Residential and commercial lease disputes usually erupt at exactly two moments: when the tenant pays late, and when one party wants to terminate early. The general framework is the property lease contract in Civil Code 23/2015/QH13, layered with two specialised regimes: residential leases also fall under Housing Law 27/2023/QH15, and premises leased from a real estate business entity also fall under Law on Real Estate Business 29/2023/QH15. This article covers residential housing and commercial premises in general for individuals and small businesses; leasing factory premises for foreign investment projects is a separate article.
Late payment: when the landlord may unilaterally terminate
Within the Civil Code framework, the right to unilaterally terminate performance of a contract is anchored in Article 428 of Civil Code 23/2015/QH13: a party may unilaterally terminate when the other party seriously breaches its obligations or when the contract or the law makes it a termination condition, and the terminating party must notify the other party and bear the consequences as agreed and prescribed. The duty to pay rent is the central duty of a property lease contract from Article 472 of the Civil Code onward; late payment therefore opens the termination right only when the lateness reaches the level of a serious breach or the threshold the contract fixed in advance.
For residential leases, termination grounds are also subject to the separate framework of Housing Law 27/2023/QH15 on conditions for leasing housing and the cases in which the lessor may unilaterally terminate and recover the housing. These two frameworks cannot be swapped for each other: residential termination grounds do not automatically apply to a purely commercial premises lease, and vice versa. In practice, a contract clause stating the lateness threshold that constitutes a breach — such as the maximum number of late days and the duty to notify before termination — is what decides whether the landlord can use Article 428.
Early termination: the deposit is handled under Article 328
The deposit in a lease is anchored in Article 328 of Civil Code 23/2015/QH13: a deposit is one party handing a sum of money or valuable property to the other for a period to secure the conclusion or performance of a contract, and when a party refuses performance, the law’s default deposit forfeiture regime applies unless the parties agreed otherwise. This article only applies the Article 328 framework to the lease termination situation and cross-references the full deposit framework in the dedicated article on deposits in transactions, without rewriting that whole framework.
Applied to a lease, the deciding question is which party is at fault for the termination and whether the contract has its own deposit clause. A tenant who terminates early without grounds puts the deposit at risk of being kept under the default regime; a landlord who terminates without grounds must return the deposit and bear the corresponding sanction. Other amounts — the breach penalty under Article 418 of the Civil Code, damages, and rent for the period already used — are layers of obligation independent of the deposit and must not be merged into one figure.
Choosing the resolution mechanism and prevention at signing
A commercial lease dispute has three mechanisms: mediation as agreed by the parties, commercial arbitration only where the lease contains a valid arbitration agreement, and the court as the default mechanism where there is no arbitration agreement. This choice must be made in the lease itself, because once a dispute has arisen, the party in the weaker position rarely agrees to add an arbitration agreement.
The most effective prevention lies in four clauses at signing: the lateness threshold constituting a breach and the notice sequence before termination; the deposit handling clause for each termination scenario; the handover record documenting the property’s condition and utility meter readings on the handover date; and the dispute resolution clause stating the chosen mechanism. These four clauses are cheaper than any lease lawsuit, and most prolonged lease disputes trace back to the absence of one of them.
Frequently Asked Questions
If the tenant pays rent late, does the landlord have the right to unilaterally terminate the lease?
Yes, but conditionally. Under Article 428 of Civil Code 23/2015/QH13, the landlord may unilaterally terminate when the tenant seriously breaches the rent payment obligation or when the contract makes late payment a termination condition, and the landlord must notify the tenant. Minor lateness that does not reach the serious breach threshold, with no specific contract clause, is not yet a ground for termination. For residential leases, the separate termination grounds of Housing Law 27/2023/QH15 must also be checked; residential and commercial premises grounds cannot be swapped.
How is the deposit handled when a lease is terminated before its expiry?
The deposit is handled under Article 328 of Civil Code 23/2015/QH13: the party who refuses to perform the contract bears the default deposit forfeiture sanction, unless the contract provides otherwise. Specifically, a tenant who terminates early without grounds risks losing the deposit; a landlord who terminates without grounds must return the deposit and pay an equivalent amount under the default sanction. The full deposit framework is presented in the dedicated article on deposits in transactions (topic GAP-20261019-01) and is cross-referenced here.
Should a commercial lease dispute be resolved by mediation, arbitration or court litigation?
The choice depends on the contract and the nature of the dispute. Mediation suits cases where the parties can still agree and need to preserve the leasing relationship. Commercial arbitration has jurisdiction only where the lease contains a valid arbitration agreement, and offers a final award with better confidentiality for commercial premises disputes. The court is the default mechanism where there is no arbitration agreement, and is also the suitable mechanism when interim emergency measures over assets are needed. The choice of mechanism should be recorded in the lease at signing.
This article has been quality-reviewed by the FLAW AI Legal Council