FDI enterprises leasing land often invest heavily in improvements and additional construction: levelling, auxiliary workshops, wastewater systems, internal roads. When the lease ends — by expiry or early termination — a sharp question arises: who owns these assets, and may the tenant dismantle, remove, or claim reimbursement for them?
The first principle: the contract decides
The law respects the parties’ agreement. The best improvements clause is written when signing the lease, covering: (a) the scope in which the tenant may improve or build additionally (with the lessor’s approval); (b) how improvements are handled at termination — tenant dismantles and removes, leaves them for the lessor with/without compensation, or transfers at residual value; and (c) how residual value is determined (depreciation, independent valuation). Without this clause, disputes are nearly certain.
Without agreement, how the law applies
Article 104 of the Civil Code 2015 (91/2015/QH13), effective 1 January 2017, governs ownership of fixtures: assets lawfully created by the investor belong to that investor unless otherwise agreed. At the same time, on termination the tenant must return the leased property in its received condition, save normal wear and tear (Article 482). Combined: the tenant may dismantle and remove its owned improvements if removal does not damage the leased property; for inseparable fixtures (foundations, underground infrastructure), the tenant can only negotiate for the lessor to pay the residual value — and if negotiation fails, the risk of losing the investment entirely is real.
Practical lessons for FDI tenants
Before improving: obtain the lessor’s written approval for each item; keep full invoices and cost records. In the contract: record the handling mechanism for each termination scenario (expiry, early termination by either party). At termination: inventory and value the improvements before handover; if the lessor keeps the assets without compensation and the contract is silent, the tenant has grounds to sue for residual value under the Article 104 ownership principle.
Frequently asked questions
1. Who owns improvements built on leased land at termination?
The contract first. Absent agreement, lawfully created improvements belong to the tenant-investor (Article 104, 2015 Civil Code), though practical handling depends on whether they can be separated from the leased property.
2. May the tenant dismantle and remove improvements?
Yes, if they belong to the tenant and removal does not damage the leased land/property. For inseparable fixtures (foundations, underground works), negotiate for the lessor to pay residual value.
3. Is improvement cost reimbursable at termination?
Only if the contract provides for compensation/residual-value payment, or negotiation succeeds. If the lessor keeps the assets without a contractual basis, the tenant may sue for residual value under Article 104.
4. Which clauses protect improvement investments?
The permitted improvement scope, handling mechanisms per termination scenario (remove / leave with compensation / transfer at residual value), and the residual-value methodology (depreciation or independent valuation).