Right to Lease in Land Lease Agreements of Economic Organizations and Foreign-Invested Economic Organizations under Vietnamese Law.
The right to lease in a land lease agreement is a newly introduced right under Land Law No. 31/2024/QH15 (“Land Law 2024”). This article discusses several legal issues related to the right to lease in land lease agreements of economic organizations and foreign-invested economic organizations under the provisions of Land Law 2024.
(1) Right to Lease in a Land Lease Agreement
Article 3.37 of the Land Law 2024 defines the right to lease in a land lease agreement as follows: “The right to lease in a land lease agreement is the right of a land user that arises when the State leases land and collects land rental annually.”
From the author’s perspective, the right to lease in a land lease agreement only arises when all of the following conditions are met: (i) it originates from a land lease agreement where the lessor is the State; and (ii) the land is leased under the method of annual rental payment.
The right to lease in a land lease agreement does not arise in land lease agreements where the lessor is not the State; this right also does not arise from sublease agreements.
(2) Scope of the Right to Lease in a Land Lease Agreement
Article 3.37 of the Land Law 2024 stipulates that land users may transfer the right to lease in a land lease agreement and that the transferee shall inherit the rights and obligations of the land user under this Law and other relevant laws.
Article 3.37 does not explicitly define the scope of the right to lease in a land lease agreement, aside from stipulating the right to “transfer” and confirming that the transferee automatically inherits the land user’s rights and obligations. However, the Land Law 2024 includes additional provisions related to the right to lease in a land lease agreement, specifically:
(i) The right to sell assets attached to the land and the right to lease in a land lease agreement when meeting the conditions stipulated in Article 46 of the Land Law 2024 (Article 34.1(c) applies to economic organizations, and Article 37.2(b) applies to individuals);
(ii) The right to lease assets attached to the land and the right to lease in a land lease agreement (Article 34.1(dd), applicable to economic organizations);
(iii) The right to bequeath or gift assets attached to the land and the right to lease in a land lease agreement (Article 37.2(c), applicable to individuals);
(iv) The right to sublease the right to lease in a land lease agreement (Article 37.2(d), applicable to individuals).
The Land Law 2024 and its implementing regulations have yet to provide additional provisions regarding other rights related to the right to lease in a land lease agreement, particularly rights related to mortgage and capital contribution using the right to lease.
Additionally, the Land Law 2024 does not provide regulations for independent transactions involving the right to lease in a land lease agreement, except for the subleasing right granted to individuals under Article 37.2(dd).
(3) Right to Lease in Land Lease Agreements of Economic Organizations and Foreign-Invested Economic Organizations
Under Article 34.1 of the Land Law 2024, economic organizations that hold the right to lease in a land lease agreement may exercise the right to lease in the following cases:
3.1. Sale of Assets Attached to the Land and the Right to Lease in a Land Lease Agreement
Under Article 34.1(c) of the Land Law 2024, an economic organization may sell assets it owns that are attached to the land along with the right to lease in a land lease agreement, provided that the conditions under Article 46 of the Land Law 2024 are met. The buyer of the assets attached to the land and the right to lease shall continue leasing the land for the designated purpose and the remaining land use term and shall inherit the rights and obligations of the land user under this Law and other relevant legal provisions.
Article 46 of the Land Law 2024 sets out three conditions for economic organizations to sell assets attached to the land along with the right to lease in a land lease agreement.
Additionally, Article 46 of the Land Law 2024 requires the transferee to complete land registration procedures.
3.2. Lease of Assets Attached to the Land and the Right to Lease in a Land Lease Agreement
Article 34.1(dd) of the Land Law 2024 stipulates that economic organizations holding the right to lease in a land lease agreement may lease assets they own that are attached to the land along with the right to lease.
However, similar to the regulation on subleasing the right to lease in a land lease agreement applicable to individuals under Article 37.2(d), the Land Law 2024 and its implementing regulations do not specify whether the lessee inherits or transfers the right to lease in a land lease agreement in such cases. Given that this right originates from a transaction with the State as the lessor, there is no clear legal basis to determine whether land users may freely agree on the inheritance or transfer of the right to lease when engaging in transactions related to this right.
It is important to note that transactions related to the right to lease in a land lease agreement of economic organizations are only permitted when they include “assets owned by the economic organization attached to the land and the right to lease in a land lease agreement.” In other words, the right to lease in a land lease agreement of economic organizations cannot be independently transferred or leased but must be included as part of a transaction involving the transfer or lease of assets attached to the land.
The Land Law 2024 stipulates that the provisions related to the right to lease in a land lease agreement under Articles 34.1(c) and 34.1(dd) also apply to foreign-invested economic organizations, including those leasing or subleasing land in industrial zones and clusters. However, from the author’s perspective, the application of the right to lease in a land lease agreement for foreign-invested economic organizations subleasing land in industrial zones and clusters (as well as for land users subleasing land in industrial, cluster, and high-tech zones) must still meet the two conditions outlined in Section (1) of this article, namely: (i) it must originate from a land lease agreement where the lessor is the State, and (ii) the land must be leased under the method of annual rental payment.
For any feedback on this article, please contact the author:
Lawyer Phan Quang Chung
BFSC Law LLC
Phone: (+84-24) 7108 2688 (Ext: 102)
Email: [email protected]
Disclaimer: The content of this article is for reference only and does not constitute legal advice from the author or BFSC Law LLC on any specific legal matter. BFSC Law LLC shall not be liable for any use of part or all of this article for any actual legal situation.