The State’s lease of non-agricultural land constitutes a key legal mechanism through which investors may obtain land use rights for the implementation of investment projects in Vietnam. However, depending on the nature of the project, the intended land use purpose, and other relevant legal considerations, different legal regimes may apply with respect to land leasing, land rental payment methods, and applicable statutory conditions. Identifying the appropriate legal framework at the project preparation stage is essential to ensuring the timely implementation of the project, mitigating legal risks, and safeguarding the investor’s lawful rights and interests throughout the land use period. This article examines the key legal issues that investors should take into consideration when leasing non-agricultural land for the implementation of investment projects.

1. What is the land lease term for an investment project?

The land lease term is determined based on the operating term of the investment project and must not exceed the maximum period prescribed by law.

Pursuant to Article 172 of the 2024 Land Law:

• The land allocation or land lease term for ordinary investment projects must not exceed 50 years.
• For projects involving substantial investment capital with a prolonged capital recovery period, or projects implemented in areas with difficult or exceptionally difficult socio-economic conditions, the land lease term may be extended to 70 years.

Upon expiry of the land lease term, where the investor continues to have a legitimate demand for land use and satisfies all statutory conditions, the State may consider granting an extension of the land use term in accordance with applicable laws.

2. Is an investor required to put the leased land into use in accordance with the approved project schedule?

Yes.

One of the fundamental obligations of a land user is to use the land for the approved purpose and in accordance with the implementation schedule specified in the approved investment project.

Pursuant to Article 81 of the 2024 Land Law, where, after the land has been allocated or leased:

• the land is not put into use for 12 consecutive months from the date of on-site handover; or
• the land use schedule is delayed by 24 months compared to the implementation schedule set out in the investment project,

the competent state authority may grant an extension within the period prescribed by law. If, upon expiry of such extension, the investor still fails to put the land into use, the State is entitled to recover the land without compensation for the land use rights.

This constitutes one of the most significant legal risks faced by investment projects where actual implementation fails to comply with the approved project schedule.

3. Is an investor leasing land entitled to transfer or mortgage the land use rights?

The rights exercisable by an investor in respect of leased land are not uniformly applicable in all circumstances but depend primarily on the applicable method of land rental payment. This is a key legal consideration, as the scope of the land user’s rights directly affects the commercial exploitation of the land use rights, the bankability of the project, and the investor’s flexibility throughout the project implementation process.

Pursuant to Article 37 of the 2024 Land Law, where the State leases land with annual land rental payments, the rights of the land user are more limited than those applicable to land leased with a one-off rental payment for the entire lease term. In such cases, the investor is not entitled to transfer the land use rights in the same manner as an investor making a lump-sum rental payment, and the range of transactions that may be conducted in relation to the land use rights is correspondingly restricted under the law.

Conversely, where land rental is paid in a lump sum for the entire lease term, the land user is entitled to exercise a broader range of statutory rights, including the rights to transfer, sublease, mortgage, and contribute the land use rights as capital, subject to compliance with the conditions, procedures, and other requirements prescribed by the 2024 Land Law and other applicable legislation. The availability of these rights enables investors to maximize the commercial value of the land use rights, utilize such rights as collateral for financing arrangements, and undertake project restructuring or investment transactions where necessary.

Accordingly, the choice of land rental payment method should not be viewed solely as a financial consideration. Rather, it constitutes an important strategic decision that may significantly influence the investor’s financing capability, asset management strategy, and overall project structure throughout the investment lifecycle. In practice, investors should carefully assess their financing needs, long-term investment strategy, anticipated restructuring plans, and the intended use of the land use rights before determining the most appropriate land lease arrangement.

Conclusion

Leasing non-agricultural land for the implementation of an investment project is not merely a land administration procedure; it forms the legal foundation for the feasibility and successful implementation of the project as a whole. Before applying for a land lease from the State, investors should carefully assess all relevant legal considerations, including the compatibility of the proposed land with applicable planning, eligibility for land lease, land use term, land rental payment method, and the obligation to put the land into use in accordance with the approved project schedule. Adequate legal preparation from the outset will help mitigate legal risks, reduce the likelihood of land recovery, and facilitate project implementation, financing, and the efficient utilization of the project throughout its operational life.