Land Lease in Thailand – What needs to be considered ?
One of the most viable options for foreigners for property purchase in Thailand is a land lease. Under the current laws of Thailand a residential lease may have a maximum of 30 years term (commercial purposes up to 50 years), whereby renew options giving additional 30 years extension(s) of term are widely used in Thailand. Recent announcements by relevant government authorties stating that longer lease periods of even 90 years shall come into effect as part of a whole packet to prevent the expected proporty investment slow down in 2009 have turned further attention to land leases. Additionally, a purchase option (under seperate agreement) can be agreed between lessor and lessee providing the lessee with a right to demand title transfer upon change of the applicable laws allowing foreign national to hold freehold title to land.
Whenever entering into a lease arrangement, highest attention should be paid to proper registration of the lease against the land. Every long term lease (longer than 3 years) needs to be recorded with the relevant land department in order to be enforceable not only but also against a third party in the event of land transfer by inheritance or sale by your landlord.
Important to know that there is no „guarantee“ or automatism in regard to the renewal of a lease. A landowner may refuse to register a new lease agreement for the lease extension upon expiration of the previous lease period. Therefore especially the default provision under your lease should be carefully examined to protect your interests. It also needs to be considerd that such renew option may not be honoured by the beneficaries of the lessor not having signed the lease. In this context sophisticated developers have implemented legal structures which allow land lessees to acquire share interest in the company that owns the project land including your individual plot. Under these structures, the holder of a land lease together with the other lessees in the project, are in effect joint-lessors of themselves who can assure renewal of the lease terms for additional 30 year periods upon expiration of the first terms.
Every investment, especially a lease investment should be checked thoroughly in regard to its capability for a potential re-sale. Therefore, a long term lease subject to rental advance payments should be examined including but not limited to the following: fair termination clauses, unrestricted assignment and transfer rights for lessee, protected right of renewals and inheritance of lease rights.
Further attention should be paid to the correct application and submission of accepted documentation to be provided to the relevant land department as evidence for actual payment of the rental if any kind of (lease) interest shall be registered against land.
Simply put, a land lease may be an interesting option to acquire interest in land in Thailand, however, it is advisable to examine the provided leases agreement thoroughly and obtain legal advise from your law firm of trust to ensure that your interests and rights are protected.
This article is written by Michael Greth, Consultant of the Phuket based law firm International Law Office Patong Beach Co., Ltd.,
michael@ilo-phuket.com
+66-(0) 76-222 191-5
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