Consulting on drafting the lease agreement

One of the most used types of contracts today is lease agreements, especially in big cities in Vietnam like Hanoi and Ho Chi Minh City. However, the Leasee often does not pay attention to this contract and often signs on the Leasor’s existing contract. Therefore, to better understand this type of contract as well as notes about house lease agreements to ensure the rights of the parties, Viet An Law gives some consulting on drafting the lease agreement for Clients focusing on the following article.

Legal basis

• Civil Code 2015;
• Law on Housing 2014;
• Law on Real Estate Business 2014;

What is the lease agreement?

A lease agreement is a type of service contract in which the Leasor agrees upon the Leasee’s possession and use of the apartment or house he or she owns for residential or business purposes, depending on the purpose and function of that apartment or house.

According to the Vietnamese Law on Housing, the subject of a lease agreement can fall into one of the following cases with separate functions:

• A house means any building in which households or individuals live. In particular, a separate house means any house built on a detached land plot under lawful rights to use of an organization, household, or individual, including villas, row houses, and detached houses.
• An apartment means any multi-story building which has multiple apartments, public stairs, hall ways, private areas, common areas, and common infrastructural works for organizations, households, or individuals, including apartment buildings for residential use and mixed-use buildings for both business and residential purposes.
• Commercial house means any house built for sale, lease, or lease purchase according to market mechanism.
• Other types of housing such as social housing, official residence, and housing serving relocation.

Contract form

The house lease agreement must be made in writing. According to Article 122.2 of the Law on Housing 2014, house lease agreements are not required to be notarized or authenticated, unless the parties so wish.

Basic terms in the contract

A house lease agreement is a type of civil contract, so the parties to the contract have the right to freely agree on the terms but must be in accordance with the provisions of governing law. Normally, a lease agreement often has the following basic provisions:

1. Information of parties participating in the contract:

• Information of the parties usually includes the following elements: Full name of the individual, name of the organization, legal representative of the organization, identity card or tax code, address, and account number of the party lessor and lessee.
• In case the Lessor is a legal entity, the Lessor needs to ensure that there are documents proving the lessor’s lease rights (Certificate of Land Use Rights, Construction Permit, Enterprise Registration Certificate with real estate business function, or equivalent documents). This is an important basis for the Leasee to carry out administrative procedures related to business investment registration if the function of the lease house is for commercial business.

2. Details about the contract object:

• Contract objects are houses, apartments, and condominiums.
• Housing may be available, or be formed in the future (in the process of investment and construction, not yet approved for use).
• Information that needs to be shown: Address, area, house condition, house structure …

Note: For apartment lease agreements, the parties must clearly state the common ownership, common use, use area under separate ownership, apartment construction floor area, and purpose of use. shared ownership and common use in the apartment building in accordance with the initially approved design.

3. Land lease term and house delivery time, time to start calculating rent: The exact and specific date, duration, and number of months should be presented.
4. Rent price, term, and method of payment of rent and deposit

• The two parties agree on the lease price, lease payment deadline (one time for the entire lease period or annual lease payment), payment time (specify date, month, year),
• Payment method (cash or bank transfer) should be clearly stated.
• It is necessary to pay attention to the refund or compensation method when overpayment or underpayment occurs.

5. Scope of rights and obligations of the parties: The rights and obligations of the parties are agreed upon according to the provisions of Civil Law, Housing Law, and Real Estate Business Law and not contrary to other relevant laws.

Note: The Lessees named in the lease agreement have equal rights and obligations towards the lessor and must jointly perform the obligations and responsibilities of the Lessee and the Lessor.

6. Effective date of the contract: Clearly state the date, month, year, and circumstances (preconditions) that may affect the effective date of the contract.
7. Conditions for unilateral termination of the lease agreement

The parties are only allowed to terminate the housing lease agreement unilaterally in one of the cases specified in Clauses 2 and 3, Article 132 of the Housing Law 2014. The party that unilaterally terminates the performance of the housing lease agreement must notify the other party at least 30 days in advance unless the parties agree otherwise; If violating the provisions of this Clause causes damage, compensation must be made according to the provisions of law.

8. Other agreements: The parties can agree on other related terms that are not contrary to law such as:

• Agreement on contract termination time and contract termination conditions;
• Agreement on other assets in lease housing;
• Agreement on remedies for breach of contract: Clearly state the penalty for violation but note that the penalty for breach of contract must not exceed 8% of the total contract value;
• Dispute resolution agreement: Clearly state the dispute resolution agency and form of dispute resolution;
• Agreement on amendments, supplements, and implementation provisions.

Some notes when consulting on drafting the lease agreement

Lease housing conditions

To ensure the legality of the lease house, the parties need to pay attention to checking the following information:

• Is the owner of the lease house the Lessor? If not, is the lessor allowed or authorized by the owner to sign the lease agreement?
• Is the lease house subject to disputes, complaints, or lawsuits regarding ownership rights? Is this house currently in the housing ownership period in case of housing ownership for a fixed term?
• Is the lease house being distrained to execute a judgment or comply with a legally effective administrative decision of a state agency?
• Is the lease house subject to a decision on land recovery and is there a notice of house clearance or demolition from a competent authority?

However, in cases where the object of the house lease agreement is a house to be formed in the future, there is no need to consider the above conditions.

Included equipment

Apartments and houses for rent often come with equipment and furniture. In case the lease agreement does not anticipate risks, asset depreciation of this equipment may cause damage to the Lessor and cause a dispute between both Parties.

In fact, the list of equipment and furniture accompanying the lease house will be designed as an Appendix, with the legal value being an integral part of the lease agreement. This appendix will ensure clarity, ease of amendment, and ensure the validity of the arising and termination of the agreement.

Conditions of parties participating in housing lease transactions

• Be the owner of the house or the person authorized or permitted by the owner to carry out housing transactions according to the provisions of this Law and civil law.
• If you are an individual, you must have full civil act capacity to conduct housing transactions according to the provisions of civil law; If it is an organization, it must have legal status.
• If you are a foreign individual or Vietnamese residing abroad, you must have full civil act capacity to conduct housing transactions according to the provisions of Vietnamese law.
• If it is an organization, it must have legal status and does not depend on the place of business registration or establishment; If it is a foreign organization, it must be eligible to own housing in Vietnam according to the provisions of the law; If the organization is authorized to manage housing, it must have the function of providing real estate services and be operating in Vietnam in accordance with the law on real estate business.

Viet An Law Firm provides services related to consulting and drafting contracts. Clients wishing to use legal services please contact us directly for the best advice and support.