Land in the FTZ: Leasing From the Management Board, Terms and Rights of Secondary Investors Leasing Infrastructure

Land inside a free trade zone is not owned by the Management Board to “sell” to investors — it is state land assigned to the Management Board to organise leasing to investors by project. Misread this three-tier structure (the State — the Management Board or infrastructure investor — the secondary investor) and an enterprise will negotiate the wrong term, price and mortgage rights.

Governing Instruments

Land allocation and leasing inside the zone: two models investors must distinguish

Under the framework of the Law on Land 31/2024/QH15 and the decision establishing the Da Nang Free Trade Zone (Decision 1142/QD-TTg), land inside the zone belongs to the land fund managed by the State and is exploited through the zone Management Board. Two common land-access models exist: (i) the project investor leases land directly in the zone from the State through the Management Board focal point — paying land rent in one lump sum for the whole term or annually, by choice and the rules applying to each project type; (ii) the secondary investor subleases land with infrastructure from the zone infrastructure developer, under a sublease within the scope of rights granted to the infrastructure investor. The two models yield two different rights packages on land use right certification, transfer and mortgage, so the first step of any deal is identifying which model you are in.

The land lease term attaches to the operating term of the investment project and does not exceed the maximum frame of land and investment law: ordinarily not more than 50 years, and up to 70 years for special cases (large capital, especially difficult areas or large-scale infrastructure projects). Land rent inside the zone follows the land price frame and the zone incentive regime: for direct leasing, rent is calculated on the land price table and applicable coefficients at leasing time, possibly with exemptions or reductions under investment incentives; for infrastructure subleasing, the price is offered by the infrastructure investor based on infrastructure investment cost and the land rent they must pay, plus zone management and operation fees.

Secondary investor rights and the mortgage and transfer bottleneck

A secondary investor subleasing land with infrastructure enjoys stable land use within the sublease term for the registered project purpose, land use right and asset certification under the rules applying to the lease form, the right to build works per planning and permits, and to exploit its own assets on the land. However, the sublessee rights are limited by the infrastructure investor head rights: the sublease term cannot exceed the remaining term of the infrastructure layer, and project transfers, further subleasing or purpose changes must conform to the sublease and zone management rules.

The practical bottleneck is mortgage: for land leased with annual rent — the common form in zones — the investor may mortgage its own assets attached to the leased land, but not the land use right as in the lump-sum lease case. A secondary investor additionally faces the sublease conditions (lessor consent, financing conditions for project security). Lending banks therefore usually require a combined security package: mortgage of assets on the land, a parent company guarantee and project revenue escrow — the project cost of capital inside the zone is directly affected by this land structure.

Application Analysis

At lease expiry, assets on the land follow three scenarios that must be anticipated from signing day: lease extension if the project still operates and fits planning — the investor performs extension procedures under land law and adjusts the investment project accordingly; transfer of the project and assets to another investor before expiry if operations will not continue; or project termination, asset liquidation and site handover under the lease — for in-zone leases, site restoration duties and treatment of remaining works are set in the contract with the Management Board or the infrastructure investor. Works with a useful life longer than the land term are a risk to be priced into the financial model from the start, not negotiated in the final year.

The core negotiation advice: lock four clause groups into the lease or sublease — the rent adjustment mechanism by cycle (avoiding open clauses allowing free increases), extension conditions and procedures, project and land-attached asset transfer rights with a consent mechanism that cannot be unreasonably withheld, and the valuation and compensation mechanism for assets on the land where the zone recovers land early for planning reasons. For secondary investors, add legal due diligence on the infrastructure investor head rights: the land allocation decision, the remaining term, and whether land financial obligations have been completed — a defect at the head-rights layer propagates down to every sublease below it.

Recommended Actions

Identify the land-access model (direct lease via the Management Board or infrastructure sublease) and diligence the corresponding head rights before signing any commitment.
Reconcile the land lease term with the project term and the works life cycle; if they diverge, negotiate the extension mechanism in the very first contract.
Design the loan security package to fit the rent payment form (lump sum or annual) and notify the financing bank early.
Write the asset-on-land handling mechanism for all three scenarios into the contract: extension, project transfer, termination and site handover.

Frequently Asked Questions

On what term and price does an investor lease land in the FTZ from the Management Board?

The land lease term attaches to the operating term of the investment project, within the maximum frame of land and investment law — ordinarily not more than 50 years, and up to 70 years in special cases. On price: for direct in-zone leasing, land rent is determined on the land price table and the regime applicable at leasing time, possibly with exemptions or reductions under investment incentives and zone policy; for subleasing from an infrastructure investor, the price is by agreement based on infrastructure cost, the land rent the infrastructure investor must pay and zone management fees. The payment form (lump sum or annual) decides many attached rights and must be fixed in the contract from the start.

What rights does a secondary investor subleasing infrastructure in the FTZ have?

The sublessee enjoys stable land use within the sublease term for the registered project purpose, certification under the rules applying to the lease form, the right to build and own works on the land, and to exploit its own assets. These rights are limited by the infrastructure investor head rights: the sublease term cannot exceed the remaining term of the layer above, and transfers or further subleasing must conform to the sublease and zone management rules.

Can land in the FTZ be mortgaged or the lease right transferred?

It depends on the rent payment form: land leased with a lump-sum payment for the whole term permits mortgage of the land use right and attached assets as prescribed; land leased with annual rent — the common form in zones — permits mortgage only of the investor own assets attached to the land, not of the land use right. Transfer in practice is mainly effected through transfer of the investment project together with assets on the land, subject to investment and land law conditions and to consent under the lease or sublease.

How are assets on the land handled when the FTZ land lease expires?

Through three scenarios: (1) land lease extension if the project continues to operate and fits planning, with corresponding adjustment of the investment project term; (2) transfer of the project and assets on the land to another investor before expiry; (3) project termination, asset liquidation and site handover under the lease — including duties to dismantle or treat remaining works if the contract so provides. The applicable scenario must be anticipated by contract clauses from signing, because the residual value of works at expiry is the most dispute-prone amount.

This article has been quality-reviewed by the FLAW AI Legal Council