The Governor of the State Bank issued Circular 11/2022/TT-NHNN (“Circular 11”) on 30 September 2022 prescribing bank guarantees. Circular 11 takes effect from 1 April 2023, replacing Circular 07/2015/TT-NHNN (“Circular 07”) on 25 June 2015 and Circular 13/2017/TT-NHNN (“Circular 13”) on 29 September 2017 has made important amendments regarding the validity of contracts for off-plan housing guarantee.

Detailed explanation of off-plan housing guarantee contract

Previously, Circular 07 and Circular 13 did not have a specific definition of contract for off-plan housing guarantee, then Circular 11 will overcome these shortcomings. Accordingly, in order to provide the applicable subjects of Circular 11 with a clear understanding of this kind of agreement, Circular 11 will, in terms of terminology, enhance the definition of a housing guarantee contract that will be developed in the future.

Defining the duration of the contract's validity period

The previous rule did not specify the duration of the contract's validity; it only required that a guarantee contract for off-plan houses shall be made in the form of a guarantee issuance agreement.

From 1 April 2023, the contract's effective period will be from the day on which it is signed until guarantee obligations off all guarantee letters given to the buyer cease to have effect in accordance with regulations, and the investor has fulfilled all obligations to the commercial bank under the completed off-plan housing guarantee contract.

Additional mandatory content of the contract

Circular 11 also supplements regulations on the content of a guarantee contract for off-plan house, according to which this contract must include a number of mandatory contents as follows:

1. The commercial bank is obliged to issue the letter of guarantee to the buyer upon receipt of the purchase contract or lease-purchase contract from the investor before the agreed-upon house transfer date specified in the purchase contract or lease-purchase contract;
2. The commercial bank and the investor shall reach a specific agreement on the responsibility to send the letter of guarantee to the buyer after it is issued by the commercial bank;
3. The investor’s financial obligations;
4. Documents submitted to request the commercial bank to fulfill guarantee obligations must be accompanied by the letter of guarantee issued by the commercial bank to the buyer.

In addition to the points mentioned above, Circular 11 details the steps and responsibilities of each party in the contract of guaranteeing off-plan house. Circular 11 also provides more progressive regulations, stipulating only the basic rights and obligations of the parties, omitting all implementation term. Thus, it can be seen that the new regulations under Circular 11 related to off-plan housing guarantee contracts contribute a better protection to the rights of related parties.