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Real Estate and Construction

Building a Factory on Leased Land: Construction Permits and Completion

13 min readFLAT LAW FIRM
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Leasing land to build a factory is a common model for manufacturing enterprises, especially FDI companies in industrial parks. Compared with buying land, leasing reduces initial capital pressure; but legally, building on leased land is far more complex: the lessee's rights are bounded by the lease term, every structure shares the fate of the lease contract, and a single permitting mistake can leave the entire factory in legal limbo.

Table of contents

1. Why building on leased land is riskier than on your own land

When building on land you own, you only need to comply with construction law. When building on leased land, you add another layer: the relationship with the lessor. This is the typical situation for FDI companies established in Vietnam leasing land to build factories.

The lease term caps the legal life of the structures. A factory may last 30–50 years, but the land lease may be only 20. When the lease expires without renewal, the factory's fate depends entirely on the lease agreement — something many companies think about only when it is too late.

Every change to the land directly affects the structures. If the lessor's land is recovered, or the lease is declared void, the structures instantly fall into legal uncertainty.

The lessee's obligations follow the land use purpose. Land leased for production and business may only host structures serving that purpose; building off-purpose (e.g. worker housing on production land without a permitted purpose conversion) violates both land and construction law.

So before thinking about design drawings, a company must answer three questions: is the leased land legally eligible for construction, does the lease term match the structures' lifecycle, and does the lease clearly provide for the structures' fate at expiry?

Two statutes govern the whole process:

The 2024 Land Law (31/2024/QH15, effective 01/8/2024) governs land leases: lease conditions, land use term (production/business leases usually capped at 50 years), lessee rights and obligations, and the regime for assets attached to leased land. An important new point of the 2024 Land Law is tighter conditions and more transparent lease procedures, plus clearer rules on lessees' rights to mortgage or contribute capital with assets attached to leased land.

The 2025 Construction Law (135/2025/QH15, passed 10/12/2025, effective 01/7/2026, replacing the 2014 Construction Law) governs all construction activity: from planning, design, permit issuance, construction, to acceptance for use. The core principle in Article 43(2): before commencing construction, the investor must hold a construction permit, except for exempt cases listed at points a–h. A major new feature of the 2025 Law is the single-checkpoint principle: a project whose feasibility study report has been appraised by the specialized construction authority and approved is exempt from the construction permit (Article 43(2)(e)). The central provisions for this article: Article 43 (permit issuance and exemptions), Article 44 (permit conditions), Article 48 (commencement conditions and commencement notice), Article 57 (construction acceptance).

Depending on the factory's nature, fire prevention law, environmental protection (environmental impact assessment or environmental registration), and the industrial park's own rules also apply.

3. Prerequisite: the leased land use right must qualify

Before applying for a construction permit, the company must ensure the leased land meets the following conditions.

The lessor has a lawful right to lease. The lessor must be a lawful land user holding a land use right certificate, and must not fall into prohibited cases (e.g. disputed land, land seized for judgment enforcement). Check the certificate and the parcel's legal status at the land registration office.

Consistent land use purpose. The land must be designated for non-agricultural production and business, industrial parks, industrial clusters, or another purpose allowing factory construction. Agricultural land not yet converted must never host a factory.

Planning conformity. The parcel must conform to land use planning, construction planning and the area's detailed planning. In industrial parks, the project must fit the park's 1/500 detailed plan and the park's targeted investment sectors.

A valid lease contract. The lease must clearly state: the lessor consents to the lessee building structures on the land; the lease term; and the fate of the structures at lease expiry. Many disputes arise simply because the lease says "land lease" in general terms and nothing about construction.

Adequate remaining term. Practice shows the lease should exceed the factory's expected depreciation period by at least 10 years, giving the company enough time to recover the construction investment.

4. Construction permits: when required, what the dossier includes

Principle: under Article 43(2) of the 2025 Construction Law, before commencing construction the investor must hold a construction permit, except for the exempt cases at points a–h. A factory is a construction work, so the general rule remains: obtain the permit before breaking ground.

Notable new feature — exemption where the feasibility study report has been appraised: works under an investment project whose feasibility study report (or adjusted report) has been appraised by the specialized construction authority and approved as prescribed are exempt from the construction permit (Article 43(2)(e) of the 2025 Construction Law). This is a major change from the 2014 Law: for a factory whose project has completed this appraisal–approval stage (typically projects in industrial parks), the company no longer applies for a permit, but must still send a commencement notice with dossiers corresponding to the permit application dossier (excluding the permit application form) to the competent local state construction authority under the provincial People's Committee's decentralization (Article 43(3)).

Issuing authority: conditions, authority, dossiers, procedures for issuance, adjustment, extension, re-issuance, revocation and publication of construction permits are detailed by the Government (Article 44(3) of the 2025 Construction Law). In practice: for factories in industrial parks, permitting authority usually belongs to the Industrial Park Management Board (a specialized construction authority under Article 3(19) of the 2025 Law) or the Department of Construction under decentralization; outside industrial parks, authority belongs to the competent local authority under the provincial People's Committee's decentralization — note that the district level was abolished from 01/7/2025, so there is no district-level People's Committee issuing permits. Confirm the competent authority in your locality to avoid filing in the wrong place.

A factory construction permit dossier typically includes:

  1. The permit application form.
  2. Proof of the lawful leased land use right (lease contract, the lessor's land use right certificate).
  3. Construction design drawings: floor plans, elevations, sections, structural drawings, technical systems.
  4. Design appraisal report (for works subject to appraisal).
  5. Fire-prevention approval documents (fire safety appraisal).
  6. Commitments on safety and environmental sanitation during construction.
  7. Other documents required by the local permitting authority.

Processing time: the 2025 Construction Law pushes maximum simplification — end-to-end online processing, simplified dossiers and conditions, shortened issuance time; specific time limits and procedures are detailed by the Government. Prepare the dossier carefully from the start rather than filing sloppily and fixing later.

5. Permit-exempt cases

Article 43(2) of the 2025 Construction Law lists permit-exempt cases (points a–h). Those potentially relevant to factories include:

  • Works under projects whose feasibility study report has been appraised and approved (point e) — the biggest new feature of the 2025 Law, analyzed in section 4. Note: exemption still requires a commencement notice with dossiers.
  • State-secret works, urgent/emergency construction works (point a).
  • Temporary works serving construction of the main works (point a).
  • Interior repair/renovation of works, or exterior repair/renovation not facing an urban road subject to architectural management requirements — provided the purpose and function are unchanged, load-bearing safety is unaffected, and fire-prevention, environmental protection and technical-infrastructure connectivity requirements are met (point h).

Important note: an ordinary production factory — newly built on leased land for manufacturing — is almost never exempt, unless the project has had its feasibility study report appraised and approved under point e above. Do not follow advice like "build first, permit later" or "factories in industrial parks need no permit" — these misunderstandings can lead to very costly consequences, as analyzed in section 8.

6. Building per the permit: common violations

Holding a permit is only the start; building off-permit is treated like building without a permit for the offending part. Common violations in factory construction:

Exceeding area, floors, or wrong location. The permit says 5,000 m² of floor area; the reality is 6,000 m²; or the works are shifted from the approved drawings. Any change from the permit requires a permit adjustment before implementation.

Changing structure or function. The approved design is a single-storey steel-frame factory; the reality adds a concrete mezzanine for offices — a change to load-bearing structure and function requiring appraisal and an adjusted permit.

Violating setbacks and building density. Encroaching the construction boundary line, safety corridors, or failing to keep fire-separation distances from neighbouring works.

Commencing without meeting commencement conditions. Starting without site handover, approved design, or safety measures — all violations.

Failing to notify commencement. The investor must send a written or online commencement notice to the local state construction authority (Article 48(1)(đ) of the 2025 Construction Law; for permit-exempt works under Article 43(2)(a)–(h), a commencement notice is still required under Article 43(3), with dossiers corresponding to the permit application dossier). A simple procedure many companies forget.

7. Completion: acceptance and post-construction legal finalization

"Hoàn công" (completion) is the common term for the acceptance of finished works and post-construction legal finalization. A mandatory step before the factory goes into operation, it includes:

Acceptance of completed works. Under Article 57 of the 2025 Construction Law, construction acceptance comprises: acceptance of construction tasks during execution; acceptance of construction phases where necessary; and acceptance of completed work items and completed construction works. The investor is responsible for organizing acceptance (Article 57(3)); completed items and works may only be put into exploitation and use after acceptance confirming compliance with the construction design, technical regulations and applied standards (Article 57(2)). Note: for works under national important projects, large-scale works, technically complex works or works greatly affecting community safety and interests, the competent authority also inspects the investor's acceptance work before the works go into exploitation and use (Article 57(4)). The acceptance minutes are the legal basis confirming the works are eligible for use.

Fire-prevention acceptance. Factories subject to fire-safety appraisal and acceptance must hold the fire acceptance document before operating — a condition authorities inspect very strictly.

Environmental dossier finalization. Implement the approved/confirmed environmental impact assessment or environmental registration as required.

Registration of assets attached to the land. After completion, register the factory as an asset attached to the leased land in the cadastral records, so ownership is recorded on the certificate. This step is crucial if the company later wants to mortgage the factory for loans — banks only accept registered assets as collateral.

Final accounts and dossier archiving. Complete the completion dossier (as-built drawings, construction logs, material certificates) and archive as prescribed; it is the works' legal asset for its entire service life.

8. Sanctions for unpermitted or off-permit construction on leased land

Decree 16/2022/ND-CP sets strict administrative sanctions in construction:

  • Building without a permit where one is required: fines of up to tens of millions of VND depending on the works' scale, plus forced work stoppage.
  • Building off-permit: fines and mandatory remediation per the permit, or demolition of the violating part.
  • Failing to organize acceptance or putting works into use before acceptance: fines and mandatory acceptance per regulations.

For works on leased land, the consequences are heavier: violating works cannot be registered for ownership and cannot be mortgaged for loans; at lease expiry, the lessor gains grounds to refuse buyback or demand demolition; and in any dispute with the lessor, the off-permit lessee is always at a disadvantage.

Practice shows the cost of "regularizing" an off-permit structure (where still possible) is often many times the cost of proper permitting from the start — not to mention lost production time.

9. Frequently asked questions

Is a construction permit required to build a factory on leased land in an industrial park?

Usually yes, unless the project has had its feasibility study report (or adjusted report) appraised by the specialized construction authority and approved — in which case it is exempt from the construction permit under point e, clause 2, Article 43 of the 2025 Construction Law, but must still send a commencement notice with dossiers to the local state construction authority. In industrial parks, permitting/inspection authority usually belongs to the Industrial Park Management Board (a specialized construction authority) under decentralization. Check the park's 1/500 detailed plan and whether the basic design has been appraised before deciding whether to apply.

Can a permanent factory be built on annually-paid leased land?

Yes, if consistent with the land use purpose (production/business land, industrial park land) and the lease term is long enough. However, when the lease expires without renewal, the structures are handled per the lease agreement and the law; agree clearly from the start on the fate of the structures at lease end.

What procedures does factory completion (hoàn công) involve?

Completion includes acceptance of the finished works for use (acceptance by the investor with the contractor, with relevant parties), fire-prevention acceptance, and updating the assets attached to the land in the cadastral records so ownership of the structures is recorded on the certificate.

What is the fine for building a factory without a permit?

Under Decree 16/2022/ND-CP on administrative sanctions in construction, building without a required permit carries fines of up to tens of millions of VND depending on scale, plus forced work stoppage, mandatory permit application or demolition of the violating part. Check the decree text for exact amounts.

Can a factory built on leased land obtain a certificate of ownership?

Yes, if lawfully built (permitted or exempt, built per permit, accepted upon completion) on land the lessee lawfully uses. Ownership of the structures is recorded on the land use right and attached-asset ownership certificate, with the ownership term tied to the lease term.

How is the factory handled when the land lease expires?

Priority goes to the lease agreement: the lessor buys it back, the lessee dismantles and returns the site, or the lease is renewed. Without agreement, the law on handling assets on land at lease expiry applies. A clause on the fate of structures at lease end is therefore mandatory in every factory land lease.

10. When to work with a lawyer

A factory project on leased land should have counsel involved early in these cases:

  • Before signing the land lease: legal due diligence on the parcel, negotiating construction clauses and the fate of structures at lease expiry.
  • Applying for the construction permit: dossier preparation, working with the permitting authority, resolving planning issues.
  • During construction: advice when design changes require permit adjustment, handling contractor disputes.
  • Completion: finalizing acceptance procedures, registering assets attached to the land for loan mortgages.
  • When sanctioned for construction violations: assessing the sanction decision, exercising complaint rights or remediation options.
  • In M&A or corporate restructuring involving factories on leased land: legal due diligence on land-attached assets and handling the lease in the transaction — see M&A and corporate restructuring advisory.

FLAT Law Firm advises comprehensively on industrial real estate projects: from land leasing and construction permitting to completion and dispute resolution. Contact hotline 0988424851 for support.

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References

  • 2024 Land Law (31/2024/QH15, effective 01/8/2024).
  • 2025 Construction Law (135/2025/QH15, passed 10/12/2025, effective 01/7/2026; Article 43(2) and 43(3) effective 01/01/2026) — Articles 43, 44, 48, 57.
  • Decree 16/2022/ND-CP on administrative sanctions in construction (effective 28/01/2022).