Directly land leasing from private landlord outside an industrial zone

Traditionally, a foreign investor in Vietnam may acquire land use rights by either from the State or from a developer of industrial zone. Article 93 of the old Land Law 2003 suggests that a foreign invested company may lease land directly from a private landlord being an economic organisation even if the landlord is not an industrial zone developer. However, there is no clear for a foreign investor to follow this direct leasing option. And in practice, few foreign investors can actually lease land from an economic organization outside of industrial zones.

The new Land Law 2013 and its implementing regulations also contain a similar provision allowing a foreign invested enterprise to direct lease land from an economic organization outside of industrial zones easier. In addition,

• The new Land Law 2013 specifically encourage an investor which presumably includes foreign invested enterprises to directly lease land from economic organizations in the event they do not want to lease land from the State or the industrial zones;
• Direct land leasing from economic organizations must satisfy the following conditions, among others: (i) complying with the approved district-level annual land use plan; and (ii) there is no other “clear” land in the relevant neighborhood available for the project. Both of these conditions are not clear and may be difficult to comply with in practice; and
• The land lease contract with the private owner must be registered with the land registration office. Upon registration, the land lease shall be recorded in the corresponding land use right certificate already granted to the landlord but no separate land use right certificate will be issued under the name of the lessee. 

Mortgage of land use rights where land rental is exempted

Under Decree 46/2014, a land user in Vietnam who leases land under lump sum payment for the entire lease term and is exempted from all land rental may have the option to pay the exempted land rental in order to enjoy the rights and obligations applicable to a normal land user including the right to mortgage the relevant land use right with credit institutions.

This is an important new point for many BOT projects which need to be able to mortgage their land use rights in favour of their lenders. Under the old land regulations, investors in a BOT project are exempted from land rental payment. However, this investment incentive has caused considerable difficulties for project sponsors in offering an acceptable security package to foreign lenders.