[Scenario] Leased Land in an Industrial Park Recovered Early — Who Does the Enterprise Claim Compensation From?

A foreign-invested company operating a factory inside an industrial park receives a land recovery decision years before its lease expires — the site is needed for a ring road. When industrial park land is recovered early, who pays compensation, what can the enterprise actually recover, and from whom? The scenario below is hypothetical and for illustration; the analysis follows Vietnam's 2024 Land Law.

Contents

• 1. The hypothetical
• 2. Legal questions
• 3. Analysis
• 4. Conclusion and recommendations
• 5. Variations

1. The hypothetical

Company A (a 100% foreign-invested enterprise) sub-leases 5 hectares inside Industrial Park X from the park's infrastructure developer, paying land rent annually. Thirty-two years remain on the lease. Company A has built an 8,000 m² factory with a construction permit and employs 300 workers. In March 2026, the provincial People's Committee issues a decision recovering the entire 5 hectares for a ring-road project (socio-economic development in the national/public interest), requiring handover within 12 months.

The scenario below is hypothetical and for illustration purposes.

Given facts:

• F1: Company A leases 5 ha in the industrial park, annual rent, 32 years remaining.
• F2: An 8,000 m² factory built with a permit, operating normally, sits on the land.
• F3: The recovery decision cites socio-economic development in the national/public interest.
• F4: Company A sub-leases from the infrastructure developer; it has no direct lease with the State.

2. Legal questions

• Q1: Is Company A entitled to compensation for the land itself?
• Q2: How is the factory compensated?
• Q3: Who does Company A claim against — the State or the infrastructure developer?

3. Analysis

3.1 Applicable framework

Three groups of rules decide the case:

1. Land compensation: point c, Clause 1, Article 107 of the 2024 Land Law — annually-rented land is not compensable as land, but the user is entitled to compensation for remaining investment costs in the land: site levelling, foundation reinforcement, prepaid compensation/support/resettlement amounts not yet offset, and other reasonable land investments (Clause 2, Article 107).
2. Attached-asset compensation: Article 102 of the 2024 Land Law. Company A's factory is not residential, so Clause 2 applies: wholly demolished structures (or where the remainder fails technical standards) are compensated at the new-construction value of an equivalent-standard facility; partial impact is compensated at actual loss. Provincial People's Committees issue the unit-price tables (Clause 4, Article 102; detailed in Article 14 of Decree 88/2024/ND-CP).
3. General principle: Clause 3, Article 91 — owners whose property is damaged are entitled to damages.

The decisive point from F3: public-interest recovery is recovery with compensation. Had the decision been grounded on land-law violations or lawful termination of land use (Article 81, Clauses 1–2 of Article 82), the enterprise would receive no land compensation (Article 101); attached assets are excluded only in the narrow cases of Clause 1 of Article 105 (Clauses 1, 2, 4, 5 and 8 of Article 81 and points b and c of Clause 1 of Article 82) — which is why reading the legal basis stated in the recovery decision is the mandatory first step.

3.2 Option A: Claim against the State through the compensation, support and resettlement plan

What it involves: Company A participates in the formulation, consultation and implementation of the compensation plan prepared by the compensation council and approved by the competent authority.

What Company A can recover (from F1–F4):

• Factory compensation (Clause 2, Article 102): new-construction value of the 8,000 m² facility at provincial unit prices. Inference: the 2024 Land Law removed the depreciation deduction the old law applied to wholly demolished structures — a material advantage for enterprises.
• Support allowances: livelihood stabilisation, worker retraining, asset relocation — per the approved plan (Decree 88/2024/ND-CP), in Company A's capacity as owner of the assets on the recovered land.
• Subject-matter note — remaining investment costs in the land (Article 107): this item belongs to the land user — the infrastructure developer (the party leased the land directly by the State) — not Company A. Company A benefits only indirectly, through a pass-through mechanism if the sub-lease provides one (the developer passing on part of the compensation received from the State). It belongs in the negotiation with the developer (see Option B), not in a direct claim against the State.

Strengths: the formal channel, with administrative complaint and litigation remedies if the plan is disputed.

Risks: lengthy timelines; provincial unit prices may sit below the actual construction cost of a high-standard FDI facility — an independent valuation should be commissioned for comparison.

3.3 Option B: Claim against the infrastructure developer under the sub-lease

What it involves: per F4, Company A has no direct relationship with the State. The sub-lease with the infrastructure developer is a second, independent claim channel alongside State compensation.

Potentially recoverable:

• Rent refund for the remaining 32 years (if prepaid in part) or termination of the annual-rent obligation from handover.
• Damages for early termination — entirely a function of the contract: many industrial-park sub-leases contain early-recovery compensation clauses. Inference: this is a purely civil-law relationship — recovery depends wholly on the contract wording, with no statutory floor as in the State channel.
• Relocation and business-interruption costs if the contract provides penalties or damages (basis: Article 13, Civil Code 2015 — persons whose civil rights are infringed are entitled to damages; the specific scope depends on the contract terms and applicable civil-liability rules; Article 105 only defines property and is not a damages basis).
• The developer's share of remaining land-investment costs received from the State: if the sub-lease contains a pass-through clause, Company A can claim under it — if the contract is silent, this amount is largely out of reach. Inference: because Article 107 pays this item to the land user (the developer), a contractual pass-through is the only bridge for the sub-lessee to benefit.

Strengths: direct negotiation, potentially faster; developers usually value ongoing investor relationships.

Risks: without a recovery-compensation clause, this channel yields little — and the same loss already compensated by the State cannot be claimed twice.

3.4 Comparison

3.5 Reading the recovery decision: four mandatory checkpoints

Before any calculation, counsel always reads the recovery decision to verify four points:

1. Legal basis of recovery: which provision is cited — recovery for national defence/security or socio-economic development in the national/public interest (with compensation), versus recovery for land-law violations or termination of land use (Article 81, Clauses 1–2 of Article 82 — no land compensation under Article 101; attached assets excluded only in the narrow cases of Clause 1 of Article 105). The two regimes produce opposite results.
2. Issuing authority: the decision must come from the competent authority in proper procedure; lack of authority grounds an administrative complaint or lawsuit.
3. Area, boundaries, asset status: cross-check against the land-use certificate, the sub-lease and reality — area discrepancies are a common dispute.
4. Handover deadline and plan milestones: the site-handover deadline, the schedule for formulating and approving the compensation plan, and payment timing.

Inference: most compensation disputes do not start with the money — they start with misreading or overlooking one of these four points.

3.6 Common pitfalls

• Missing the plan-consultation deadline: the draft plan is open for comments for a fixed period; silence means losing the chance to put your documents and figures into the calculation file.
• Signing handover minutes before compensation is agreed: handover and compensation are separate procedures — but in practice, bargaining power drops after handover. Any unresolved items must be recorded in writing before signing.
• Confusing "support" with "compensation": support (livelihood stabilisation, retraining, relocation) is policy-based under the plan; compensation (assets, investment costs) is a statutory right. Keep the two groups separate when reviewing the plan so they are not merged to reduce the total.
• Not benchmarking provincial unit prices against actual cost: provincial unit prices (Clause 4, Article 102) are the calculation basis, but the enterprise may commission an independent valuation and complain if the prices do not reflect market levels.

4. Conclusion and recommendations

Conclusion: on facts F1–F4, Company A is not entitled to land compensation (annually-rented land — point c, Clause 1, Article 107). Company A is entitled to the new-construction value of its factory (Article 102) and support allowances under the plan (as owner of the assets on the land). The remaining investment costs in the land (Article 107) belong to the land user — the infrastructure developer; Company A benefits only indirectly through a pass-through mechanism if the sub-lease so provides. It should pursue two parallel channels: (A) the State compensation plan — the primary, mandatory channel; and (B) the infrastructure developer under the sub-lease — a supplementary channel (rent refund, contractual damages, pass-through negotiation) whose yield depends on the contract.

Recommended next steps:

1. Read the recovery decision closely: confirm the legal basis (public interest vs. violation — opposite compensation regimes).
2. Assemble all land-investment and factory-construction records from project inception (invoices, construction contracts, final accounts).
3. Review the sub-lease: early-termination, compensation and rent-refund clauses, plus any pass-through mechanism for the remaining land-investment costs (Article 107).
4. Participate fully in plan consultations; commission an independent valuation to benchmark provincial unit prices.
5. Negotiate in parallel with the developer on relocation support within the same or another industrial park.

This conclusion holds only on assumed facts F1–F4. Changing one fact (e.g., lump-sum rent, unpermitted construction, violation-based recovery) could reverse the outcome. Real cases require counsel's assessment of the actual file.

5. Variations

What if the rent was paid lump-sum for the whole term? The enterprise could then be entitled to land compensation at the specific land price (except where rent was exempted — point c, Clause 1, Article 107) — a major value difference. See our analysis of FDI land-lease expiry.

What if the factory was built without a permit? Unpermitted structures on leased land risk receiving no compensation. The legal status of the works should be assessed before any calculation.

What if the company wants to keep producing? Negotiate with the developer for an alternative plot in the park, using compensation and support funds to reinvest — or consider a land-lease extension if the project term allows.

Is your situation different? Every recovery decision has its own basis and compensation plan. Contact FLAT Law Firm — hotline 0988424851 — for an assessment based on your enterprise's actual file.

References

• Land Law No. 31/2024/QH15 (effective 01/8/2024)
• Decree No. 88/2024/ND-CP dated 15/7/2024 (compensation, support and resettlement upon State land recovery)
• Civil Code 2015

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