Property Lease in Thailand
A more viable option for foreigners who want to have a legal and long-term interest in the property in Thailand is done through lease agreement. As foreigners cannot claim ownership over land as freehold, the preferred method of acquiring land is through leasehold. Leasehold or the hire of property is a contract whereby the letter agrees with another person called the hirer, has the use or benefit of a property for a limited period of time, and the hirer agrees to pay the rent.
Foreigners renting properties or in possession of a real estate property whether a land, land and house, condominium unit, or apartment are governed by lease or rental agreements under Thai law.
Property rental and lease laws in Thailand states that any hire of immovable property exceeding three (3) years is not enforceable unless there is written evidence signed by the parties and registered with the Land Department. A short-term contract need not be registered but must be made in writing in order for the contract to be enforceable.
The lease term of a real properties in Thailand can either be fixed or periodic. A lease agreement will usually guarantee the initial 30-year lease term. A foreigner can safely acquire the right to use the land and register the right for a maximum of 30-year lease at the Land Department.
Section 540 of the Civil and Commercial Code provides that the duration of a hire of immovable property cannot exceed thirty (30) years. If it is made for a longer period, such a period is to be reduced to thirty (30) years. However, the 30-year period may be renewed, but the renewal must be made prior to the expiration of the lease term.
Renewal of Lease
Renewal of lease in Thailand is not in Perpetuity. There is no automatic right to renewal and parties must take an active step to renew the lease towards the end of the initial term.
It is difficult but possible and success will depend upon careful drafting of the clause regarding the intention to renew and there it will still be subject to the Registrar's discretion.
Renewal periods thereafter the initial period must not exceed 30 years. Under Thai law and Supreme Court rulings, the agreed term in the lease is considered a real right of the lessee, but an option to renew the lease is considered a contract option or contract obligation (not a real lease right) that needs to be enforced in the future. Have your lawyer advise you on renewal clauses.
Lease Agreements and RegistrationDrafting of the Lease
A lease agreement in Thailand may contain standard clauses based on the provisions of laws on contracts and the hire of property. Both parties, however, may opt to include specific clauses based on their terms provided that those are in congruent with Thai laws.
The lease contract is usually drafted in the Thai language; however, we do provide English versions if needed.
It is recommended to include family members such as young adults as co-lessees in the contract. In the uneventful demise of the parents, the children can carry on the full term of the lease period.Registration of Lease
Leases for more than 3 years are able to be registered at the Land Office, which will then further protect your interest in the house or real estate, as it becomes an encumbrance.
Upon registration, the title deed will then contain your name and particulars as to the lease. The lease contract is then attached to the title deed and maintained at the Land Department.
The foreigner can construct a house on the land if the lease agreement permits. The construction permit must be applied for in the name of the foreigner and subsequently, the foreigner will own the structure in his/her own name.
Most importantly, leases are valid even upon the demise of the lessor, or in the event that the land is sold. However, leases are only transferable to third parties in the event that the guarantor of the lease permits it. It is important to note that unless otherwise provided by the contract of lease, a hirer cannot sublet or transfer his rights in whole or in part of the property to third persons. Without the permission of the lessor, the latter may terminate the lease.
The advantage of leasehold is a lower registration fee. The registration fee for registering such a lease is 1.1% of the rental value.