DISPUTE OVER A LEASE CONTRACT

Legal issue: The Plaintiff requested that the court terminate the Lease Contract, order the defendant to pay outstanding rent, late fees, and compensate for damages.

Case Brief: 

On October 1, 2019, Company P (the Lessor) entered into a Lease Contract with Company M (the Lessee) for the lease of a warehouse and multi-story parking garage, with a total area of 1,418 square meters, located in Tan Binh Industrial Zone, Tan Binh District, Ho Chi Minh City. The monthly rental price was 138,510,000 VND, inclusive of VAT, but exclusive of waste disposal, electricity, telephone, and other expenses. The lease term was five years, commencing on October 1, 2019. Company M paid a security deposit of 415,530,000 VND to the Lessor.

Initially, Company M fulfilled its payment obligations under the lease agreement. However, beginning in November 2020, Company M defaulted on its rental payments. Despite repeated written notices from Company P regarding the breach of the lease contract and demands for payment, Company M failed to comply. Upon inspection of the premises, Company P discovered that Company M’s employees were no longer occupying the leased space. As a result, Company P issued a Notice of Termination and subsequently filed a lawsuit seeking the following relief:

1. A declaration terminating the Lease Contract between Company P and Company M;
2. An order compelling Company M to pay the outstanding rent from November 2020 to May 2021, amounting to VND 967,570,000;
3. An order compelling Company M to pay interest on the overdue rent at a rate of 9% per annum for the period of default, totaling VND 72,717,155;
4. An order compelling Company M to compensate for the costs incurred in cleaning the premises, recovering the leased space, and pursuing this lawsuit, totaling VND 91,643,560.

How we helped our client: 

(1) Advised Company P to issue a written notice demanding that Company M fulfill its obligations to pay the rent, electricity bill, transportation costs, and late interest; and to notify Company M unilaterally of the termination of the lease agreement and that the leased premises would be recovered. (2) Advised on the recovery of the leased premises which were locked by Company M. Before proceeding with the recovery, our lawyer advised Company P to have a notary public draw up a notarial certificate to record the condition of the leased premises at the time of recovery. (3) Advised Company P on preparing the lawsuit and represented Company P as an authorized representative in the first-instance trial. At the trial, the lawyer presented the claim, cited the legal basis, and presented and analyzed the evidence as follows:

(i) Due to Company M’s breach of its obligation to pay the rent, a serious violation of the contract, the lawyer asserted that Company P had the right to unilaterally terminate the lease agreement pursuant to Articles 481 and 428 of the Vietnam Civil Code 2015 and based on the agreement at Article 4 of the signed contract. The lawyer argued that Company P’s unilateral termination was in accordance with the law and should be upheld, and that the court had sufficient grounds and evidence to declare the termination of the lease agreement as requested by Company P.

(ii) Regarding the claims for unpaid rent, late interest, and damages, our lawyer asserted that Company M’s breach of its payment obligations caused actual damage to Company P. Therefore, based on Article 306 of the Vietnam Commercial Law 2005 and Articles 474 and 482 of the Vietnam Civil Code 2015, and the evidence consisting of written requests for payment, notices to vacate the premises, and the notarial certificate drawn up by Company P, the lawyer requested the court to grant all of Company P’s claims. Given that Company P agreed to offset the security deposit paid by Company M against the outstanding rent owed by Company M, our lawyer requested the court to order Company M to pay a total amount of VND732,944,860.

Dispute Resolution Result: 

In March 2023, the Court issued a first-instance judgment that fully upheld our lawyer’s arguments and claims. The court’s decision included the following:

1. Granted all of the Plaintiff’s claims.
2. Declared the termination of the Lease Contract between Company P and Company M.
3. Ordered Company M to pay Company P a total sum of 732,944,860 VND, which includes:

• Outstanding rent after offsetting the security deposit: 554,040,000 VND
• Late interest on the rent: 87,261,300 VND
• Actual damages for cleaning costs: 74,843,560 VND

Damages for the cost of preparing the notarial certificate: 16,800,000 VND.