Potential (incorrect) limitation on Foreign-Invested Enterprises’ Leasing Office in Vietnam

Article 14 of the Law on Real Estate Business 2014 has the title “Entities which can purchase, receive assignment, lease, hire-purchase (thuê mua) real esates from real estate companies”. Article 14.2 of the Law on Real Estate Business 2014 provides that a foreign-invested enterprise (FIE), as a customer of a real estate company, is allowed to “purchase, hire-purchase houses, construction works to use for offices or business facilities in accordance with use function of such houses, construction works”. Article 14.2 does not include “leasing from real estate companies” from the permitted scope of purchase by an FIE. Technically, this could mean that an FIE is not allowed to lease office from real estate developers in Vietnam.

However, this technical conclusion is contrary to the fact that in practice, many FIEs, especially those in service sectors, regularly lease offices from real estate developers. Accordingly, the wording of Article 14.2 of the Law on Real Estate Business 2014 seems to be a drafting mistake rather than an actual intention of draftsman of the Law on Real Estate Business 2014.

In any case, restricting an FIE from leasing office from a real estate developer is unreasonable because:

·       if foreign organisations could lease all types of real estate for use, then an FIE should also be entitled to the same treatment;

·       if an FIE is permitted to purchase or lease-purchase construction works, then, logically, they should also be permitted to lease such construction works from developers; and

·       this restriction (if it is true) is inconsistent between provisions of the Land Law 2013 regarding FIEs' capacity to lease real estate. For instance, under the Land Law 2013, a FIE may sub-lease infrastructure attached to land from an industrial zone developer.

This post is written by Nguyen Hoang Duong and edited by Nguyen Quang Vu.