In Vietnam, leasing land directly from the State is a common option to acquire land use right (LUR). That means one, as master “land user” (người sử dụng đất), needs to sign a land lease agreement (LLA) with State, by which it is obligated to pay land rental. Depending on the choice of the land user, the land rental could be paid in lump sum for the whole term or annual basis. Regarding the former case, the land law allows the land user (Assignor) to assign its LUR to another entity (Assignee) via, among others, sale of or capital contribution in form of LUR (generally, assignment). Meanwhile, the law does not make it clear on whether the Assignee should sign a new LLA with State as a result of the LUR assignment. In particular,

• On the one hand, the land law expressly requires an Assignee who acquires a LUR via acquisition of assets attached to land leased on annual rental payment basis to sign new LLA with State. On the other hand, the land law is strangely silent on the requirement of LLA resigning in case the Assignee acquires LUR associated with the land leased with lump sum rental payment. It is not clear if this could be interpreted that there is no applicable requirement on resigning of LLA with State; and

• In the context of transferring investment project associated with LUR assignment, the land law again fails to address the issue in question. Specifically, Article 83.2 of Decree 43/2014 merely provides that the local authority will recover the land from the Assignor and make decision on leasing land to the Assignee. Considering other relevant provisions of the land law, such an authority’s decision should usually involve issuance of a land lease approval, but not resigning of the LLA.

  One may take a fair view that resigning of LLA should not be necessary given the Assignor has paid the land rental in full and the Assignee could anyway obtain certificate of the relevant LUR in accordance with law. However, the Assignee, as end land user, should prudently consider demanding a LLA newly signed with State because of the following reasons:

• Under the law, a lease must be established via a mutual agreement. Without resigning of the LLA, it is not clear the Assignee can use the land on what basis; and

• According to Article 370 of the Civil Code 2015, an obligor (like Assignor) may transfer its contractual obligation to another entity (like Assignee) after obtaining consent from the obligee (like State). Upon the transfer of contractual obligation, the Assignee will become the obligor. Without signing new LLA with State, it is not clear (i) how the State indicates its acceptance of the LUR assignment, and (ii) whether it could be deemed that the Assignee must automatically inherit all obligations of the Assignor under the original LLA, except for payment of land rental.

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