Can a security deposit contract when buying an apartment be cancelled ?

The  two parties often choose a deposit contract to create trust for each other before making an apartment purchase and sale contract. However, is it possible to cancel the deposit contract if a party changes their mind?

According to Clause 3, Article 292 of the Civil Code, a deposit in general and a deposit to buy an apartment in particular is one of the measures to secure the performance of obligations.

After the parties make a deposit to buy the apartment, within an agreed period of time, the depositor (buyer) must pay the entire amount for the purchase of the apartment to the depositee (the seller) and the seller transfers ownership of the apartment. This is for the buyer.Illustration

If a deposit has been made but then either party "changes its mind" and cancels the deposit, it will be settled according to Clause 2, Article 328 of the 2015 Civil Code as follows:

- Carry out the purchase and sale: The deposit is returned to the depositor or deducted from the initial purchase amount of the apartment. In this case, the buyer only has to pay the remaining amount after deducting the deposit.

- The seller does not want to sell the apartment after they have signed a deposit contract: The seller must pay the buyer twice the deposit amount, unless the parties agree not to pay the deposit or the amount to be paid. 

- The buyer does not want to buy the apartment after the deposit contract has been made: The previously deposited amount will belong to the seller. If the two parties agree otherwise (for example, in addition to the lost deposit, the buyer must pay the seller an additional amount) then the parties must comply with this agreement.

If the parties allow either party to cancel the deposit or have to pay compensation, it shall comply with the agreement of the parties. Otherwise, the provisions of the Civil Code as above shall be applied.

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