Leasing Land and Factories in Industrial Parks
For many foreign investors, everything starts with a simple need: premises in an industrial park to build a factory. But “leasing land” in an industrial park in Vietnam is rarely just a premises-leasing transaction. Behind the contract lies an entire legal structure comprising land use rights, the status of the infrastructure developer, the form of rental payment, a term tied to the investment project, and limits that not every lessee anticipates. This article moves from the nature of the transaction, through the current legal framework, to the practical points to settle before signing.
How is leasing “land” different from leasing a “ready-built factory”?
Investors usually face two choices: leasing a vacant plot in an industrial park and building their own factory, or leasing a ready-built factory. Commercially, this is a question of cost and time. Legally, these are two transactions of different natures.
Leasing land is a relationship concerning land use rights: the lessee receives the right to use a defined area for a definite term and — depending on the form of payment — may build works, sublease, and mortgage assets attached to the land. Leasing a ready-built factory is mainly a relationship of leasing an asset: the lessee pays to use a completed work, is less involved in land procedures, but also has fewer rights of disposal.
Who may lease land in an industrial park under the Land Law 2024?
The Land Law 2024 (No. 31/2024/QH15, effective from 01/8/2024) uniformly uses the term “foreign-invested economic organisation”, replacing the former term “foreign-invested enterprise”, in order to align with the Law on Investment 2020 (now the Law on Investment 143/2025/QH15, effective from 1 March 2026) and related laws.
Under Article 120 of the Land Law 2024, the State leases land with annual rental payment or one-off payment for the whole lease term to economic organisations — including foreign-invested economic organisations — to implement non-agricultural production and business investment projects, the typical case being a factory in an industrial park. Besides leasing directly from the State, an investor may sublease land use rights from the developer of industrial park, industrial cluster or high-tech park infrastructure; the Land Law 2024 has added specific provisions on the rights and obligations of foreign-invested economic organisations when using land in these zones. The prerequisite is that the investment project must conform to the planning and investment attraction orientation of the park.
Two ways of paying land rent and their accompanying legal consequences
Choosing annual rental payment or one-off payment for the whole lease term is not only a financial decision — it shapes the rights the lessee holds. With one-off payment, the lessee has a stronger legal position: it may more fully exercise rights such as transfer, sublease, and mortgage of land use rights and assets attached to the land during the lease term. With annual payment, these rights of disposal are significantly limited.
In an industrial park, this choice is also linked to the infrastructure developer’s pricing structure. Many developers quote a land sublease price that already includes the one-off land rent they have paid to the State, plus infrastructure usage fees. Investors need to break down clearly in the contract: which part is land rent, which part is infrastructure fees, and what the original form of land rental payment is — because that determines the scope of rights enjoyed, including the ability to mortgage assets on the land to borrow capital later.
Land lease term: three time points to cross-check
The term of a land lease for implementing an investment project is determined according to the term of the project, within the maximum term framework prescribed by land law for each type of project. For an FDI project in an industrial park, the period of operation stated on the investment registration certificate is an important reference point.
Quite a few land sublease contracts state a term “until the end of the infrastructure developer’s land lease term” or a fixed number of years. Investors should cross-check three points: their own investment project’s term, the infrastructure developer’s original land lease term, and the term stated in the sublease contract. Extension clauses, conditions and extension costs should be negotiated from the outset rather than left until close to expiry to be negotiated from a weak position.
Legal status of the industrial park developer
The party subleasing land with whom the investor usually works directly is not the State but the developer of industrial park infrastructure. Checking the status of this entity is a step that cannot be skipped: whether it has a lawful land allocation or land lease decision; whether it has fulfilled its financial obligations regarding land; and whether it is in a dispute or subject to any security measure affecting its right to sublease.
A practical point: not every industrial park has a uniform legal status across its entire area. Some parks are developed in phases, and the plot offered for lease belongs to a phase whose infrastructure is not yet complete. The contract should link the handover schedule for the site and technical infrastructure to payment obligations, rather than paying a lump sum for a plot whose infrastructure still exists only on paper.
The land sublease contract: the decisive clauses
The land sublease contract is usually drafted by the infrastructure developer on its form. Besides price, investors should read carefully the following groups of clauses: description of the leased object — location, area, boundaries, current condition and accompanying infrastructure must be defined by a map appendix and handover minutes; price and adjustment mechanism — the sublease price, infrastructure fees, management fees and conditions for periodic price increases need a cap or a clear formula; the land use purpose and lines of business must match the registered investment project.
Next are the right to build and responsibility for the construction permit for works on the leased land; the rights to transfer, sublease and mortgage; and the group of clauses most often overlooked — handling of assets on the land when the contract ends.
The lessee’s rights to build, sublease and mortgage
The scope of the lessee’s rights depends on the form of lease and whether the lease is directly from the State or a sublease from the infrastructure developer. For an FDI project paying land rent in one lump sum, the lessee may mortgage land use rights and assets attached to the land at a credit institution to raise capital — an important financial tool that the annual payment form does not provide.
The right to sublease is also of interest to many investors with surplus area. However, subleasing land use rights in an industrial park is governed simultaneously by land law and real estate business law: the sublessor must satisfy the conditions of a real estate business enterprise, and the subleased object must conform to the park’s planning. For construction on leased land, the lessee must also comply with construction and investment law: the factory project still needs full procedures on design, appraisal, permits (or satisfaction of permit-exemption conditions) and acceptance for putting into use.
Land registration after signing the contract
Signing a land lease contract is only half the journey. For the project’s land use rights to be recognised and protected by the State, the investor needs to carry out land registration as prescribed. Depending on the form of lease, the result may be a land use right certificate in the investor’s name or registration of a change and updating of lease information on the land registration system.
This stage is often delayed by lack of coordination: the infrastructure developer is slow to provide original documents, or the investment project dossier and the land dossier contain inconsistent information. Experience shows that the obligation to cooperate in completing land registration procedures should be put into the lease contract, with specific deadlines and sanctions for the party obliged to provide documents.
Costs beyond rent and the incentives story
The total cost of using land in an industrial park rarely stops at the rent per square metre. Investors need a full cost table including: land rent (or sublease rent paid to the infrastructure developer), infrastructure usage fees, management–maintenance fees, non-agricultural land use tax, and technical infrastructure connection costs such as power stations, water supply and wastewater treatment.
On incentives, a project in an industrial park may enjoy corporate income tax incentives and land rent exemption or reduction according to preferential location and sectors. But incentives do not apply automatically — investors must satisfy conditions and carry out confirmation procedures. Assuming that “being in an industrial park means incentives” without checking the specific conditions of one’s own project is a common mistake.
Lease land or lease a ready-built factory?
Leasing land and building oneself suits investors with specific needs for premises and production lines, long-term use plans and construction project management capacity. The advantages are full control over design, functions and expansion potential; the disadvantages are a long implementation time — usually 12–24 months from signing the contract to operation — and large initial investment capital.
Leasing a ready-built factory suits needs for rapid deployment, moderate scale, or a market exploration phase before a long-term commitment. Legally, this option requires careful skills in reviewing the factory lease contract — checking the lessor’s status, the legal status of the work, fire prevention and fighting conditions, and renovation and handover clauses.
Early legal preparation: what to do before signing
Leasing land in an industrial park is a decision binding one for decades to a location, an infrastructure partner and a framework of legal obligations. The value of early legal preparation lies in three things: appraising the plot and the infrastructure developer before negotiation; structuring the contract to cover the end-of-term scenario as well; and synchronising the land dossier with the investment project dossier. FLAT LAW FIRM regularly supports foreign investors in industrial real estate and industrial park transactions: from legal review of plots, negotiation of land sublease contracts, to completion of land registration procedures. If a business is considering a plot in an industrial park or needs to reassess its current lease contract, discussing early with a lawyer will help reveal the full risk structure before committing. Contact us for advice tailored to the specific project of your business.
Frequently Asked Questions
Can a newly established FDI enterprise lease land directly in an industrial park?
A foreign-invested economic organisation is among the subjects entitled to State land lease to implement non-agricultural production and business projects under the Land Law 2024. In practice, subleasing land from the industrial park infrastructure developer is more common, subject to having an investment project conforming to the park’s planning.
How do one-off land rental payment and annual payment differ?
One-off payment for the whole lease term gives the lessee a broader “basket of rights”: transfer, sublease, and mortgage of land use rights and assets attached to the land. With annual payment, these rights of disposal are significantly limited. This is not only a cash-flow question but also a question of asset-use strategy.
Which clause of a land sublease contract deserves the most attention?
Besides price, attention is needed to the description of the leased object and accompanying infrastructure, the price adjustment mechanism, the match between land use purpose and the investment project, the rights to build — transfer — mortgage, and especially the clause on handling assets on the land when the contract ends.
Is building a factory on leased land in an industrial park exempt from a construction permit?
This depends on each specific project under Article 43 of the Construction Law No. 135/2025/QH15 (provisions on construction permit exemption in Clauses 2 and 3, effective from 01/01/2026). Current law lists the cases exempt from construction permits under new criteria, and no longer applies verbatim the old conditions such as “a project in an industrial park with a 1/500 plan and appraised design”.
Whether exempt from a permit or not, the investor must still fully perform other obligations: notice of commencement, compliance with requirements on work quality, construction safety, fire prevention and fighting, and environmental protection. To determine accurately whether your project is exempt, please contact a lawyer to review the specific planning and design dossier.
When should a lawyer be brought in?
Best from the stage of appraising the plot and negotiating key terms, before signing a memorandum of understanding or paying a deposit. A lawyer helps verify the legal status of the land and the infrastructure developer, structure clauses protecting the lessee, and synchronise the land dossier with the investment project dossier.
