Precedent No. 79/2025/AL: Mortgaged land does not automatically render a deposit agreement invalid

In disputes concerning deposits for the transfer of land use rights, two grounds are commonly invoked to seek a declaration that a deposit agreement is invalid: the relevant property is mortgaged to a bank, and the person who signed and received the deposit is not the person named in the land use right certificate.

Precedent No. 79/2025/AL, however, confirms that neither circumstance automatically invalidates a deposit agreement. The decisive factors are not limited to the legal status of the property or the identity of the signatory, but also include the parties’ knowledge and intention, the scope of authorization, the negotiation and execution process, and, in particular, the actual reason why the land use rights transfer agreement was not executed.

Precedent No. 79/2025/AL was developed from Cassation Decision No. 296/2023/DS-GĐT dated 13 December 2023 of the Judicial Committee of the High People’s Court in Ho Chi Minh City. It was adopted by the Judicial Council of the Supreme People’s Court on 24 December 2025 and published under Decision No. 339a/QĐ-CA dated 25 December 2025.

1. Summary of the Case

Ms. Le Thi Tuyet N agreed to acquire the land use rights over two land plots for a total transfer price of VND 3 billion. The land use rights were registered in the names of Ms. Nguyen Thi Hoang K and Ms. Nguyen Thi Hoang M, who are the daughters of Mr. Nguyen Xuan D.

On 6 April 2022, Ms. N and Mr. D executed a deposit agreement under which Ms. N paid Mr. D a deposit of VND 1 billion to secure the execution of the land use rights transfer agreement. The parties agreed that Ms. N would pay an additional VND 1.5 billion upon notarization of the transfer agreement and the remaining VND 500 million after completion of the registration of the land use rights in her name.

Although Mr. D was not the registered land user, the evidence established that Ms. N knew that the land use rights belonged to Ms. K and Ms. M. Ms. N had directly discussed the transfer price, the deposit amount and the proposed execution date with the registered land users. She also knew that the two land plots were mortgaged to a bank but nevertheless prepared the deposit agreement, requested Mr. D to sign it and transferred VND 1 billion to his bank account.

After receiving the deposit, Mr. D transferred the money to Ms. K and Ms. M. Ms. N subsequently considered the agreed transfer price to be too high and requested that the transaction be terminated and the deposit refunded. When her request was rejected, she initiated legal proceedings seeking a declaration that the deposit agreement was invalid on the grounds that Mr. D was not the registered land user and that the two land plots were mortgaged to a bank.

Both the first-instance and appellate courts accepted Ms. N’s claim, declared the deposit agreement invalid and ordered Mr. D to refund the VND 1 billion deposit. The cassation panel, however, held that such assessment failed to reflect the true nature of the transaction and the evidence contained in the case file. It therefore set aside both judgments and remanded the case for retrial.

2. Three Key Legal Issues Addressed by the Precedent

2.1. A Deposit Agreement Is an Independent Transaction

The first issue addressed by the Precedent is whether the mortgage over the land use rights rendered the deposit agreement invalid.

Under Article 328 of the 2015 Civil Code, a deposit is an amount of money or another valuable asset delivered by one party to another for a specified period to secure the execution or performance of a contract. A deposit agreement and a land use rights transfer agreement are therefore separate transactions with different purposes and legal consequences.

A land use rights transfer agreement directly gives rise to the transfer of land use rights from the transferor to the transferee. By contrast, a deposit agreement merely secures the parties’ future execution or performance of the transfer agreement.

Accordingly, the fact that the land use rights were not immediately eligible for transfer at the time the deposit agreement was executed did not necessarily mean that the purpose of the deposit agreement was incapable of being achieved. The parties could agree that, during the period between the payment of the deposit and the notarization of the transfer agreement, the transferor would repay the secured loan, procure the release of the mortgage and complete the legal procedures necessary for the transfer.

In this case, Ms. N knew that the property was mortgaged but still voluntarily entered into the deposit agreement. The mortgage was neither concealed from her nor did it cause her to misunderstand the subject matter of the transaction.

The cassation panel therefore held that the parties’ execution of a deposit agreement while the property was mortgaged did not affect its validity. Provided that the deposit agreement satisfied the validity requirements for civil transactions under Article 117 of the 2015 Civil Code, it remained valid and binding upon the parties.

This approach is consistent with common real estate practices. In many transactions, land use rights are mortgaged, but the registered land user intends to use part of the transfer proceeds to repay the loan and release the mortgage. Treating every deposit agreement involving mortgaged property as invalid would unnecessarily prevent many otherwise lawful transactions from being carried out.

Nevertheless, the validity of the deposit agreement did not release the deposit recipient from the obligation to procure the release of the mortgage. By the agreed date for execution of the transfer agreement, the deposit recipient was still required to ensure that the property satisfied the applicable transfer conditions.

2.2. A Person Who Is Not the Registered Land User May Still Execute the Deposit Agreement

The second issue clarified by the Precedent concerns the legal capacity of the person signing the deposit agreement and receiving the deposit.

Although Mr. D was not named in the land use right certificates, this did not automatically mean that he lacked authority to execute the deposit agreement.

The evidence showed that Ms. K and Ms. M, as the registered land users, had directly participated in the negotiations. The parties had agreed on the transfer price, the deposit amount and the proposed date for execution of the transfer agreement. Ms. N knew that the land use rights belonged to Ms. K and Ms. M and agreed that Mr. D would sign the deposit agreement and receive the deposit on their behalf.

After receiving the deposit, Mr. D transferred the money to Ms. K and Ms. M. The registered land users also acknowledged the transaction, did not object to Mr. D’s receipt of the deposit and continued to request that Ms. N proceed with the transfer.

Mr. D’s execution of the deposit agreement was therefore not an unauthorized disposition of another person’s property. He acted with the authorization or approval of the registered land users, and Ms. N knew of and did not object to that representative arrangement.

The Precedent should not be interpreted as permitting any person to accept a deposit for the sale of another person’s property. It applies only where there is sufficient evidence that the property owner or registered land user authorized or approved the transaction and that the depositing party was aware of such representation.

2.3. The Relevant Time for Determining Fault

One of the most important aspects of the Precedent is its approach to determining when and why fault arose.

The first-instance and appellate courts held that the deposit agreement was invalid because the property was mortgaged at the time it was executed. The cassation panel disagreed with this assessment.

Under the parties’ agreement, the land use rights transfer agreement was expected to be executed and notarized on 19 April 2022. It was therefore necessary to assess, as at that date, whether the deposit recipient had been able to procure the release of the mortgage, whether the registered land users were prepared to execute the transfer agreement, and whether the depositing party was ready to make the agreed payment.

Only if the transfer agreement could not be executed by the agreed deadline because the land use rights had not been released from the mortgage would there be a basis for considering whether the deposit recipient was at fault.

In this case, however, Ms. N refused to proceed because she considered the agreed transfer price to be too high. This reason was unrelated to the mortgage and did not establish that the deposit recipient was incapable of completing the transaction by the agreed deadline.

The cassation panel therefore determined that Ms. N’s refusal to execute the transfer agreement constituted a breach of the deposit agreement. The fault lay with the depositing party, and the legal consequences were to be determined under Article 328.2 of the 2015 Civil Code.

2.4. Practical Significance

Precedent No. 79/2025/AL confirms that a mortgage over land use rights does not automatically invalidate a deposit agreement where the depositing party knew of the mortgage and voluntarily entered into the transaction. Similarly, a person who is not the registered land user may sign the deposit agreement and receive the deposit where such person has been authorized or approved by the registered land user and the depositing party is aware of and does not object to that arrangement.

In resolving a dispute, the actual reason why the transfer agreement was not executed by the agreed deadline must be identified. If the deposit recipient fails to procure the release of the mortgage, the fault may lie with that party. Conversely, if the depositing party withdraws because of a change in the market price or its commercial interests, that party may be required to forfeit the deposit.

The parties should therefore clearly specify the deadline for releasing the mortgage, the obligation to execute the transfer agreement, the scope of any authorization and the consequences of breach. They should also retain complete records of the negotiations and performance of the transaction.

3. Conclusion

Precedent No. 79/2025/AL requires courts to assess a deposit agreement based on the true nature and overall course of the transaction, rather than relying solely on the fact that the property was mortgaged or that the deposit recipient was not named in the land use right certificate.

Accordingly, the validity of the deposit agreement and liability for forfeiture, refund or penalty in respect of the deposit must be determined by reference to the parties’ intention, the property owner’s authorization or approval, and the actual fault that caused the transfer agreement not to be executed.

Submission date: July 20, 2026

Disclaimers:

This article is for general information purposes only and is not intended to provide any legal advice for any particular case. The legal provisions referenced in the content are in effect at the time of publication but may have expired at the time you read the content. We therefore advise that you always consult a professional consultant before applying any content.

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Apolat Legal is a law firm in Vietnam with experience and capacity to provide consulting services related to Dispute Resolution and contact our team of lawyers in Vietnam via email info@apolatlegal.com.

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