- Land lease agreement with the state
Long-term leases are typical, where the tenant leases a vacant land and develops it for a period of up to 50 or 70 years. Once the project development is completed, the tenant may sublet, transfer the space to a retail store, office, or residential or industrial tenants, depending on the type of project development and the terms of the business certificate. Land rent may be paid annually or in a lump sum. However, land use rights can be mortgaged only when the lump sum payment method is used (i.e., when all land rental for the entire lease term has been paid to the state).
- Sublease of land in economic, export-processing, industrial zones
For industrial zones or hi-tech zones, the prime/land lease would be between the developer and the provincial authorities. An industrial zone or hi-tech zone infrastructure developer may sublease land with available infrastructure to tenants. These subleases are usually long-term and typically last until the remainder of the prime/land lease. In case the developer pays annual land rental to the state in the prime / land lease, the tenants will be expected to contribute yearly land rental. Otherwise, the tenant mainly pays a lump sum infrastructure usage fee (payable in instalments), in addition to other service fees, management fees or utility fees (depending on the industrial zone or hi-tech zone).
- Commercial lease
The main commercial leases tend to be office or retail space leases which are contracted for a few years. The common practice for a payment term is three months’ rental and service fee paid in advance.
- Residential lease
Negotiable between the parties. We note that a lease of an apartment unit for office use is not permitted under the law.
Decree No. 02/2022/ND-CP imposes a template lease agreement for all commercial leases, including the sublease of land in an industrial or hi-tech zone. That said, the templates are not overly detailed and many lease provisions remain freely negotiable, provided that the parties have full legal capacity and authority to enter into lease agreements and follow the statutory procedures.
When it comes to a land lease with the state as the landlord, lease provisions are regulated and no negotiation is allowed in the majority of cases.
The maximum lease term of land from the state is 70 years (except diplomatic organizations, for which the maximum lease term is 99 years) and can be renewed. Except for residential projects, however, the standard maximum is 50 years.
For a private entity or individual, there is no maximum lease term for leases set by regulations, but the lease term must be within the duration of land granted to the landlord in the Land Use Rights Certificate or the operation terms stated in the business certifications of both parties.
These may vary. Commercial office or retail leases, for example, usually lasts for around five years.
There are no instances where a tenant may demand an extension of a private lease, unless otherwise agreed by contract.
On the other hand, a land user may request for an extension of the lease with the state, although whether the extension will be granted depends on the authorities’ discretion, taking into account various legal and socio-economic factors.
Under the Real Estate Business Law, a landlord can legally terminate the lease under the following circumstances:
- The tenant fails to make rent payments on the due date for at least three months;
- The tenant's use of the property is not consistent with that agreed in the lease;
- The tenant intentionally causes material damage to the property; or
- The tenant carries out repairs, renovations, replacements, or sublet the property without the consent of the landlord.
A tenant can legally terminate the lease under the following circumstances:
- The landlord fails to repair the property when the property is not safe for use or causes damage to the tenant;
- The landlord increases rent unreasonably; or
- The right to use the property is restricted by a third party’s interest.
Yes. Foreign exchange control regulations in Vietnam require that all transactions between two Vietnam-based entities must be denominated in Vietnam dong (VND). This applies to a lease agreement.
Rent can be paid monthly, quarterly, yearly or in lump sum, or as agreed by the parties. The common practice is that payment should be made in advance for every payment term.
Review of rent is subject to negotiation. Rent is usually reviewed yearly by a maximum increase/decrease percentage compared to the previous rent. There are no strict legal limits to the increase in rent except for land leased directly from the state.
The following is usually required of landlords:
- Ensure uninterrupted usage of the property by the tenant
- Handover the property in accordance with the contract
- Repair and maintain the structure of the property
The following is usually required of tenants:
- Pay rent on time
- Pay an interest-free security deposit to the landlord
- Comply with laws and regulations, and maintain valid proper business licenses
- Keep the property in good order
- Inform the landlord if repairs are needed and give the landlord access to the property to carry out repairs
- Give the landlord access (often by appointment) for inspections and landlord’s work
- Be responsible for neglect, or damages caused to the property by the tenant’s staff, contractors, visitors, etc.
The transfer of the lease by the tenant is subject to negotiations between the parties. The tenant may negotiate the right to transfer the lease agreement to its affiliates without consent.
In all cases, the consent of the landlord is required either in the agreement or for every specific case.
If the premises is substantially damaged or destroyed by force majeure, the lease is often terminated. Rent generally ceases during this period of time.
If the premises are damaged or destroyed due to causes attributed to the tenant, then the tenant is liable for repairs or replacement.
The landlord is usually responsible for procuring mandatory insurances for the entire building. Fire insurance is mandatory under Vietnamese law. The tenant may be required to purchase certain insurances (e.g., public liability insurance, business interruption).