The landlord says “my factory, my insurance”; the tenant says “I’m the user, the fire risk comes from my operations” — and in the end nobody buys, until a fire leaves both with nothing. The dispute over who must buy fire insurance for a leased factory is not about premium money; it is about who bears legal liability when authorities inspect.
Current legal framework: Decree 23/2018 is gone
First, to avoid citing expired law: Decree 23/2018/ND-CP on compulsory fire and explosion insurance expired on 6 September 2023. The current framework comprises: the 2022 Law on Insurance Business (Article 8 — fire and explosion insurance is a compulsory line; covered organisations and individuals must buy, and insurers may not refuse eligible buyers); Decree 105/2025/ND-CP (issued 15 May 2025, effective 1 July 2025, guiding the 2024 Law on Fire Prevention, Fighting and Rescue) with the list of establishments required to buy compulsory fire and explosion insurance in Appendix VII; and Decree 347/2026/ND-CP (issued 8 September 2026, effective 15 September 2026) amending Decree 105/2025. Any citation of Decree 23/2018 as current law at the time of writing (20 October 2026) is wrong.
Who is the statutory buyer: landlord or tenant?
The law places the duty on agencies, organisations and individuals having establishments subject to the requirement — i.e., whoever manages, operates and uses the establishment. Applied to factory leases: the tenant producing inside the factory controls the daily fire risk (machinery, chemicals, processes), so in principle the tenant must buy. A landlord merely leasing bare land, or leasing a factory without operating it, is not the establishment’s user. The law does not forbid a different contractual allocation — the landlord may well buy and build it into the rent, as long as a valid policy covers the establishment. What inspectors care about is not “who paid the premium” but “does this establishment hold a valid compulsory fire and explosion policy”.
Allocating it in the lease: how to draft?
The factory lease should carry a standalone insurance clause with four items: (1) which party must buy compulsory fire and explosion insurance (recommended: the tenant); (2) minimum scope (which assets: factory, machinery, goods — per Decree 105/2025’s list); (3) the duty to provide the other party a copy of the policy/certificate annually; (4) sanctions for non-purchase (the other party may buy in replacement and deduct from rent, or treat it as serious breach warranting unilateral termination). Without this clause, after a fire both sides blame each other over “who should have bought” — while authorities penalise the establishment’s user regardless of oral side-deals.
Skipping compulsory cover: consequences
One — administrative penalties for fire prevention violations under the current sanctioning decree — organisational fines are far from light, plus remedial measures. Two — when fire strikes, each asset owner bears its own loss: the landlord loses the burnt factory, the tenant loses burnt machinery — no insurance means paying out of pocket with no compensation inflow. Three — third-party liability: fire spreading to neighbouring factories harms others — the fire-causing party compensates under the 2015 Civil Code’s extra-contractual liability rules, and without liability cover it pays alone. Practice shows many industrial park fires bankrupted uninsured enterprises that never recovered.
Frequently asked questions
1. For a leased factory, must the landlord or the tenant buy fire insurance?
In principle the tenant — the establishment’s manager, operator and user — must buy under the current compulsory framework (Article 8, 2022 Law on Insurance Business; Decree 105/2025/ND-CP). Parties may allocate differently by agreement, but a valid policy must cover the establishment.
2. What is the penalty for skipping compulsory fire insurance?
Administrative penalties for fire prevention violations under the current sanctioning decree (organisational fines are substantial), plus possible remedial measures. Check the exact figures in the sanctioning decree in force at the violation date.
3. If a leased factory burns uninsured, who bears the loss?
Each asset owner bears its own asset’s loss: the landlord loses the factory, the tenant loses the machinery. Fire spreading to third parties triggers compensation by the fire-causing party under the 2015 Civil Code.
4. How should the insurance clause read in the lease?
Four items: which party must buy (tenant recommended); minimum scope per Decree 105/2025; annual delivery of policy copies to the other party; sanctions for non-purchase (buy-in-replacement/rent deduction or serious-breach treatment).
Key takeaways for investors
- Decree 23/2018 expired on 6 September 2023 — current framework: 2022 Law on Insurance Business (Article 8), Decree 105/2025/ND-CP, Decree 347/2026/ND-CP.
- In principle the tenant (the establishment’s operator) must buy compulsory fire and explosion insurance; parties may agree otherwise but a valid policy must exist.
- The lease needs a standalone insurance clause: who buys, what scope, annual policy copies, sanctions for non-purchase.
- Skipping means administrative penalties, bearing all fire losses out of pocket, and third-party compensation if fire spreads.
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.
