Leasing an industrial park plot for a factory without checking its “environmental past” is like buying a house without seeing the title deed. Land once used as a waste dump, chemical warehouse or dyeing workshop can harbour soil and groundwater contamination for decades. When environmental authorities find it, the current tenant — your FDI enterprise — is the first to be questioned, and the burden of proving “I didn’t cause it” falls on you.
Why assess the environment before signing?
Article 161 of the 2020 Law on Environmental Protection (Law 72/2020/QH14, in force as of 20 October 2026) provides: organisations and individuals violating environmental law and causing pollution must remediate the pollution, restore the environment and compensate for damage. The “polluter pays” principle sounds protective of new tenants — but in practice, when inspectors find contamination during your tenancy, authorities first demand explanations from the current land user. Without evidence that the pollution predated your lease (an initial environmental baseline report), escaping liability — at least administratively during investigation — is very hard. An assessment costs a fraction of later remediation.
What does the assessment involve?
The international standard FDI investors typically apply has two phases: Phase I — records review: land use history (what the land was, who used it), the previous owner’s environmental files, interviews with neighbours, and a site walkover for red flags (discoloured soil, strange odours, old tanks). Phase II — sampling and analysis: drilling soil and groundwater samples at suspect locations, testing for heavy metals, hydrocarbons and organic chemicals at an accredited laboratory. The result is an environmental baseline report — the tenant’s most important legal document, which should be annexed to the lease and countersigned by both parties.
Contamination found before signing: who remediates?
If the assessment finds pre-existing contamination, the tenant has three options: (1) require the lessor to fully remediate before handover — the cleanest route, with the remediation standard (national soil quality technical regulations) and deadline written into the contract; (2) negotiate a rent reduction matching the remediation cost the tenant will bear; (3) walk away — for severe contamination (heavy metals, dioxins), usually the wisest choice since remediation can dwarf the lease’s value. Never sign on a verbal “we’ll clean it up later” without binding clauses.
Contamination discovered after leasing: must the tenant clean up?
In principle, the tenant is not liable for pollution it did not cause — liability sits with the polluter under Article 161. But legal reality is messier: the tenant must prove the contamination predated its tenancy (the baseline report is golden evidence), and while the polluter is being identified, authorities may require the current user to cooperate with emergency remediation. Hence the lease should contain a contamination liability allocation clause: the lessor warrants the land’s environmental condition at handover (based on the jointly signed baseline); if pre-existing contamination surfaces later, the lessor bears remediation costs and compensates the tenant’s losses (production standstill, temporary relocation); the tenant may unilaterally terminate if contamination exceeds permitted thresholds and the lessor fails to remediate within the agreed time.
Frequently asked questions
1. Should leased land be environmentally assessed before signing?
Yes — and for industrial land with multiple past users, practically mandatory. An assessment costs a fraction of later remediation; the baseline report is the tenant’s most important legal shield.
2. Who remediates contamination found before leasing?
The lessor (or the prior polluter) must remediate before handover — with the standard and deadline in the contract. The tenant’s three options: demand full remediation, negotiate a rent reduction, or walk away if contamination is severe.
3. If pre-existing contamination is found after leasing, must the tenant clean up?
In principle no — the polluter is liable (Article 161, 2020 Law on Environmental Protection). But the tenant must prove pre-existence via the baseline report, and may be required to cooperate with emergency remediation while the polluter is identified.
4. Which contract clauses allocate contamination liability?
The lessor’s warranty of environmental condition (based on the jointly signed baseline); the lessor’s remediation and compensation duties for pre-existing contamination; the tenant’s right to unilaterally terminate if contamination exceeds thresholds and the lessor fails to remediate on time.
Key takeaways for investors
- Pre-lease environmental assessment of industrial land is practically mandatory — the baseline report is the tenant’s golden evidence.
- The polluter remediates and compensates (Article 161, 2020 Law on Environmental Protection) — but the tenant must prove it did not cause the pollution.
- Contamination found pre-signing: demand full remediation, negotiate a discount, or walk away — never rely on verbal promises.
- The lease must allocate contamination liability: condition warranty, lessor remediation duties, tenant termination rights.
This article has been quality-reviewed by the FLAW AI Legal Council. Content is for legal reference only and does not replace lawyer advice for specific cases.
