Term of land use right in Vietnam. What happens after that term?

Aug 16, 2021

1. We receive questions from many investors when coming to Vietnam about the land use term, which is how long the land use term? After that time, what will happen?

According to Clause 3, Article 126 of the Land Law:

The time limit for land allocation or land lease for organizations to use for commercial and service purposes or as a non-agricultural production base; organizations to carry out investment projects; foreign-invested enterprises in Vietnam for not more than 50 years.

For projects with large investment capital but slow capital recovery, investment projects in areas with difficult socio-economic conditions, the time limit shall not exceed 70 years.

Therefore, most of land in industrial parks and industrial clusters have a lease term of 50 years, and some areas are located in areas with extremely difficult socio-economic conditions. The lease term is not more than 70 years.

2. The question is, what happens when the use time of industrial land, industrial clusters or project land expires?

Also according to Article 126 of the 2013 Land Law stipulating that when the land use term expires, if the land user wishes to continue using it, the State shall consider extending the land use term but not exceeding the time limit specified in this Clause.

For example, in Binh Duong, there are a number of production factories located outside the industrial zone, with a ten-year lease term. upon the expiration of the 10-year term, if the factory has demand for further production and If they meet the relevant local regulations and planning, the state can still consider and extend the land lease contract for another 10, 20 years but the maximum total time is not more than 50 years.

3. So what happens after that 50-year period?

Theoretically, factory industrial clusters have a term of 50 years. The enterprise has paid the land rental amount (once or annually) for that 50-year period. After 50 years, that land is no longer owned by enterprises but is decided by the state and local authorities.

However, most of Vietnam's old industrial parks are still close to 30 years, most of them are 3 years, some newly established IPs have about 40 years left, so please feel free to invest.

After that period, if you still want to continue the investment project, the Vietnamese government still creates all conditions to extend the lease period for your business with the land rental price calculated at that time. In case your factory area is in the local general planning for defense, security, housing, urban projects, then your business is still facilitated to find a location for production. Other outputs are more suitable for that period.

4. Case study: Bien Hoa Industrial Park 1

Bien Hoa 1 Industrial Park was established in 1963, so far has experienced more than 50 years of development. This industrial park has contributed a lot to the budget of Dong Nai and the whole country, creating jobs for many workers, but the historical mission has expired, so it has to be relocated and closed.

From that fact, in 2008, Dong Nai proposed to the Government to convert the function of the industrial park. A year later, the Prime Minister agreed to the policy of converting the function of Bien Hoa 1 Industrial Park into an urban - commercial - service area.

However, since then, the implementation process has encountered many obstacles and delays. The main reason is that there is no legal basis for Dong Nai to move businesses, close Bien Hoa 1 Industrial Park to carry out functional conversion.

Therefore, Document No. 111/TTg-CN of the Prime Minister issued on January 28, 2021 on the approval to remove Bien Hoa 1 Industrial Park from the development planning of Vietnam's industrial zones is the legal basis. It is important for Dong Nai to continue carrying out procedures to relocate businesses and terminate the operation of the oldest industrial park in the country.

We are also reviewing the results of the conversion and relocation of Bien Hoa Industrial Park and will notify you after the plan is completed.