The Real Estate Scandal: Unveiling the Billion-Dollar Fines for Breaches

Heavy fines of up to 1 billion VND imposed on real estate businesses

Decree No. 16/2022/ND-CP (referred to as Decree 16), which took effect on January 28, 2022, stipulates administrative sanctions for violations in the construction sector.

According to the Ministry of Construction, in the past, some investors, driven by economic interests, intentionally committed violations such as not disclosing full information when trading real estate, putting real estate up for sale without meeting the prescribed conditions, and collecting large sums of money as deposits from home buyers, adversely affecting the rights and interests of the people.

Therefore, the Ministry has focused on and proposed stricter penalties in the new decree, which replaces Decree No. 16, for such violations.

The fine for violations related to non-disclosure of mortgage information on residential houses, construction works, floor areas, land use rights, and real estate projects has been increased to a range of 800 million VND to 1 billion VND.

The Ministry of Construction stated that the act of non-disclosure or insufficient disclosure of project information had been subject to a fine of 100 million to 120 million VND under Decree 16. However, in reality, there have been cases where investors mortgaged their projects to banks and simultaneously sold them to people without informing the buyers about the mortgage. As a result, buyers, unaware of the true status of the property, signed purchase agreements only to find out later that the property had been mortgaged when the bank auctioned it.

The Ministry of Construction proposed increasing the maximum fine to 1 billion VND for various violations in real estate business. Photo: Hoang Ha

In response to social concerns, the Ministry of Construction has studied and proposed a separate provision for the non-disclosure of mortgage information, with a maximum fine of up to 1 billion VND.

Some opinions suggest that the fine, despite the increase, is still relatively low compared to the profits that investors can make, which explains why many investors deliberately break the law, disregarding the rights and interests of customers.

The Ministry of Construction affirmed that this is the maximum penalty prescribed by the Law on Handling of Administrative Violations for the real estate business sector.

Specifically, according to Article 24 of this Law, the maximum fine for violations in the real estate business field is 1 billion VND, applicable to organizations.

“Based on this regulation, the draft decree has adjusted the penalty levels for some violations in the real estate business field, with a maximum fine of up to 1 billion VND. In addition, the draft decree also stipulates that investors must disclose project information truthfully and fully and will be subject to supplementary penalties, including the suspension of real estate business activities,” the Ministry of Construction said.

Suspension of business activities for a definite period

Similarly, the fine for real estate businesses operating without meeting the prescribed conditions or without permission has been increased from 600 million VND to a maximum of 1 billion VND.

The Ministry of Construction added that, according to the draft decree, violating organizations and individuals would also be subject to supplementary penalties, including the suspension of real estate business activities for a definite period, and remedial measures to rectify the consequences of their violations.

These remedial measures may include forcing the disclosure of information as prescribed by law, forcing the revision of contracts related to land use rights, forcing the return of various fees and amounts related to real estate business to buyers, forcing the refund of deposits exceeding the prescribed limit, and forcing the completion of procedures for granting land use certificates (“red books”), among others.

The violations and penalties specified in the draft decree have been carefully considered by the Ministry of Construction, and the penalties (including primary and supplementary penalties) are designed to be deterrent. Unscrupulous investors who conceal information will be severely punished, and the rights and interests of customers and people will be protected by law, minimizing the adverse effects of administrative violations.

Hong Khanh