Home Real Estate The Great Real Estate Ruse: How ‘Land Schemes’ are Distorting the Market

Real Estate

The Great Real Estate Ruse: How ‘Land Schemes’ are Distorting the Market

6 December, 2024

The Sophisticated Schemes of Land Speculators

In recent times, there have been instances of individuals bidding extremely high prices for land only to back out, resulting in unsuccessful auctions. The most recent cases occurred in Thanh Oai and Soc Son, Hanoi, in late November 2024.

These incidents have raised questions among the public about the motives and intentions of these individuals, as well as potential solutions to address this issue effectively.

Attorney Nguyen Ngoc Hung, head of the Connecting Law Office (Hanoi Bar Association), stated that the unusual aspect of these recent cases lies in the fact that some individuals placed extremely high bids and then withdrew, causing the auctions to be canceled.

From a subjective perspective, this behavior is intentional, deliberate, and well-planned. There must be a significant “benefit” for these individuals to take such a risk, otherwise, they wouldn’t be willing to forfeit their deposit money.

Currently, many areas are experiencing artificial land price surges due to the manipulative tactics of speculators. Their actions have led to abnormal land price hikes, creating a chaotic market situation.

Consequently, ordinary citizens with a genuine need to purchase land at a fair price are unable to do so. They are either denied access or forced to buy from land speculators at inflated prices.

The plot of land up for auction in Soc Son district attracted bids of up to 30 billion VND per square meter.

In reality, there have been numerous instances where individuals have forfeited their deposits without facing criminal charges, emboldening these speculators to act with impunity.

From a legal standpoint, unless there is evidence of falsifying documents, colluding to suppress or inflate prices, it is challenging to assign criminal responsibility. Meanwhile, the administrative penalty stipulated in Clause 23 of Decree 82/2020/ND-CP, with a fine ranging from 7 million to 10 million VND, is insufficient to serve as a deterrent.

Attorney Nguyen Ngoc Hung suggested that typically, forfeiting a land auction deposit is considered a civil transaction. The bidder accepts the financial loss, whether due to a change in financial circumstances or a change of heart about the purchase. Therefore, the decision to back out of the auction stems from personal choice.

Attorney Nguyen Ngoc Hung, Head of the Connecting Law Office, Hanoi Bar Association

However, it is essential to consider criminal liability when there are indications of collusion or conspiracy to manipulate auction prices for personal gain. In the Soc Son case, the individuals involved had agreed to purchase the land at a maximum price of 30 million VND per square meter. If the price exceeded this threshold, they would “sabotage” the auction to ensure that no one could buy the desired lot, and the auction would be unsuccessful. Indeed, the events at the auction unfolded according to their plan. The auction was canceled after a bidder offered 30 billion VND per square meter and then withdrew. Therefore, initiating criminal proceedings for such behavior is appropriate.

Requiring Escrow Deposits for Land Auctions

To prevent individuals from exploiting legal loopholes to manipulate land prices and disrupt auctions, Attorney Hung suggested considering the following solutions:

– Require bidders to provide proof of financial capability and submit escrow deposits to guarantee contract performance. Bidders should only be allowed to place bids within the limit of their deposited funds. Auction houses should have the authority to deduct the deposit amount for each successful auction.

– Increase the deposit amount to 10-20% of the initial auction price.

– Implement penalties and compensation requirements corresponding to 30-50% of the auction value for bidders who back out after winning the auction.

– Maintain records and update information to prohibit individuals who have forfeited their deposits from participating in any future auctions.

The land auction in Soc Son on November 29th witnessed a bid of 30 billion VND per square meter for a plot of land.

Additionally, the authorities could issue a resolution from the Council of Judges of the Supreme People’s Court or a joint circular from the Ministry of Public Security, the Supreme People’s Procuracy, and the Supreme People’s Court to provide detailed guidance and address violations related to land auctions.

In cases of auction sabotage, the prosecuting authorities may also consider applying the law more broadly to include the offense of “Obstructing those performing official duties” under Article 330 of the Penal Code. These manipulative tactics disrupt the normal operations of government agencies and the land auction process, causing significant damage to the state in terms of reputation and economic losses due to the high costs incurred in organizing unsuccessful auctions. They also create confusion and anxiety among the public.

Thanh Hieu