Does late payment of rent result in termination of financial leasing contracts ahead of schedule in Vietnam?

Does late payment of rent result in termination of financial leasing contracts ahead of schedule in Vietnam?

Pursuant to Clause 1, Article 21 of Decree 39/2014/ND-CP providing for termination of financial leasing contracts ahead of schedule as follows:

1. A financial leasing contract may terminate ahead of schedule in one of the following cases:

a/ The lessee fails to pay the rent or violates one of other terms and conditions constituting grounds for terminating the contract under provisions of the financial leasing contract;

b/ The lessee is declared bankrupt or dissolved;

c/ The lessor violates one of other terms and conditions constituting grounds for terminating the contract under provisions of the financial leasing contract;

d/ The leased assets are lost or irreparably damaged;

dd/ The lessor and lessee agree to the latter’s payment of the remaining rent ahead of schedule prescribed by the financial leasing contract.

Thus, in case the financial leasing contract stipulates that the late payment of rent is the basis for termination of financial leasing contracts ahead of schedule, the credit institution may request the termination of the above contract against the company of the financial leasing company. The late payment of rent will not lead to termination of financial leasing contracts ahead of schedule if the lease contract does not provide for late payment as a basis for contract termination in Vietnam.

What is handling of financial leasing contracts terminated ahead of schedule in Vietnam?

Article 22 of Decree 39/2014/ND-CP stipulates handling of financial leasing contracts terminated ahead of schedule as follows:

1. In case a financial leasing contract is terminated ahead of schedule under Points a and b, Clause 1, Article 21 of this Decree, the lessee shall immediately pay the remaining rent. If the lessee fails to pay the rent, the lessor shall handle the leased assets as follows:

a/ The lessor shall notify in writing to the lessee, the People’s Committee and the public security office of the place where the lessee’s head office and leased assets are located the recovery of the leased assets and request such agencies, within the ambit of their functions, tasks and powers, to apply methods in accordance with law to maintain security and order in the course of recovery of the leased assets, to ensure the lessor’s exercise of the owner rights to the leased assets; immediately recover the leased assets (except the leased assets being subjects and material evidences of criminal cases handled in accordance with the criminal law); grant compulsory loans to the lessee to pay the cost of recovering the leased assets upon its/his/her breach of the financial leasing contract and involuntary transfer of assets;

b/ The lessee shall immediately cease the use and return the leased assets to the lessor at the latter’s request, refrain from any act to hinder the recovery of the leased assets or continued possession or use of the leased assets; pay the remaining rent under provisions of the financial leasing contract and expenses arising from the recovery of the leased assets; accept compulsory loans offered by the lessor to pay for the cost of recovering the leased assets upon the lessee’s breach of the financial leasing contract and involuntary transfer of assets.

2. In case a financial leasing contract is terminated ahead of schedule specified at Points c and dd, Clause 1, Article 21 of this Decree, its provisions shall be complied with.

3. In case a financial leasing contract is terminated ahead of schedule under Point d, Clause 1, Article 21 of this Decree:

a/ If the leased assets are lost or irreparably damaged, the lessor shall notify in writing the administration of the locality where the lessee’s head office and leased assets are located of the lost or irreparably damaged assets and request the application of methods within its competence in accordance with law to ensure the lessor’s exercise of the owner rights to the leased assets; send the lessee a notice of recovery of the lost assets and request its/him/her to pay the remaining rent under provisions of the financial leasing contract and expenses relating to the recovery of the leased assets;

b/ The lessee shall transfer the damaged leased assets at the request of the lessor, pay the latter the remaining rent under provisions of the financial leasing contract and expenses arising from the recovery of the leased assets.

Best Regards!