Can a Landlord Terminate the Lease if the Tenant Fails to Pay Rent on Time?

Jun 30

Case Study: A Land Lease Dispute Lasting Over 15 Years

In 2008, Joint Stock Company H signed a lease agreement allowing Company A to sublease land in an industrial zone to build warehouses and factories. The agreement outlined a detailed payment schedule divided into multiple installments, with the remaining balance permitted to be paid over five years. Company A received the land, proceeded with construction, and began operations, but later failed to fulfill its payment obligations as committed.

Over several years, Company H repeatedly reminded and requested Company A to settle the debt, but Company A failed to meet the payment deadlines. The prolonged delays prevented Company H from transferring the land use rights and caused difficulties in properly utilizing the asset.

Since 2015, Company H filed a lawsuit against Company A, requesting the payment of outstanding rent and asking the court to terminate the land lease and order the return of the land use rights.

The court thoroughly reviewed the case and ruled in favor of Company H:

The land lease agreement was terminated due to the lessee's breach of payment obligations.
Company A was ordered to return the land use rights to Company H.
Company H was required to refund the received rental payments, deducting the cost of land usage over the 15-year period.
The tenant was required to dismantle any structures built on the land.

Legal Insights from the Case: Effective Solutions from DEDICA

When a tenant repeatedly violates payment obligations, the landlord has full rights to initiate legal proceedings and request contract termination—provided they can prove significant damages and the tenant's lack of good faith. Key recommendations include:

1. Prepare a Complete Set of Evidence

Important documents include the lease agreement, land handover minutes, payment notices, and unfulfilled payment commitments. These are critical for defending your case in court.

2. Be Cautious About Accepting Partial Payments

Continuing to accept small, delayed payments after major breaches may be interpreted as acceptance of the contract, weakening your legal argument.

3. Assess Damages and Plan for Asset Recovery

It’s essential to calculate land usage costs, the value of on-site structures, and to have a clear strategy if seeking to reclaim the land. In this case, the legal team supported the calculation and enforcement of asset recovery, including lawful dismantling of structures.

4. Choose the Right Litigation Strategy

Once litigation is considered, it’s crucial to prepare a clear strategy, which may include demands for contract termination, asset recovery, and compensation. A well-defined legal approach is key to winning complex disputes.

DEDICA – A Trusted Legal Partner for Businesses

DEDICA has supported businesses from the initial preparation of legal documents, through strategic legal planning, and courtroom representation, achieving results that protect and maximize the legal rights of our clients.