Options to secure land for a school project
Vietnamese law does not recognize private ownership of land. Instead, the state allocates or leases land-use rights (LURs) to qualified users. A user of land receives a land-use rights certificate (LURC), which records, among other things, the land parcel, the permitted use of the land (for example, education), and the duration of use.
To build and operate a private school in Vietnam, a school operator must secure lawful access to land and facilities. Vietnamese law allows for several structures for this, with suitability driven by the project’s specifics (such as project type, the LUR holder, and the origin of the LURs):
- leasing land (or under earlier regulations, being allocated land) directly from the state, typically for up to 50 years
- leasing or acquiring land zoned for education in master urban development projects from the primary or “first-tier” developers
- subleasing land zoned for education in an industrial zone, industrial cluster, or high-tech park from the zone developer, also for up to 50 years
- leasing or borrowing property from the legitimate owners of record
- BCC arrangements.
Emerging reforms also signal potential new options, including priority access to surplus premises of state authorities and the possibility of leasing state-owned buildings for private schools. The specific eligibility conditions and procedures are expected to be clarified in forthcoming regulations.
BCCs in the education sector
Vietnam’s 2020 Investment Law recognizes the BCC as a type of investment where two or more investors collaborate on a business and share profits or products. They do not need to set up a new company.
Any combination of Vietnamese and/or foreign investors can enter into a BCC. However, if a foreign investor, or a Vietnamese company that is considered a foreign investor (also known as a “deemed foreign investor”), is a party to the BCC, the parties must obtain an investment registration certificate from the relevant Department of Finance. A deemed foreign investor is a company that is more than 50% owned by foreign investors, or by another company that is itself more than 50% foreign-owned. A deemed foreign investor is subject to the same rules as foreign investors.
The parties to the BCC must set up a coordinating board to manage the contract and have autonomy in deciding how this board operates.
The 2020 Investment Law requires the BCC to include key details such as the names and addresses of the parties, project location, goals, capital contributions, profit sharing, timeline, rights and duties, amendments, assignment, termination, liabilities for contractual breaches, and dispute resolution. It should be noted that the Ministry of Finance is preparing a draft Investment and Business Law, which would replace the 2020 Investment Law and is expected to take effect on July 1, 2026. The draft generally maintains the current framework with respect to BCCs; the main change is that the detailed contents of BCCs would be set out in subsequent government guidance.
In a typical private school project, the developer who leases land from the state contributes the LURs and, in many cases, the completed buildings. The school operator contributes educational expertise, staff, and day-to-day management. The parties share revenue or profit in the proportion specified in the BCC. The LURs and ownership of the buildings remain with the developer; the school operator gains contractual rights to operate the campus for a defined term.
Common legal commentary and market realities
Several Vietnamese legal commentators characterize BCCs used in private school projects as instruments that, in substance, resemble leases. Two main factors are typically cited:
- First, developers generally obtain land from the state under an annual land-rent regime or, under earlier regulations, through land allocation with an exemption from land-use fees, which does not allow subleasing to third parties.
- Second, once land is leased (or allocated under prior regulations) by the state to a developer, the developer is expected to construct and operate the school directly; delegating the operation to a separate party may be viewed as inconsistent with the developer’s commitments to the state and the developer’s registered investment objectives. Similarly, for education projects in urban development areas, while the law allows a first-tier developer to lease or transfer the LURs for education plots to a second-tier developer, it is unclear if the latter can sublease the LURs or lease the completed building to a school operator. Some view this as a real estate business activity, inconsistent with the educational land-use purpose of the plot; instead, the second-tier developer is generally expected to build and operate the school directly.
As a result, BCCs may be regarded as a means to navigate statutory restrictions on subleasing, although the legal consequences in this context remain unclear.
However, developers and school operators tend to take a different view. A genuine BCC is seen less as a disguised lease and more as an educational management contract that aligns commercial realities with improvements in educational quality.
It is worth noting that educational management contracts emerged in other jurisdictions during the 1990s. In Vietnam, some parties have adopted BCCs instead of traditional leases where the contractual structure better accommodates the complex mix of real estate and pedagogical considerations inherent in a private school.
Recent transactions indicate that, in certain cases, a BCC can fulfill functions that go beyond those of a traditional lease, as outlined below.
- From a financial perspective, the contractual framework of this type often uses an income-sharing arrangement linked to the school’s revenue, profits, or student enrollments, rather than a fixed rental amount. Accordingly, the developer’s income varies with enrollment and tuition levels. In years of strong performance, income sharing may yield returns exceeding prevailing market rents. Moreover, a BCC enables the school to access more resources—whether from the operator, its investors, or lenders—that the developer and the school might find difficult to secure independently.
- The school operator generally acquires a level of operational autonomy; it may interact directly with the licensing authorities and set its own academic standards, policies, and quality assurance procedures. Meanwhile, the developer retains an economic interest in operational results, campus maintenance, and possibly the brand name. These elements foster closer cooperation than is typical in a traditional developer-tenant relationship.
- Operationally, where an operator manages multiple schools, it can share curriculum design, teacher training programs, and best practices across sites, potentially enhancing educational quality.
Key provisions of education BCCs
Although each arrangement differs, education BCCs in Vietnam typically share consistent characteristics:
- The developer’s primary focus is financial returns.
- The operator is focused on ensuring (i) a long, predictable term for the BCC, and (ii) continuity of the physical campus and the property-related and education licenses. As such, BCCs grant the school operator broad autonomy over academic, staffing, and operational decisions.
The key is incorporating balance into the contract with sufficient clarity and protections to address each party’s objectives and concerns.
Set out below are some common provisions that a well-drafted education BCC should include, and how they are typically negotiated in Vietnam.
Choice of parties to the BCC and establishing the operator’s rights
Vietnam does not currently have a single, standardized form of education license with a consistent approach to naming the “school owner” or “school investor”. Some licenses list the property developer as the school owner or investor while others do not address this point. If the operator is not expressly named on the license, it is important to establish a clear connection between the operator and the school by other means. A BCC between the operator and developer achieves this objective. Since in this arrangement the operator acts in a management capacity rather than as the school owner or investor, the operator should carefully evaluate the relevant management business lines for purposes of Vietnamese law and register the appropriate ones. This approach is similar to hotel management arrangements, where the operator signs a management contract and registers the relevant management business lines.
Once it is determined that a BCC will be established, an important consideration is which entity on the operator side should sign the contract.
In most cases, the operator signs the contract. However, in some rare situations, the entity executing the BCC may be the operator’s parent company. This arrangement means the operator does not have a direct contractual right to operate the school. This gap can pose challenges if the operator later seeks bank financing, new equity investment, or a partial exit. Lenders and investors typically prefer that operating rights and associated revenue be held by the same entity or group they intend to fund or acquire. If the rights site elsewhere, lenders and investors may require amendments to the BCC or additional contracts to be put in place.
In other rare instances schools themselves sign the BCC, which raises questions about how the operator secures a clear contractual right to manage the school. Additional complexities arise if the school is later acquired by foreign investors at the upstream level and converts into a foreign-invested education establishment (FIEE). While education licenses and regulations explicitly state that domestic schools are separate legal entities, the law remains silent on the legal status of FIEEs. The prevailing view is that an FIEE is not a legal entity. Consequently, any contract the school signs after becoming an FIEE might be challenged or even deemed void on the grounds that the FIEE lacks the legal capacity to enter into the BCC.
Responsibilities and the relationship
Education BCCs should have a clear outline of ownership and duties. The developer commonly contributes the LURs and the school building. The contract usually requires that both assets be free of any mortgages or other encumbrances for the entire BCC term. It is also important for the operator to seek confirmation that the developer has paid all past fees and penalties and agrees to indemnify the operator against any pre-existing liabilities attached to the contributed assets.
In addition, the parties normally set out who will bear each category of development cost. Key items include construction, fit-out, equipment, working capital, and know-how. The government land-use fee for the BCC term should also be considered. The operator may agree to fund some or all of these costs.
For greenfield school projects, design authority and construction management appear in most education BCCs. Permit applications and obligations to ensure site access sit with the developer, subject to a defined timetable. After handover of the completed building from the developer to the operator, the operator takes on routine maintenance and non-structural repairs. Any material change to the building footprint usually requires the developer’s prior written consent. The developer remains liable only for major structural defects linked to the original works or for hidden land risks.
The BCCs also assign responsibility for regulatory approvals, including education licenses, and land and property approvals. Whether those tasks sit with the developer, the operator, or both, the BCC generally obligates the responsible party to obtain and renew the approvals for the life of the BCC term.
Control of daily operations stays with the operator. Curriculum, staffing, tuition setting, and marketing fall within its remit. The operator may also license the trademark and related intellectual property to the school and retains ownership of those assets.
Operator’s control
BCCs often set out developer undertakings designed to preserve the operator’s control over the campus while the BCC is in force. In particular, the developer cannot sell, mortgage, or otherwise encumber the project land or any school building unless it receives the operator’s prior written consent.
Some BCCs even extend the same concept to ownership of the developer itself. Transfers of equity interests that would have a similar economic effect are also often prohibited without the operator’s approval. Mergers, de-mergers, dissolutions, or any other corporate reorganization by the developer typically fall under the same consent requirement.
BCCs may also restrict the developer from actions that could hinder the operator’s exclusive use of the site, including undertakings not to interfere with daily operations of the BCC school, halt construction or services in respect of the premise, or negotiate competing opportunities or non-school uses of the property with third parties. Breach of these commitments can lead to indemnification or termination of the BCC.
In addition, operators commonly negotiate a pre-emptive right to buy the buildings or the equity interest in the developer if those assets are to be disposed of. This right gives the operator an early chance to secure possession of the campus.
Some BCCs go further and include a call option exercisable at the operator’s discretion. The option can cover all equity interest in the developer and/or the buildings that the developer contributed. Whether the operator can in fact acquire the buildings hinges on the specific circumstances of each transaction and the guidance issued by the relevant local authorities where the project is located.
As to enforceability, Vietnamese law does not expressly recognize call options; nonetheless, they are widely used and have not been publicly challenged by regulators or the courts. If, however, the option is not honored and enforcement becomes necessary, there remains some uncertainty as to whether the authorities would uphold it. To mitigate this risk, the call option may be structured as a conditional purchase agreement that the option holder can activate by delivering notice when it wishes to proceed. Detailed, pre-agreed terms and conditions in such a conditional purchase arrangement are crucial to achieving enforceability in Vietnam.
Additionally, if the BCC terminates upon the expiration of the LURs, the operator may require an undertaking from the developer to assist in obtaining a new LURC or a new lease from the state in the operator’s own name.
Intellectual property
Most BCCs name the operator as the sole owner of all brands, curricula, teaching materials, and other know-how it brings to the project.
However, some projects use a school trademark held by the developer. In such cases, the operator normally seeks an exclusive license to use the mark during the BCC term. The BCCs should contemplate a restrictive covenant to prevent the developer from registering, assigning, or licensing any identical or confusingly similar marks during the cooperation period.
Termination provisions should address post-termination use of intellectual property. Most BCCs require removal of signage and destruction or return of hard copies and electronic files. Meanwhile, any intellectual property or materials that need to be used or shared between the parties after termination should be clearly set out in the BCCs.
Financial arrangements
Most education BCCs in Vietnam link the developer’s return to the school’s tuition revenue. The parties often choose one of two basic models. The first model allocates a fixed percentage of gross or net tuition to the developer. The parties may negotiate whether “tuition revenue” includes income from uniforms, meals, transport, and after-school activities. Once the developer receives the agreed percentage, the operator keeps the balance.
The second model applies a fixed payment per enrolled student, either alone or together with the percentage share of tuition revenue.
Many BCCs also include a floor, which is a minimum annual return payable to the developer. This ensures that the developer return cannot be eroded by fluctuations in enrollment or tuition fees. If enrollment exceeds a stated level, the floor may rise according to a pre-set formula.
If the school posts losses for several consecutive years, the reputable operator with strong bargaining power may request a change in the payment formula or may terminate the BCC. At the same time, developers commonly obtain audit rights. Typical audit language allows the developer to inspect enrollment records, financial statements, and other supporting data to confirm the amounts paid.
These structures differ from revenue sharing in education management contracts in some other jurisdictions and from hotel management contracts. Under those arrangements, the operator typically earns a fixed percentage of revenue and perhaps an incentive fee, while the owner receives the remaining revenue.
Performance-based fees tied to student results, parent satisfaction, attendance, etc., are not common in Vietnam. When such arrangements are used, the BCCs should specify measurable benchmarks, timeframes for improvement, and the consequences for not meeting the benchmarks. BCCs may also carve out exceptions for factors beyond the operator’s control, such as economic downturns, labor disputes, or unexpected events.
Non-compete & non-solicitation
In some education BCCs, reputable operators with strong bargaining power include broad non-compete and non-solicitation covenants for the developer. These clauses prohibit the developer and its affiliates from opening, managing, funding, or advising any school that offers the same grade range or curriculum as the project during the term of the BCC and for three to five years thereafter. The restriction is usually drafted to apply nationwide rather than only in the province where the campus is located.
The non-solicitation covenant typically mirrors the same three- to five-year period and extends to teachers, administrative staff, students, parents, suppliers, and service providers, thereby limiting the developer’s ability to draw resources away from the BCC school.
Indemnification
Indemnity provisions in education BCCs in Vietnam usually place the primary risk for land-related matters on the developer. The developer is generally required to hold the operator harmless from losses linked to any defect in LUR, property-related permits, or the physical condition of the buildings. In parallel, the operator commonly accepts responsibility for liabilities connected to the day-to-day running of the campus—for example, parent or employee claims arising out of operations.
It is not uncommon for BCCs to refine this risk allocation by listing express “indemnity events”. Typical triggers include cancellation or non-renewal of an education license, reassessment of taxes or land-use fees, legal challenges to land tenure, or any conduct by the developer that undermines the operator’s exclusive right to use the premises. Where these events occur, some contracts pair the indemnity with a pre-set sum designated as liquidated damages.
However, Vietnam’s Commercial Law does not expressly recognize liquidated damages, so the enforceability of such clauses can be uncertain. While the Civil Code allows parties to agree in advance on a specific amount of damages, in practice, court and arbitral decisions have been inconsistent.
Vietnam’s Commercial Law does provide for penalties and compensation. Parties may agree on a penalty for breach, capped at 8% of the value of the breached obligation. Compensation must reflect actual, direct losses and the direct benefits the non-breaching party would have obtained absent the breach. Because recovery often depends on demonstrating these elements, the non-defaulting party tends to rely on compensation under the law. To strengthen the indemnity, operators sometimes require, if available, a parent-company guarantee of the developer’s indemnity.
Term and termination
The typical term of education BCCs in Vietnam is ten to 30 years, or one matching the underlying land use term.
Termination events may include: (i) default-based termination, (ii) commercial-based withdrawal, and (iii) expiry or non-renewal of the LUR.
Default-based termination is reciprocal, but the grounds differ. A developer may end the BCC on notice if the operator fails to pay any agreed revenue share or becomes bankrupt/liquidated. The operator may terminate at once, on notice, or at the end of a school year if the developer obstructs exclusive use of the campus, transfers the land or buildings, fails to maintain utilities or LUR, or becomes bankrupt/liquidated. It is usual for the defaulting party to have a defined cure period if the breach is curable.
Commercial triggers can also be considered. For example, the developer or the operator can often step away if the school posts losses for a set number of consecutive years. This right usually requires advance notice.
Education BCCs should also have clear provisions on contract renewal. The goal is to keep schooling continuous and protect each side’s investment. One approach gives the operator a first right to negotiate a renewal on terms at least as favorable as the expiring BCC, provided the operator is not in material breach. Another approach grants automatic renewal unless the operator opts out. In that model, if the developer wishes to bring in a new operator, it must compensate the departing operator for any unrecovered book value of its contributed movable assets.
The BCCs should require that all outstanding fees be settled before termination and should clearly set out how contributed assets and related arrangements will be handled upon termination.
Governing law and dispute resolution
Since education BCCs involve land use rights and/or buildings in Vietnam, the Civil Code requires that they are governed by Vietnamese law. Further, the Civil Procedure Code gives Vietnamese courts exclusive jurisdiction over real-estate disputes. Accordingly, any disputes relating to an education BCC should be resolved by Vietnamese courts.
Some may argue that such disputes relate to the contractual rights and obligations under the BCCs, rather than the real estate aspects, and therefore Vietnamese law and courts are optional. However, in practice, most education BCCs choose Vietnamese law and Vietnamese courts to ensure compliance with legal requirements.
Conclusion
While the regulatory framework for BCCs in Vietnam’s education sector is still developing and therefore calls for careful consideration, market practice indicates that they can serve as effective tools for enhancing educational quality and protecting the economic interests of the parties involved. As the regulatory environment and market continue to evolve, parties considering BCCs should remain attentive to legal developments, and engage with their lawyers for comprehensive guidance to ensure that their agreements are tailored to address both statutory requirements and the practical needs of their school projects.
For more on Vietnam’s education sector, please see our article “Unlocking potential in Vietnam’s education sector” (March 2025).