Property Lease Agreement
Phuket is one of the most popular destinations attracting visitors from all over the world. Many foreigners traveled to Phuket for vacation and fell in love with the magnificent coastlines and tropical sunshine that they decided to make this beautiful island their home. Phuket attracts people of all ages and professions. Whether you are a retiree, a business owner, or looking for a place to reside with your family, the island has everything you need to live comfortably.
For that reason, Phuket has become a property hotspot for foreigners. However, due to legal complications, purchasing a property in Phuket or anywhere else in Thailand is not as simple as it may seem. Foreigners will have to engage in the complex process and understand the laws involved. Hence, many turn to the option of a long-term lease rather than buying the property.
Types of Property Ownership in Phuket
As mentioned, the law is considered a major obstacle for foreigners to own property in Phuket or other places in Thailand as foreigners are restricted from owning land in the country. Nonetheless, the Condominium Act permits foreigners to purchase and own freehold condominium units under several conditions. In addition, there is no regulation prohibiting foreign individuals from leasing property in Thailand.
At present, there are two options for foreigners to legally own property in Phuket. These include Freehold and Leasehold options. Each one has its perks and trade-offs. It is important for foreigners to carefully weigh their options and proceed with what best suits their preferences and conditions.
What is Freehold?
The term freehold itself means having a full entitlement over the real estate whether it’s a villa, a house, or a condominium. Yet, since foreigners are not allowed to own land without a registered Thai company or a Thai spouse, purchasing a house is not a probable option until the Land Code is amended.
Thanks to the Condominium Act B.E. 2522, foreigners are permitted to have full rights over condominium units. This can only be achieved provided that the total units owned by foreigners in the estate do not exceed 49%. Other conditions, such as the funds used to purchase the condominium must be transferred from abroad also applies. With the full entitlement to the condominium, foreigners will be able to rent out the units to others or sell the rooms when desired.
However, being an owner of the property also comes with responsibilities of maintenance and higher tax payment. Consequently, it is common for foreigners to look for an alternative and opt for the leasehold option.
What is Leasehold?
Though a leasehold does not exactly mean having a permanent right to the property as it is considered a “lease”, the rental or lease agreement can last for a very long period. The Civil and Commercial Code of Thailand allows the lease term to have a maximum length of 30 years with the possibility of two subsequent extensions provided that both the lessor and the lessee agree with the renewal. A lease agreement that covers the lease period of over 3 years shall be registered with the Land Department for a guaranteed right to the property during the lease term.
With the leasehold option, foreigners have the ability to select a variety of properties to relocate to, from a house, a townhouse, a villa, or a condominium unit. Additionally, it is generally less expensive to register the lease agreement at the Land Office than paying for the transfer fee in the case of a freehold.
This is a great and viable option for foreign individuals whose financial position may not allow them to purchase a property. They will also have a chance to decide if the place is to their taste before permanently settling down.
Lease Agreement
For a long-term lease of more than 3 years, the lease agreement must be arranged to comprise all the lease details, terms, and conditions. It shall have a Thai script version if originally drafted in a different language and registered at the Land Office along with the Title Deed for the agreement to be legally valid. Meanwhile, if the lease is less than 3 years, no registration is required with the relevant authority.
In any event, the lease agreement shall not exceed 30 years period. Though there are chances the agreement will be renewed, there may be an issue where the original owner passed on during or after the initial lease term and the new owner fails to reach an agreement with the lessee. Furthermore, the renewal may be included in the contract, but it is not enforceable by law.
In the case that the lessee intends to sublease the property to a third party for any reason, the agreement must indicate that the lessee is allowed to do so or to use the property rented for commercial purposes. The owner must be informed and approve of the sublease.
Another important provision that should be mentioned in the agreement is regarding the termination of the lease. It must be outlined clearly as to what can cause the agreement to be terminated, the notice period as well as the handling of the deposit fee.
For the reasons above, it is advised for foreigners to speak with a legal representative or a property lawyer in Phuket to receive a consultation before entering into a lease agreement.
Lease Agreement Requirements
Below are the requirements for the long-term lease agreement to be valid in accordance with Thailand’s Civil and Commercial Code.
Lease Agreement Registration
With all the necessary documents prepared and the agreement carefully drafted, the authorized officer at the Land Office will input the lessee’s name on the property’s Title Deed. The copy of the Title Deed and the lease contract will be stored at the Land Office.
Fee and Tax for Lease Agreement
The lessee is subject to the transfer fee of 1.1% of the total lease agreement. This is a one-time payment and covers the whole duration of the lease whether the lease term is 3 years or 30 years. This amount is paid at the Land Office upon registration of the lease agreement.
In addition, there is a Land and Building tax which must be paid annually. The tax rate depends on the usage of the property and the assessed value determined by the government authority. This responsibility is often passed on to the lessee and must be referred to in the contract.
A proficient lawyer in Phuket will be able to assist foreign individuals from drafting or reviewing the lease agreement to ensuring its comprehensiveness, preparing for agreement registration along with providing consultation on any related matters.
Since the contract is legally binding, it will be difficult to make any changes once it is executed. Foreigners should discuss their intentions and requirements with the local property lawyer to gain clarification before engaging in the lease agreement. Reach out to our experienced legal representative in Phuket who will make sure every action taken will be favorable to you.
Siam Legal (Phuket)
123 / 27-28 Moo 5, Bangtao Place, Cherngtalay, Thalang, Phuket, 83110, ThailandPhone: +66 76 326 322
Siam Legal Phuket
Call Us:
| Local Office Numbers: | |
| Bangkok: | 02-254-8900 |
| Phuket: | 076-326-322 |
| Chiang Mai: | 053-818-306 |
| Pattaya: | 084-021-9800 |
| International Numbers: | |
| US: | 1-877-252-8831 |
| Thailand: | +66 2254-8900 |
