IS IT ILLEGAL TO TERMINATE THE HOUSE LEASE CONTRACT BEFORE THE TERM?

A party to the contract terminates the house lease contract before the term depending on each specific case to determine whether such behavior is in accordance with regulations, or depends on the agreement of the parties in the actual contract.

Legal basic:

Civil code 2015;

Law on residential housing 2014.

1. Lease duration and rent of residential housing

Article 129 of Law on residential housing 2014 stipulates the specific lease duration and rent of residential housing as follows:

• The lessor and the lessee of a residential house may agree on the lease duration and the rent and form of payment of rent periodically or in a lump sum; where there are State regulations on residential housing rent, the parties must abide by such rules.

• Suppose the lessor carries out an improvement to a residential house before the expiry of the duration of the contract for its lease, and the lessee agrees to such modification. In that case, the lessor has the right to adjust the rent of the residential house. The parties shall conform to the new rent of the residential house; failing such agreement, the lessor has the right to terminate the contract for the residential house lease unilaterally and must pay compensation to the lessee according to the Law.

• The legitimate rights and interests of lessors and lessees of residential houses are protected by the State during the process of leasing and renting residential houses.

2. Cases of unilateral termination of performance of a residential house lease contract

During the lease duration of a residential house as agreed in the contract, the lessor and the lessee may not unilaterally terminate the house lease contract or take the residential house currently on lease, except in the cases prescribed in Article 132 of Law on residential housing 2014 is as follows:

• The lessor of a residential house may terminate unilaterally the performance of the house lease contract and take the residential house in one of the following cases:

- The house is a State owned residential house or a social residential house which has been leased not in accordance with authority, not to the correct lessee or not on the correct conditions as prescribed in this Law;

- The lessee fails to pay rent as agreed for three or more months without a legitimate reason;

- The lessee fails to use the residential house for the correct purpose agreed in the contract;

- The lessee, at its own will, carries out alteration, extension, renovation or demolition of the leased residential house;

- The lessee converts, lends or sub-leases the leased residential house without the consent of the lessor;

- The lessee causes disturbance of order, or insanitation to the environment or serious interference with daily activities of p eople in the vicinity and when the lessor, the head of the resident group in an urban area or the head of the village, hamlet, mountainous village or highland village has made minutes for the third time but the lessee still fails to remedy the breach;

- The case prescribed in article 129.2 of Law on residential housing 2014.

• The lessee of a residential house may terminate unilaterally the performance of the contract for residential house lease when the lessor commits any of the following acts:

- Failure to repair the residential house when it was seriously damaged;

- Unreasonable increasing rent or increasing rent without notifying the lessee in advance as agreed;

- The right to use the house was restricted for the interests of a third party.

• A party which terminates unilaterally the performance of a residential house lease contract must give at least thirty (30) days' prior notice to the other party, unless otherwise agreed by the parties; any [party in] breach of this clause causing any loss and damage must pay compensation therefor in accordance with Law.

From the foregoing, it can be seen that, one party to a house lease contract has the right to terminate the contract with the other party in one of the above cases in accordance with the above-mentioned laws. However, if a party to a house lease contract does not fall into one of the following cases where it is allowed to unilaterally terminate the house lease contract, but arbitrarily performs the act of unilaterally terminating the house lease contract before the expiration of the lease term or violate the regulations on notice time, they may have to pay compensation in accordance with the laws.

3. Agreement on penalties for violations in case of unilaterally terminating the house lease contract before the expiration of the lease term

When a party unilaterally terminates the house lease contract before the allowable period, it may bbe subject to a fine for violation as prescribed in Article 418 of the Civil Code 2015:

• The parties may reach agreements on fines for violations to a contract that requires the violating party to pay a fine to the non-violating party.

• The acceptable levels shall be agreed upon among the parties unless otherwise prescribed by relevant laws.

• The parties may reach an agreement that the violating party has to pay only a fine for violations and is not liable to any compensation for damage or has to pay both a penalty for violations and compensation for damage.

Thus, the parties may agree upon the principle of penalty for the violation in the contract. If the parties are not willing to comply with the agreement, they may initiate a lawsuit to the People's Court competent to settle disputes according to the provisions of the Civil Procedure Code 2015.

ADK & Co Vietnam Lawyers Law Firm