Scenario: a company has mortgaged its workshop for a bank loan and now wants to lease the workshop to another business to generate cash for debt service. The bank’s relationship officer says «once mortgaged, it cannot be leased». What does the law actually say — and what does the credit agreement say differently?
Under civil law: the mortgagor keeps the right to exploit and lease
A mortgage under the Civil Code 91/2015/QH13 does not strip the mortgagor of ownership or of the right to exploit the asset. The mortgage framework (around Articles 317–323 Civil Code 2015) recognises that the mortgagor may exploit the asset’s utility and lease or lend the mortgaged asset, subject to the core condition of notifying the lessee or borrower that the asset is mortgaged, and to the lease not destroying or diminishing the security value beyond what is agreed.
The notification duty is not a formality: the tenant is entitled to know the workshop it is about to rent can be realised for debt repayment at any time. Concealing the mortgage exposes the lease to invalidity risk for deception and liability to compensate the tenant when the workshop is seized.
Under the credit agreement: banks usually prohibit or condition it
In practice, most bank credit and mortgage agreements contain a clause: the borrower may not lease, transfer or further encumber the secured asset without the bank’s prior written consent. That is a contractual term — breaching it does not automatically void the lease against the tenant, but it is an event of default with the bank: the bank may accelerate the loan or apply contractual remedies.
The real answer therefore has two layers: the law allows it (with notification); the contract usually prohibits it (without consent). The correct route is to obtain the bank’s written consent before signing the lease — many banks agree where rent is routed into a blocked account or an account at the lending bank itself, because the rental cash flow improves repayment capacity.
What the company and the tenant should each lock down
- The company (mortgagor): review the restriction clauses in the credit/mortgage agreements, obtain the bank’s written consent, and notify the tenant of the mortgage status in writing;
- The tenant: inspect title documents and confirm the mortgage status, search the secured-transactions registry; negotiate protections — early-termination rights and reimbursement of fit-out costs if the workshop is realised, or a tripartite agreement with the bank respecting the lease term;
- If the asset is realised: even a lawful, notified lease can be affected when the asset is sold for the debt — the tenant should price rent and term against this risk instead of investing heavily in premises it may lose.
Frequently asked questions
Can we lease out a workshop already mortgaged to the bank?
Under civil law, yes: the mortgagor may exploit and lease the mortgaged asset under the Civil Code 2015, provided the tenant is notified of the mortgage. But if the credit agreement prohibits it or requires prior consent, obtain written consent — breaching it risks loan acceleration.
What happens if we lease without telling the bank?
The lease is not automatically void against the tenant, but you have breached your undertaking to the bank: the loan may be treated as in default, with acceleration and realisation of the asset under the contract. That risk far outweighs the consent procedure.
Is a tenant of a mortgaged workshop protected?
A notified, lawful tenant still faces the risk that the lease is affected when the asset is realised for the debt. Practical protections: early-termination clauses, fit-out cost reimbursement, and for long leases a tripartite agreement with the bank respecting the term.
Must the bank consent to the lease?
No. Consent is the bank’s right under the signed contract. To improve the odds, present a transparent rental cash-flow plan — for example rent paid into an account at the lending bank — showing leasing improves, not worsens, repayment capacity.
This article has been quality-reviewed by the FLAW AI Legal Council
