Loopholes in land auctions

In 2024, almost all land auctions in suburban districts of Hanoi were involved in some scandal related to paying unusually high prices and then canceling deposits.

For example, in the auction of 58 plots of land in Soc Son on November 29, some "saboteurs" appeared by deliberately offering an unbelievable price of up to 30 million VND/m2, then giving up halfway.

Further analyzing this issue, Mr. Nguyen Thanh Tuan, a real estate expert, said: According to land auction regulations, in case the customer wins the auction, after 120 days of the results but does not pay or does not pay the full amount of the winning amount, the deposit will be lost. The deposit will be at least 5% and at most 20% of the starting land price.

However, the starting prices at land auctions in Hanoi in recent times have been relatively low. Therefore, even if customers cancel their deposits midway, it will not cause too much damage to their “wallets”.

This is true for the cases of winning land auctions in Thanh Oai and Hoai Duc that took place in September and mid-November 2024. However, in the case of land auctions in Soc Son, customers who paid 30 billion VND/m2 in the 5th round and did not participate in the auction in the 6th round (the round that determines the result) are considered to have "validly" given up, and this customer himself does not bear any responsibility, does not suffer any damage, and does not even lose his deposit.

“After the auction in Thanh Oai in September 2024, localities adjusted the starting prices of auctioned land lots in an upward direction, thereby increasing the deposit rate before participating in the auction. The purpose is to prevent deposit cancellations. However, real estate speculators have many tricks that make the solutions proposed before almost ineffective,” said Mr. Tuan.

Meanwhile, Mr. Nguyen Quang Huy, CEO of the Faculty of Finance and Banking at Nguyen Trai University (NTU), said that pushing land prices up very high in the first rounds, but then stopping participating in the last round, not only caused a loss of resources but also affected the reputation of the auction.

However, this is not the only “loophole” that exists. According to Mr. Huy, there are two other “loopholes”: the current deposit level is still low, not deterrent, and the payment period is long or there are no clear regulations on land use progress, causing land to be abandoned and wasting resources.

Therefore, to close this “gap”, Mr. Huy said that it is necessary to increase the starting price higher, then the deposit amount will be large and force investors to participate in the auction seriously. At the same time, it is necessary to increase the deposit rate from 30 - 50% of the starting price, instead of only 5 - 20% as at present.

In addition, the time for depositing money after winning the auction should be shortened, stipulating the time to pay the full amount of the winning bid within 10-20 days after the announcement of the results. After this period, if the full amount is not paid, the right to win the auction will be revoked, and the winner will lose all the deposit.

“Prices close to the market, increased deposits, shortened payment times, limited transfers and required on-schedule construction will not only create a transparent playing field, but also contribute to sustainable economic development, ensuring optimal exploitation of land resources,” Mr. Huy emphasized.

Need to be tougher on cases of sabotage of land auctions

Faced with this situation, ministries, sectors and localities have applied a number of solutions, such as recalculating the starting price, publicly identifying some subjects who bid unusually high prices and then canceled their deposits, or gave up halfway. However, many opinions say that these solutions do not bring much effectiveness.

Instead, many experts have spoken out to suggest that we should take strong action against those who sabotage land auctions to increase deterrence and set an example for others. Therefore, they strongly agree with the Hanoi Police's decision to temporarily detain a number of subjects who "sabotaged" land auctions in Soc Son in the recent auction, for colluding to raise prices in property auction activities.

Lawyer Dang Van Cuong, Head of Chinh Phap Law Office, said: Due to the great profits from winning land prices in auctions, recently in many localities, there have appeared a number of subjects participating in land use rights auctions who behave like thugs, "gangsters" manipulating land use rights auction activities such as fighting to buy documents, forcing to resell documents, reselling the winning land lots, obstructing land use rights auction activities, not allowing people from other places to participate in auctions, causing insecurity, disorder and social safety.

Many subjects have been criminally prosecuted for various crimes, including disturbing public order.

However, public disorder activities are not only using physical force, force, weapons or using words, threats, insults to obstruct the activities of the auction organization. The act of obstructing the auction is also shown in the act of paying high prices and then intentionally abandoning the deposit, with the purpose of making the auction unsuccessful.

According to Mr. Cuong, the law strictly prohibits auction participants, auction winners, individuals and other organizations from performing the acts specified in Clause 5, Article 9 of the 2016 Law on Property Auction, including acts of obstructing property auction activities.

If someone does not have the need, is unable to pay for land use, does not want to buy but still participates in the auction, pays a high price and then forfeits the deposit, causing the auction to fail and have to be re-auctioned, this is a violation of the law and an act of disturbing public order.

Those who obstruct land use rights auctions may be subject to administrative penalties or criminal prosecution.

The level of administrative sanctions for those who obstruct property auction activities is stipulated in Decree 82, with a fine of 7 - 10 million VND.

In case of obstructing the auction of land use rights by paying an unusually high price and then abandoning the deposit, making the auction impossible to organize or unsuccessful, causing negative impacts on social security and order, the person committing this act may be prosecuted for the crime of disturbing public order as prescribed in Article 318 of the Penal Code, the highest penalty for this crime can be from 2 years to 7 years in prison.

“ In the above land use rights auction, the bid of more than 30 billion VND for residential land in Soc Son district is unusual and shows a disregard for auction activities. Therefore, the authorities will investigate and clarify the identities of those who paid high prices and then abandoned their deposits, and at the same time assess the consequences to consider the level of handling according to the provisions of the law,” said Mr. Cuong.

Viet Vu