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Using Leased Factory as Project Site Without Land Title

6 min readFLAT LAW FIRM
Góc nhà xưởng công nghiệp tường tôn sóng xám với viền xanh dương

Leasing a Factory as a Project Site When the Landlord Has No Land Title: Risks and Solutions

An investor finds a factory in a great location, 20% below market rent — but the landlord is "processing the title" and promises it in 3 months. Should you sign a 5-year lease and register your investment project at this address? A lawyer's answer in most cases: not so fast. Today's bargain can become tomorrow's dispute bill.

Contents

1. Why this situation is common

In suburban areas and spontaneous industrial clusters, many factories sit on land with complicated origins: farmland whose purpose-conversion was never completed, reclaimed land used stably but never certificated, inherited land never re-registered. Landlords offer three familiar excuses: "the title is being processed," "it's family land, nobody disputes it," "the whole area is like this." Tenants — especially foreign investors racing a project timeline — are easily swayed by cheap rent and good location.

2. Legal framework: Article 45 of the 2024 Land Law

Article 45 of the 2024 Land Law sets conditions for land users exercising their rights (conversion, transfer, lease, sublease, inheritance, donation, mortgage of land use rights, etc.). A land user may exercise these rights only when:

  1. Holding a land use rights certificate (except special cases provided by law);
  2. The land is dispute-free or disputes have been resolved;
  3. The land use rights are not distrained for judgment enforcement and not subject to provisional urgent measures;
  4. The land use rights are within their term;
  5. The land use rights are not subject to provisional urgent measures under law.

Direct consequence: a landlord without a certificate in principle lacks the conditions to lease land use rights. A land use rights lease in this situation risks invalidity under Articles 117 and 122 of the 2015 Civil Code (transactions violating legal prohibitions).

3. Distinction: leasing the factory vs leasing land use rights

This is the key technical point many parties confuse:

  • Leasing the factory (an asset attached to land): an asset lease under Article 472 of the 2015 Civil Code. The law does not prohibit leasing a factory merely because the landlord lacks a title — but the lease's legal value depends on the factory's own lawfulness (whether it was built legally).
  • Leasing land use rights: a transaction in land use rights, directly governed by Article 45 of the 2024 Land Law — no certificate, no qualifying conditions.

In practice, a factory lease is inseparable from the land beneath it. When a land dispute erupts or the factory is found illegally built, the tenant cannot detach itself from the risk of "the land underneath."

4. Four specific risks for the tenant

Risk 1 — Unable to register the project site. Investment in-principle approval / IRC applications typically require documents proving lawful use of the site. A site on uncertificated land invites queries, supplementation requests — or rejection.

Risk 2 — Losing the site to a land dispute. If the land is disputed (including latent family disputes of the landlord), the tenant can be dragged in and lose actual use even while the lease remains valid on paper.

Risk 3 — Factory built without permit or for the wrong land purpose. A factory on farmland never converted, or built without a construction permit, may face administrative penalties and forced restoration (demolition) — wiping out the tenant's fit-out and production-line investment.

Risk 4 — No mortgage, no assignment of lease rights. The tenant cannot use lease rights as bank-loan collateral if the site's legal status is unclear.

5. Pre-signing due diligence checklist

Before signing, require the landlord to provide — and verify independently:

  • [ ] Land origin: the certificate (if any) or the full origin file: land allocation decision, transfer contracts, inheritance papers, commune-level confirmation of land-use history.
  • [ ] Dispute/distraint status: check with the Land Registration Office and the civil judgment enforcement agency.
  • [ ] Zoning and land-use purpose: cross-check against the land-use plan and annual district land-use plan.
  • [ ] Factory lawfulness: construction permit, completion acceptance minutes, fire-safety design approval and acceptance.
  • [ ] Title progress: if the landlord claims a title is being processed, ask for the file receipt at the Land Registration Office and verify progress yourself.

6. Structuring the deal safely

If due diligence shows acceptable risk (e.g., the title file has been received, no dispute, factory has a construction permit), structure tenant protection in:

  1. Conditional lease: full lease effect (or long-term rent payment obligations) conditional on the landlord producing the certificate by a committed deadline.
  2. Refundable conditional deposit: if the deadline passes with no title, the tenant may unilaterally terminate and recover the full deposit plus interest.
  3. Damages clause: the landlord compensates relocation, fit-out, and production-interruption costs if the tenant loses use due to land legal issues.
  4. Milestone-based payment: instead of 5 years upfront, split payments across milestones: signing, title issuance, handover meeting fire-safety conditions.

7. FAQs

Q: Can a landlord without a land title lease out a factory?

A: Leasing the factory (an asset on the land) is not prohibited in principle, but the tenant cannot safely use the site to register an investment project: investment authorities typically require proof of lawful land use rights for the project site. Without a certificate, the project file risks rejection or later review if disputes arise.

Q: What is the biggest risk of leasing from a landlord without a title?

A: Three main risks: (1) inability to prove lawful land use rights for the site during investment procedures; (2) land disputes between the landlord and third parties can cost the tenant the site; (3) a factory built without permit or for the wrong land purpose may be fined and ordered demolished.

Q: How do I verify a leased factory was built lawfully?

A: Ask the landlord for: the land use rights certificate (or full land-origin file), construction permit, completion acceptance minutes, fire-safety approval, and check zoning and land-use purpose with the natural resources authority. If the construction permit is missing or the land purpose is wrong, walk away.

Q: Is there a safe way to lease while the landlord is obtaining the title?

A: Use a conditional lease: full lease effect tied to the landlord producing the certificate by a committed deadline; a refundable conditional deposit; compensation clauses if no title issues; and verify title progress with the competent authority before paying long-term rent.

8. When to work with a lawyer

Work with a lawyer when: considering leasing a factory on uncertificated land and needing independent verification of land origin, zoning, and construction lawfulness; drafting a conditional lease protecting the tenant; or disputes over the site have already arisen after signing. FLAT Law Firm diligence-checks and structures factory and industrial-land leases for domestic and foreign investors — hotline 0988424851.

References

  • 2024 Land Law (No. 31/2024/QH15), effective 1/8/2024.
  • 2025 Law on Investment (No. 143/2025/QH15), effective 1/3/2026.
  • 2015 Civil Code (No. 91/2015/QH13), effective 1/1/2017.

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