the rules of invalid civil transactions (e.g., Article 146 of the Civil Code 2015) — both parties must return what they have received, except for reasonable preservation or transaction costs.

3. Procedures for Resolving Disputes Over Real Estate Deposit Contracts

3.1 Forms of Resolution

• Negotiation or Mediation: The parties may negotiate to reach a settlement, agree on compensation, refund, or contract performance.

• Grassroots Mediation: The 2024 Land Law encourages land-related disputes to be mediated at the commune or ward level. If the deposit dispute involves land elements (e.g., boundaries, land use), grassroots mediation may apply.

• Civil Litigation: If negotiation fails, the aggrieved party can file a lawsuit in a competent civil court to seek judicial resolution.

3.2 Jurisdiction of the Court

Under Articles 39 and 40 of the Civil Procedure Code 2015, for real estate deposit disputes, the plaintiff has two options:

• File the case at the court where the defendant resides or is headquartered;

• Or, choose the court where the contract is performed or where the real estate is located (as per point g, clause 1, Article 40).

However, some interpretations hold that since the subject matter involves real estate, the competent court should be the one where the property is located (point c, clause 1, Article 39).

Thus, jurisdiction can be flexible, but in practice, plaintiffs often choose the district-level court where the defendant resides or where the property is located.

3.3 Timelines and Procedures

Under Article 203 of the Civil Procedure Code 2015, the court must prepare for trial within four months of accepting the case; for complex matters, the period can be extended to no more than six months.

Key steps in litigation:

• Prepare a lawsuit petition and list of evidence (deposit contract, receipts, correspondence, etc.);

• Submit the petition to the competent court;

• The court accepts the case, reviews the documents, and may conduct mediation;

• Trial and judgment: If no appeal is filed within the legal period, the judgment takes effect.

If mediation succeeds, the court may issue a decision recognizing the settlement, ensuring its enforceability.

4. Practical Experience & Tips to Prevent Disputes

4.1 Draft Clear and Detailed Deposit Contracts

• Specify the deposit amount, deadline, performance conditions, and mutual rights and obligations.

• Clearly define what constitutes “refusal to perform” and exceptions such as force majeure or objective obstacles.

• If a specific penalty rate (e.g., 20% of the deposit value) is agreed upon, it must be explicitly stated.

4.2 Notarization, Certification, or Witness Confirmation

Although the law does not require notarization or certification for deposit agreements (only for transfer contracts), many disputes arise due to a lack of proof of payment. Therefore, parties should:

• Execute a written deposit agreement;

• Notarize or certify the document if possible;

• Have witnesses present;

• Keep payment receipts, bank transfers, or photos of the transaction.

4.3 Avoid Ambiguity: Distinguish Between “Deposit” and “Advance Payment”

Since the legal consequences differ, parties must explicitly state whether the sum is a deposit (with penalty provisions) or an advance payment (subject to refund only).

4.4 Verify Property Information and Transaction Progress

Common dispute triggers include:

• The seller’s failure to transfer ownership as scheduled;

• The property being under dispute, mortgage, or seizure without the buyer’s knowledge;

• The actual property size or title differing from the contract.

Before depositing, always verify the title deed, check for encumbrances, and document all commitments clearly in writing.

5. What to Do When a Dispute Arises

Suspend performance (if the breach is clear) and formally notify the other party in writing.

Negotiate or send a demand letter for refund and penalty payment.

If unresolved, file a civil lawsuit with the competent court.

During litigation, request the court to:

• Seize or freeze the property if necessary;

• Claim damages beyond the deposit penalty (e.g., expenses incurred due to the breach);

• Enforce deposit penalties under contract or default legal provisions;

• Apply interim injunctions to prevent property transfer during the proceedings.

6. Conclusion

Disputes over deposit agreements in real estate transactions often arise from unclear terms, incomplete property information, or unilateral withdrawal by a party. Under the Civil Code 2015, if the seller (deposit recipient) refuses to perform, they must return the deposit and pay an equal amount, unless otherwise agreed.

Disputes are generally resolved through civil litigation, with the court’s preparation time capped at 4–6 months.

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