ParkCity denounced of cheating clients
Baffling actions often amounting to breaking of agreements with homebuyers at the ParkCity Hanoi urban area project, developed by Vietnam International Township Development JSC (VIDC), led to the suspicion that purchasing homes at the project would just be throwing the money out the window.
Tran Thi Dung (living at N1, C12, Van Dien Battery Factory residential bloc, Thanh Tri district, Hanoi) told the media that on November 24, 2011 VIDC signed a contract with her on the purchase of house 06/05/TH4B (M) at the ParkCity Hanoi urban area for the price of VND10.4 billion ($477,000) (VAT not included). Addendum 3 of the contract included a detailed blueprint of the house. Payment was scheduled over four installments with the first 30 per cent of the sum to be paid shortly after signing the contract. Dung has paid developer VIDC the required VND 3.25 billion ($149,000).
It was indicated in the contract that both parties mutually discussed and agreed to build the house as detailed in the blueprint. However, on January 10, 2013, VIDC sent a document signed by the company’s general director Lawrence Peh, requiring an additional payment of VND315 million ($14,450) due to changes to the house design.
VIDC claimed that the drawing attached to the previous contract signed by the company’s former general director Habibullah Khong Sow Kee substantially differed from the common design and Habibullah had violated the company's charter as well as its internal regulations. By VIDC’s contentions, Dung would be liable to pay the additional costs of building the house according to the originally agreed blueprint.
Dung did not accept the company’s argument as she had not submitted a request to change to the house design. When signing the contract, Habibullah was the general director of VIDC as well as its legal representative and VIDC's seal was affixed to the contract. In the correspondence between the parties, Dung kept to the viewpoint that responsibility for the general director’s violation of company regulation should not be pushed on her.
During the time of the unsolved dispute over the extra payment, Dung temporarily stopped her scheduled payment.
By December 19, 2014, Winco Law Company, authorised by VIDC, has sent Dung a notice of contract termination as she did not make the second installment as required. Even more irrationally, Dung was fined 8 per cent of the house price, equivalent to VND868.5 million ($39,800) due to the breaking of contract terms.
She was also charged an out-of-contract late payment compensation fee of another VND500 million ($23,000). The combined sum was to be deducted from Dung’s first installment of VND3.257 and the remaining VND1.88 billion ($86,000) would be returned to Dung. Payment would be made after VIDC's selling of the house to a third buyer. VIDC would advertise to sell the house, as noted in Winco’s notice.
At a negotiation session on May 19, 2014, Dung agreed to terminate her contract with VIDC and required the company to return her VND5.71 billion ($261,900) without deductions. VIDC's head of Foreign Affairs and Enterprise Development Committee Vu Thuy Diem refused Dung’s request and even reduced the repayable amount to VND1.56 billion ($78,500) because in addition to the contracted fine and out-of-contract compensation, Dung was to bear the legal costs for consultancy and dispute mediation amounting to VND439 million ($20,130). VIDC would deduct these charges from the amount previously paid by Dung, and would return the remainder only after the house was sold.
Rightfully enraged by VIDC’s actions, Dung authorised her lawyer to settle the dispute at court to protect her legitimate interests.
Potential tax evasion in the background
According to the Ministry of Finance’s Circular 153/2010/TT-BTC dated September 28, 2010, effective since January 1, 2011, traders in real estate are required to issue invoices for each payment scheduled in a contract.
Article 14.2 indicates that, “If trading in real estate, building infrastructure and facilities, building houses for sale or transfer to collect money on basis of project progress or as detailed in the contract, date of money collection is also date of invoice.”
Besides, according to clause 2 of Article 21, Decree 51/2010/ND-CP dated May 14, 2010, organisations and individuals selling commodities or services should be obliged to “prepare and issue invoices to clients upon the sale of commodities and services, except no invoice required under this decree.”
Thus, according to legal regulations, VIDC should have issued an invoice and pay VAT tax to the taxation agency upon receiving Dung's first installment of VND3.25 billion. Following the performance of due taxation obligations VIDC should have also delivered the invoice to Dung.
However, when personally visiting VIDC's head office to require the VAT invoice, Dung was refused. On August 26, 2015, Dung submitted another document to VIDC requesting the VAT invoice for the first installment and was refused once again.
VIDC’s actions bring up questions as to why VIDC did not provide the invoice to the client and whether the company issued VAT invoice and pay tax (in fact, the VAT was paid by the client) as stipulated by law?
As stated by the tax consultancy section of a renowned auditing company belonging to the Big Four, if a real estate enterprise does not issue invoice when collecting money from a transaction, it violates invoicing regulations, incurring late tax payment and taxation regulation violation charges.
In the case of VIDC, if the client submitted a complaint to the Hanoi Tax Department, the responsible taxation agency would be requested to investigate. If found to be in violation, the enterprise will be punished.
Dung commented that if VIDC did not provide her invoice, she would turn to the taxation agency for assistance.
So far neither VIDC nor Hanoi Tax Department have officially clarified whether VIDC was in violation of state VAT regulations.
Former general director of Park City: Every sales contract signed by me is legitimate
Related to whether VIDC's current general director Lawrence Peh did not keep the agreement struck between VIDC and the client, and negated the signature of his predecessor, VIDC’s former general director Habibullah Khong Sow Kee was contacted on the issue on October 28, 2015.
Khong said that he had accepted the proposal of client Tran Thi Dung to change the interior design of the house because it was a reasonable request that incurred no further costs to the company. Accordingly, the contract he signed with Dung was legitimate and should be respected.
Khong also commented that he signed the contract with Dung in his official capacity as general director and legal representative of VIDC, not as an individual. He signed the contract, approving the interior design changes altering the design shown in the VIDC catalogue. By his argument, he and the client had reached a consensus.
“Dung or any client of VIDC have bought their houses through public offering at identical prices. The demand for changing the interior design, if not incurring further building costs, is generally accepted. Not only Dung, if requested by any other client, I would have accepted to create the most favourable conditions for the client and VIDC,” Khong said.
“I discussed it with my lawyer and he is confident that what I did was in compliance with my authority and duty. The contracts I signed with ParkCity buyers are legally effective and should be protected,” Khong affirmed.
VIDC’s former general director also raised the following question, “The contract signed with Dung was publicly announced by the company. If I made mistake, why no claim was made in the past four years and why did VIDC’s general director Lawrence Peh wait to raise the issue until today?”
The conduct of VIDC's management board towards its clients is also worth to mention. According to the documents provided by Tran Thi Dung, on May 19, 2014, Dung and her lawyer worked with VIDC's representative, Vu Thuy Diem, and Winco Law Company.
The conclusion to the negotiations was that VIDC and Dung mutually agreed to terminate the signed contract, leaving the mediation of the terms of the termination for future discussion. However, after this initial agreement, VIDC cut negotiations with the client. Anxious for developments, Dung called many times for information and further discussion to find a way-out but VIDC provided no feedback.
More than one year later, on August 7, 2015, Winco Law Company sent a notice to Dung notifying her that VIDC had fulfilled procedures on transferring the house to another buyer and proposed Dung to provide her bank account to receive VND1.79 billion ($82,100), a sum VND1.46 billion ($66,900) less than what Dung paid almost four years ago.
Dung said VIDC had sold the house under dispute to another client and unilaterally retained her payment without her consent.
According to Item 1 of Clause 188 of the Land Law 2013, it is prohibited to transfer ownership over land under dispute. Based on this, Dung proposed the Hanoi Department of Natural Resources and Environment to temporarily refuse applications for the house’s land use certificate.
The Hanoi Department of Natural Resources and Environment has issued documents to guide related agencies to solve this issue. This means that not only Dung, but also other clients buying houses at ParkCity urban area will have their interests affected.