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REAL ESTATE DEPOSITS: 7 COSTLY MISTAKES & 10 STEPS TO PROTECT YOUR DEPOSIT

In civil transactions, particularly in contracts for sale, lease, transfer, or investment, the use of a deposit is frequently applied as a security measure to ensure the execution and/or performance of a future contract. Although the 2015 Civil Code (“Civil Code 2015”) has established specific provisions to define the legal nature of this measure, its practical application still gives rise to numerous complex disputes. These complications primarily revolve around the validity of the deposit agreement, the conditions that trigger the deposit penalty liability, as well as the rights and obligations of the parties in the event that the contract is not executed or cannot be performed.

REAL ESTATE DEPOSITS: 7 COSTLY MISTAKES & 10 STEPS TO PROTECT YOUR DEPOSIT

Index

Table of Contents

  1. What is a deposit & how is it different from an "advance payment"?

  2. Top 3 legal frameworks to remember (2025)

  3. 7 costly mistakes when making a deposit

  4. 10 steps to protect your deposit (checklist)

  5. Suggested "risk-proof" clauses to insert into contracts

  6. Conclusion

1) What is a deposit & how is it different from an "advance payment"?

According to the 2015 Civil Code (Article 328), a deposit is an act where one party gives the other money, precious metals, gemstones, or other valuable assets to secure the entering into or performance of a contract. Default rule:

If the receiving party breaches → returns the deposit + an equivalent amount (double);

If the depositing party breaches → loses the deposit. The parties can agree otherwise, but it must be proportionate and not contrary to legal prohibitions.

"Deposit" ≠ "Advance payment": if the contract does not clearly identify the nature of the amount,

the law may automatically consider it an advance payment (Article 37 of Decree 21/2021). The legal consequences of these two mechanisms are very different.

Therefore, clearly state it right from the title and opening clauses.

Quick note: Transactions within Vietnamese territory must not be paid in foreign currency (except for legal exceptions).

Property rights (e.g., land use rights) are not suitable as "deposit assets" in the sense of immediate handover.

2) Legal frameworks to remember

2015 Civil Code – Article 328

  • Definition of deposit, handling methods in case of breach.

  • Allows agreements different from the default rate (but must be reasonable and not illegal).

Decree 21/2021 – Article 37

  • Distinguishes between "deposit" and "advance payment".

  • Not using the correct name → risk of being considered an "advance payment".

2023 Law on Real Estate Business – Articles 25 & 26

  • Limits on the collection rate before handover (70%/50%).

  • Handover guarantee mechanism; publicizing profiles before sale.

Market update: some banks are suspending/tightening loans used to pay deposits via "agreement documents" drafted by brokers/consultants until there is a clear conclusion. Buyers should prioritize depositing directly with a qualified developer, or use a blocked/escrow account.

3) 7 costly mistakes when making a deposit

  1. Failing to name the amount: ambiguous contracts between "deposit" and "advance payment".

  2. Depositing with an unauthorized party: signed on behalf by brokers/consulting units, the project is not yet qualified for business.

  3. Using foreign currency or assets that cannot be handed over immediately: violation of foreign exchange regulations, risk of invalidation.

  4. "Unlimited" handling level: easily seen as disproportionate and hard to enforce.

  5. Not setting legal suspensive conditions: getting the deposit "stuck" when the project has legal issues.

  6. Transferring money through the wrong channels: into personal accounts, writing the wrong transfer syntax → hard to reclaim/call the guarantee.

  7. Failing to manage deadlines: letter of guarantee expires/conditions for calling the guarantee are not met.

4) 10 steps to protect your deposit (checklist)

  • Deposit directly with a qualified developer, limiting "reservation" documents from brokers.

  • Use the correct name right in the title: "DEPOSIT CONTRACT (Article 328 Civil Code)" or "ADVANCE PAYMENT AGREEMENT".

  • Only use VND; clearly describe the payment purpose in the payment order/receipt.

  • Blocked/ESCROW account at the bank; only release upon reaching defined legal/progress milestones.

  • Proportionate penalty for breach (avoid "unlimited"); do not exclude compensation when proven damages occur.

  • Legal suspensive conditions: if state agencies conclude it is illegal/unqualified → the deposit contract terminates, money is refunded, no deposit penalty.

  • No widespread authorization: verify signing authority, seals, and legal representatives.

  • Do not exceed the advance collection ceiling according to the Law on Real Estate Business; cross-check the payment schedule with the construction progress.

  • Documents – Evidence: save all invoices, statements, emails, messages, images, and handover videos.

  • Exit strategy: agree to prioritize negotiation/refund before filing a lawsuit/arbitration.

5) Suggested "risk-proof" clauses to insert into contracts

5.1. Legal suspensive conditions

"In the event that the competent state agency concludes that the document used to receive the deposit is illegal or the project is unqualified for business, this Contract shall automatically terminate; the parties shall return to each other what they have received; no deposit penalty shall be applied."

5.2. Blocked account/escrow

"The deposit amount shall be blocked at

5.3. Naming & payment channels

"The parties confirm the nature of the amount is a

5.4. Handling level upon breach (proportionate)

"In case the Deposit-receiving Party breaches, the Deposit-receiving Party shall return the deposit and an equivalent amount (Civil Code default) or another amount as agreed which is

6) Conclusion

Trial practice shows that many disputes arise simply because the parties do not fully understand the legal nature, conditions for validity, and consequences of breaching a deposit agreement. Thus, deposit and deposit penalty agreements are crucial legal mechanisms to secure the entering into and performance of a contract, while binding the responsibilities of the parties when committing a breach of commitment. 

Contact Information

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