CONSULTATION ON UNILATERAL TERMINATION OF PROPERTY LEASE AGREEMENT

Background:

On April 9, 2019, Mr. Võ Ngọc A and Mr. Phan Thanh B entered into a Lease Agreement (“Contract”) for an apartment located at 21, Floor 1 & 2, Apartment Building 145, Bến Thành Ward, District 1, Ho Chi Minh City at Notary Office No. 3. On April 10, 2019, the parties executed a supplemental agreement, modifying certain terms of the lease. Accordingly, the parties agreed on a rental price of 175,000,000 VND  per month, a deposit of 279,000,000 VND and a lease term of 5 years starting from April 9, 2019.

During the execution of the Contract, since July 2019, Mr. Phan Thanh B has failed to fulfill his obligation to pay rent as agreed in the Contract. Additionally, Mr B subleased a portion of the leased property without Mr. A’s consent, which was a breach of the Contract.

The client’s request: The client – Mr. Võ Ngọc A requests legal advice regarding the termination of the lease contract with Mr. Phan Thanh B; at the same time, he seeks advice regarding the lawsuit that Mr. B has filed in the People’s Court of District 1.

Consultation content:

(1) The lawyer has advised and assisted in drafting documents to help the Client carry out the necessary procedures to unilaterally terminate the Contract in accordance with the agreement in the Contract and in compliance with legal regulations.

On September 10, 2019, Mr. Võ Ngọc A sent a notice of unilateral termination of the rental agreement to Mr. Phan Thanh B. The grounds for termination were based on the Tenant’s breaches of the agreement as mutually agreed upon by the parties, specifically: (i) Mr. B failure to make consecutive monthly rent payments for more than three months; and (ii) Mr. B’s unauthorized subletting of a portion of the leased property. Consequently, Mr. A demanded that the Mr. B return the leased property on October 10, 2019. The sending and receipt of the notice were duly The sending and receipt of the notice were duly created legal record by the bailiff.

However, by the deadline for handover, Mr. B did not show any willingness to cooperate; the door was locked, preventing Mr. A from retrieving the rented property; at the same time, they also did not pay the rent.

On October 15, 2019, Mr. Võ Ngọc A was informed that Mr. Phan Thanh B had filed a lawsuit in the People’s Court of District 1, seeking: (1) Rescission of the rental agreement; and (2) Damages from Mr. A on the grounds that Mr. A had concealed the information that the building, Apartment Building 145, had been subject to a structural repair order due to a dangerous balcony overhang. As a result of this concealment, Mr. B had invested in renovations after entering into the lease but was unable to utilize the property for commercial purposes. The amount of damages claimed was VND 1,500,000,000, which included the return of the security deposit, two months’ rent, and costs incurred for construction, repairs, renovation, and business investment.

(2) The lawyer advises on options for the client to participate in litigation at the court:

– Consultation: The client as the defendant, was advised to prepare a document stating their complete disagreement with all claims made by the plaintiff.

– Consultation: The client, Mr. A, was advised to file a counterclaim requesting the court to order Mr. Phan Thanh B to: (1) return all leased property; (2) pay all outstanding rent from July 2019 until the date of the trial; and (3) offset the security deposit against the unpaid rent.

– An attorney was assigned to represent the client at the trial court. On September 19, 2020, at the trial, the attorney presented legal arguments, cited relevant laws, and analyzed evidence to support the defendant’s position and counterclaim. Specifically, the attorney argued:

(i) Based on the terms of the Rental Agreement signed by both parties and the Certificate of House Ownership No. 12**/2008/UB-GCN, Mr. Võ Ngọc A was not obligated to inform about the state’s repair of the balcony and other deteriorating structures. The reason being that the area subject to repair was not under his ownership and was not included in the leased area. Therefore, Mr. B’s lawsuit is without grounds;

(ii) According to the agreement in the Contract, ‘The lessor has the right to unilaterally terminate the Contract in the event that the lessee fails to pay rent for one month or more.’

(iii) Pursuant to Article 482 of the Civil Code in 2015 regarding rent payment, Mr. Phan Thanh B’s failure to pay rent for three consecutive months constitutes a serious violation of the Contract, and falls under the circumstances where the lessor has the right to unilaterally terminate the contract.

Therefore, the attorney asserted that Võ Ngọc A had unilaterally terminated the contract in accordance with the agreement between the parties and the provisions of the law. Consequently, the attorney requested that the court dismiss the plaintiff’s (Mr. Phan Thanh B) entire lawsuit and grant the defendant’s (Mr. Võ Ngọc A) counterclaim in full.

Dispute resolution outcome: The court accepted the views and proposals of the lawyer, ruling to dismiss the plaintiff Mr. Phan Thanh B’s lawsuit; fully accepting the counterclaim of the defendant Mr. Võ Ngọc A.

(3) On September 30, 2020, Mr. Phan Thanh B appealed the entire first-instance judgment, requesting the annulment of the first-instance judgment because the court did not include the company owned by Mr. Phan Thanh B as a participant in the proceedings as a witness. At this stage, TAPHALAW continued to represent him by proxy in the appellate phase. On March 29, 2021, at the hearing, the lawyer presented a request to uphold the first-instance judgment, stating that including the company owned by Mr. Phan Thanh B as a participant in the proceedings as a witness was unnecessary.

Dispute resolution outcome: The court did not accept the appeal of the plaintiff, Mr. Phan Thanh B; the first-instance judgment is upheld. Accordingly, TAPHALAW successfully defended the legal interests of Mr. A throughout the entire lawsuit, from the initial consultation to the trial court and appellate levels.