Commercial Leasing for Overseas Vietnamese: Key Notes

Commercial leasing for overseas Vietnamese involves specific legal rules and practical factors that require careful consideration. Investing in business in Vietnam demands thorough preparation, especially when securing a lease, which is a critical factor for business stability. The following detailed analysis provides a solid legal and practical framework.

Leasing Conditions for Overseas Vietnamese

Vietnamese law differentiates the rights and obligations of overseas Vietnamese based on their citizenship status. You must determine which category you fall into to comply with regulations and avoid legal risks.

Individuals with Vietnamese Citizenship (Dual Nationals)

For overseas Vietnamese who still hold Vietnamese citizenship, Vietnamese law recognizes them as Vietnamese citizens. According to the Law on Vietnamese Nationality, they have full citizenship rights.

Therefore, when leasing commercial premises, you are subject to the same laws as a domestic citizen. You have the right to sign lease agreements, register as a sole proprietor, or establish a company under the Law on Enterprises 2020 without any nationality-based restrictions. Proving your citizenship with a valid Vietnamese passport simplifies procedures significantly.

Individuals of Vietnamese Origin (Without Vietnamese Citizenship)

For those of Vietnamese origin who no longer hold Vietnamese citizenship, the regulations are more complex. While the Law on Housing 2023 grants them rights to own housing, directly leasing commercial premises as an individual faces limitations.

1. Difficulty in Registering a Sole Proprietorship: According to Decree 01/2021/NĐ-CP, only Vietnamese citizens can establish a sole proprietorship. To operate this business model, you would first need to undergo the process of reapplying for or naturalizing as a Vietnamese citizen, which involves specific conditions such as residing in Vietnam for at least five years.
2. Legal Business Solutions: To conduct business legally, you have two primary options:
   • Establish a foreign-invested company under the Law on Investment 2020 and the Law on Enterprises 2020. The company, as a legal entity, can then sign the lease agreement.
   • Contribute capital to or purchase shares in an existing company in Vietnam.
3. Risks to Note: Some individuals opt to have another person or entity in Vietnam sign the lease and operate the business on their behalf. This “nominee” arrangement is highly risky. It can lead to disputes over assets and profits and create complex legal problems during state inspections.

Sign with the Legal Owner or an Authorized Person

The legal standing of the lessor is crucial to the validity of the lease agreement. Signing with an unauthorized person can render the contract void, causing financial loss and business disruption.

Before negotiating, you must request the lessor to provide documents proving their legal ownership or usage rights. Key documents to check include:

• Certificate of Land Use Rights and Ownership of Housing (the “Red Book” or “Pink Book”): This is the most important document confirming ownership.
• ID Card/Citizen ID/Passport: Cross-reference the information on the ID with the Certificate to verify the owner’s identity.
• Co-ownership Documents: If the property is co-owned (e.g., by a married couple or household members), the lease must be signed by all co-owners, or one person must have a notarized power of attorney from the others.
• Power of Attorney: If dealing with an authorized representative, you must inspect the notarized Power of Attorney. Check its scope and validity to ensure the representative is authorized to sign the lease, receive deposits, and collect rent on the owner’s behalf.

Notarize the Lease Agreement

While not always mandatory by law, notarizing a commercial lease agreement is a highly recommended step that provides strong legal protection. Notarization serves as irrefutable proof of the contract’s content and the parties’ voluntary consent.

According to the Law on Notarization 2024, a notarized document has evidentiary value; its contents are presumed to be true and do not need to be proven in court unless declared void by a court. A notary public will verify the legal documents of both parties, acting as an initial legal filter to detect risks such as disputed property or an unauthorized lessor. This small investment provides significant security for your business operations.

Ensure Clarity in the Lease Agreement

A detailed and tightly drafted contract is the foundation for preventing future disputes. You should pay special attention to the following clauses:

• Rent and Payment Method: Clearly state the rent amount in Vietnamese Dong (VND), as foreign currency pricing is prohibited in domestic transactions under the Ordinance on Foreign Exchange. Specify the payment schedule (monthly, quarterly) and method (cash, bank transfer).
• Security Deposit: Define the deposit amount, conditions for its refund, and circumstances for forfeiture (e.g., contract violation, improper early termination).
• Lease Term and Renewal: State the exact start and end dates. Crucially, include a renewal clause that specifies the lessee’s priority right to renew, a clear roadmap for rent increases (e.g., “not to exceed 10% of the previous year’s rent”), and the notice period for renewal.
• Termination Clause: Detail the conditions under which either party can unilaterally terminate the contract early. A clear notice period (e.g., 60 or 90 days) is essential to avoid sudden business disruptions. Specify penalties for improper termination.

Define Assets Attached to the Premises

A detailed handover report is essential to avoid disputes upon the lease’s termination. This document, supported by photos or videos, serves as legal proof of the property’s condition at the start of the lease.

The handover report should include:

• A detailed list of all assets and equipment provided by the lessor (e.g., air conditioning systems, lighting, sanitary fixtures).
• A description of the condition of each asset (new, used, working well, minor defects).
• A record of the structural condition (walls, ceilings, floors, electrical and water systems).
• Signatures of both parties.

This document will be the basis for comparison when the lease ends, clarifying responsibility for repairs and preventing disputes over the security deposit.

Clarify Responsibility for Taxes and Fees

Clearly defining who pays for various taxes and fees is mandatory to avoid financial disputes.

• Lease-Related Taxes: For lessors with annual rental income over 100 million VND, Value-Added Tax (VAT) at 5% and Personal Income Tax (PIT) at 5% are payable. The contract must state whether the rent price is net (lessee pays these taxes) or gross (lessor pays from the rent received). This is a common point of contention.
• Operating Fees: Clarify who is responsible for management fees (in building complexes), utilities (electricity, water, internet), sanitation, security, and parking fees.
• Other Taxes: The lessee is responsible for their own business license tax. The lessor is typically responsible for the non-agricultural land use tax, but this should be confirmed in the contract.

Address Common Areas and Related Issues

For premises with shared spaces, it’s vital to clarify usage rights to prevent conflicts that can affect your business operations. Before signing, survey the property and discuss:

• Scope of Use: Clearly define private versus common areas like entrances, parking lots, hallways, and restrooms on a diagram attached to the lease.
• Rules and Costs: Establish rules for using common spaces and clarify who bears the cost of cleaning and maintenance.
• Signage: Determine the rules for the location and size of advertising signs.
• Noise and Odors: Set regulations for noise levels and odor management, especially for food and beverage businesses, to maintain a good relationship with neighbors.

Consulting Services for Overseas Vietnamese

The process of commercial leasing for overseas Vietnamese, establishing a business, and operating in Vietnam is legally complex. Using a professional consulting service is a strategic and effective solution.

At Long Phan Consulting Company, we can assist with:

• Analyzing your legal status to advise on the most suitable investment path.
• Advising on optimal investment forms (100% foreign-owned company, joint venture, capital contribution).
• Conducting legal due diligence on the premises and the lessor.
• Drafting, reviewing, and negotiating lease terms to protect your interests.
• Assisting with the entire business setup process, from investment registration to post-establishment procedures.
• Advising on tax, labor, and other regulatory obligations.

Frequently Asked Questions about Commercial Leasing

Can I renovate the leased premises?

Yes, provided you have written consent from the owner. The lease agreement should specify the scope of permissible renovations and the responsibility for restoring the premises to their original state upon termination.

What happens if the owner sells the property during my lease term?

Your lease remains valid. The new owner inherits the rights and obligations of the previous owner, and you have the right to continue leasing until the contract expires, unless otherwise agreed. The lessor must notify you in advance of the sale.

Can I sublet the premises to a third party?

Subletting is only legal with the explicit written consent of the owner. This should be addressed in the contract from the beginning.

What are the penalties for early termination?

If you terminate the contract improperly, you will typically face financial penalties as stipulated in the agreement, most commonly the forfeiture of your security deposit and potentially a fine equivalent to several months’ rent.

How large is a typical security deposit?

While there is no legal limit, security deposits in practice are usually equivalent to one to three months’ rent. The contract must clearly state the conditions for the refund to protect this amount.

Conclusion

Commercial leasing for overseas Vietnamese in Vietnam is a procedure that demands caution and thorough preparation. From legal verification and partner due diligence to contract drafting and financial compliance, every step is key. To ensure legal safety and optimize your investment, professional support is highly recommended. Please contact Long Phan Consulting Company at our hotline, 1900636389, for detailed and comprehensive assistance from our consulting service for foreign individuals and investors.