Rights and Obligations of Entities Leasing State Land with Annual Rent Payment

This English version is translated from the Vietnamese original. In case of any discrepancy, the Vietnamese version prevails.

What are the rights and obligations of persons to whom the State leases land with annual rent payments?

Based on the Land Law 2024, No. 31/2024/QH15, Article 34 specifies in detail the rights and obligations of economic organizations, public service units, religious organizations, and affiliated religious organizations using land leased by the State with annual rent payments. This is a common form of land lease for manufacturing and business enterprises in Vietnam — and the legal rights in this case are considerably narrower compared to cases of land allocation with payment or land lease with one-time payment.

What specific rights do economic organizations leasing land with annual rent payments have?

According to Clause 1, Article 34 of the Land Law 2024, economic organizations and religious organizations to whom the State leases land with annual rent payments have the following rights:

• Rights and obligations as prescribed in Article 26 and Article 31 of the Land Law 2024;

• Pledge assets owned by them attached to the land at credit institutions permitted to operate in Vietnam, at other economic organizations, or to individuals;

• Sell assets attached to the land, or sell assets and the right to lease in the land lease contract when meeting the conditions prescribed in Article 46 of the Land Law;

• Contribute capital using assets owned by them attached to the land within the lease term; the recipient of capital contribution shall continue to be leased the land by the State according to the purpose determined in the remaining lease term;

• Lease assets owned by them attached to the land and the right to lease in the land lease contract;

• Sublease the right to use land in the form of annual rent payments for land where infrastructure has been completed in cases permitted to invest in and operate infrastructure for industrial zones, industrial clusters, and high-tech zones; the sublessee must use the land for the correct purpose and perform financial obligations as prescribed by law.

"The purchaser of assets attached to the land and the right to lease in the land lease contract may continue to lease the land according to the purpose determined and the remaining land use term, and shall succeed to the rights and obligations of the land user as prescribed in this Law and other related provisions of law." — Article 34, Clause 1, Point c, Land Law 2024

Do public service units leasing land with annual payments have different rights from economic organizations?

There is an important difference. According to Clause 2, Article 34 of the Land Law 2024, public service units to whom the State leases land with annual rent payments (not falling under cases of investing in and operating infrastructure for industrial zones, industrial clusters) have similar rights to Clause 1, Article 34 of the Land Law 2024, but are excluded from three rights:

• No right to sell assets attached to the land and the lease right;

• No right to pledge assets attached to the land and the lease right;

• No right to contribute capital using assets attached to the land and the lease right.

Additionally, public service units are permitted to exploit and use land combining multiple purposes according to a plan approved by their supervising agency; or lease, joint venture, or cooperate with economic organizations if there is a public asset use plan approved by the competent authority in accordance with law on management and use of public assets.

How is annual land rent calculated and adjusted?

According to Clause 2, Article 153 of the Land Law 2024, annual land rent is applied steadily for a 5-year cycle calculated from the date the State decides to lease the land or permits change of land use purpose linked with conversion to annual rent payment form.

"Land rent for the subsequent cycle shall be calculated based on the land price table of the year determining subsequent land rent. If land rent increases compared to the previous cycle, the land rent to be paid shall be adjusted but not exceeding the rate prescribed by the Government for each period. The adjustment rate prescribed by the Government for each period shall not exceed the annual national consumer price index (CPI) of the preceding 5-year period." — Clause 2, Article 153 of the Land Law 2024

What if the land is leased from organizations or individuals outside industrial zones?

According to Clause 3, Article 34 of the Land Law 2024, economic organizations and public service units using land leased from organizations or individuals outside industrial zones, industrial clusters, and high-tech zones shall apply rights and obligations according to civil law — not apply the special rights mentioned in Clause 1 and Clause 2 of this Article. Enterprises should carefully distinguish the source of land lease (from the State or from private parties) to correctly determine the legal rights framework.

Quick comparison: annual rent lease and one-time payment lease — what's the difference?

This is a practical question many enterprises ask. According to Article 33, Clause 1 of the Land Law 2024, economic organizations to whom the State allocates land with payment or leases land with one-time payment have broader rights, including: transfer of land use rights, lease of land use rights, capital contribution using land use rights, pledge of land use rights. In contrast, persons leasing land with annual payments have rights only to assets attached to the land and the "right to lease in the land lease contract" — not full land use rights. This difference directly affects the ability to mobilize capital, pledge to banks, and transfer projects.

What should enterprises pay attention to when conducting transactions related to annually-leased land?

Several important practical points:

• The right to sell assets attached to the land together with the lease right can only be exercised when meeting the conditions in Article 46 of the Land Law 2024 — carefully verify these conditions before transacting;

• Pledge applies only to assets (factories, structures...) attached to the land, not the land use right — banks and enterprises must clearly distinguish when drafting pledge contracts;

• Subleasing the land use right may only be performed for land within industrial zones, industrial clusters, or high-tech zones and must be land where infrastructure has been completed;

• When an enterprise is divided, separated, merged, or restructured, according to Decree 102/2024/ND-CP, the land user lawfully formed after such changes shall continue to exercise rights and obligations for the remaining land lease term.

If your enterprise is considering transactions related to State land leased with annual payments — pledge, asset sale, capital contribution, or sublease — A&D Law Firm is ready to assist in reviewing land documents, advising on transaction conditions, and drafting contracts in compliance with current regulations. Contact our legal team for specific consultation.

This article is for reference purposes only and does not serve as legal advice for specific circumstances. Land regulations may be amended or supplemented; please contact a lawyer for accurate and updated advice on your situation.