WHAT YOU SHOULD KNOW ABOUT LAWS
Lease agreements in Thailand is a commonly used instrument and is more specifically referred to as a “hire of property” under the Civil and Commercial Code of Thailand.
By definition, it is a contract whereby a person called the lessor agrees to let another person called the hirer or lessee to use or obtain benefit of a property for a limited period of time whereby the hirer agrees to pay the rent for such use or benefit.
Lease Agreements in Thailand
No because the laws of Thailand do not permit foreigners from acquiring real estate properties outright, lease agreements between Thai nationals and foreigners of these real estate properties have become popular in Thailand. Nevertheless, it must be borne in mind that there are things to remember before concluding a Lease Contract. Hence, before you even consider entering into a lease agreement you should remember the following tips before entering into lease agreements in Thailand.
First. Know Thai laws relating to Lease Agreement. Lease Agreements or Contract to Hire are governed by Sections 537-571 of Thailand Civil and Commercial Code. Since many are unfamiliar with such laws, it is usually easier to contact a lawyer to address these matters:
Formalities Required: The Civil and Commercial Code of Thailand states that lease agreement involving immovable properties must be in writing and must be signed by the parties. Also, if the lease is more than three (3) years or for the lifetime of either the lessor or the lessee, the following conditions must be met: a) it must be in writing, b) the Thai Chanote or the Title Deed must be attached and c) requires registration with the competent official, otherwise it will not be valid.
Duration of the Lease Agreement: Generally, a Contract of Lease is valid only for a period of 30 years. No longer period is allowed. However, the parties are permitted to renew the lease agreement subject to the approval of the competent official and requires re-registration. There is, however, no guarantee that the renewal will be approved.
Sublease Permit: the lessee is only permitted to sublease the property subject of the lease agreement if the same is allowed or stated in their contract, otherwise, the lessee cannot sublet or sublease the property, neither may they transfer their rights over the property leased.
Transferability of the rights to the lease to heirs: Should the lessee die during the term of the lease, the remaining term of the lease agreement will not pass automatically to the lessee’s heir. The transfer of this right is generally subject to the agreement of the parties. The transfer of the right to the leased property is subject to the requirement that the same shall be registered with the land office department of Thailand. Hence, the remaining period of lease in the name of the heirs must be registered.
Extinguishment of the Lease Contract: At the end of the agreed period of the lease, the contract shall be extinguished without notice to the parties. However, if there is no period agreed by the parties, either party may terminate the contract at the end of each payment provided that notice of at least one rent period is given, but no more than two months notice need be given.
Second: Check all terms in the contract before signing a lease agreement. Clarify the terms if you must. Make sure that the terms are explained to you clearly. Make sure that the conditions of the property subject of the lease contract embodied in the agreement exist at the time of the conclusion of the lease agreement. This includes ocular inspection of the site if necessary in order to check that the property you want to lease is in good condition. The agreement should also contain provisions for the payment of expenses at the end of the lease.
Third. Contact a property lawyer. A Thailand lawyer will help you with all the requirements before you can enter into contract of lease. It is beneficial to engage the services of a lawyer before entering into a lease contract because of language and legal technicalities involved with lease agreements.
Thailand became one of the most desired countries to retire in Southeast Asia. Because of its famous beaches, and friendly locals, foreigners are attracted to owning land in Thailand.
However, laws of Thailand with regard to foreign ownership of their land are strict and, as a matter of fact, foreigners are generally prohibited from acquiring ownership over any land in Thailand. Nevertheless, there are some exceptions to this.
Owning Land in Thailand
Under Section 86 of Thai Land Law, a foreigner is permitted to own land in Thailand provided that there is a treaty allowing the same. However, presently Thailand does not have any treaty with any country that allows the same.
Section 27 of the Investment Promotion Act, a foreigner is also allowed to own a land in Thailand provided that the same is authorized by the Board of Investment (BOI). It is, however, a condition that the same land should be used by the foreign company for the sole purpose of carrying out its business objectives. The land area must also be approved by the Board of Investment which will be in accord with its business goals.
An alien, who brings to Thailand an investment in the amount of not less than 40 Million Baht, may also apply for ownership of land in Thailand. However, as a condition for the ownership, the foreigner should use the land for residential purposes. It limited to one (1) rai only and permission from the Minister is necessary. The foreigner is allowed to own the land as long as he maintained the investment for not less than five (5) years. If the investment is preterminated, such withdrawal of the investment shall be reported in writing to the competent official within 60 days from the date of the investment withdrawal. This right however is not transferable through inheritance. Thus, the ownership lasts only during the lifetime of the alien applicant.
Another exception to the limitation against foreign ownership of land in Thailand is given to Thailand companies, owned by foreigners. It must be remembered, however, a foreign shareholder is prohibited from owning more than 39% shares and that the total foreign ownership in said company must not exceed 49%.
A foreigner can also acquire ownership over land in Thailand if he or she is a statutory heir. However, the land would still be regulated under Thai law.
If you are looking at buying land or a villa in Thailand or buying a villa in Krabi for that matter, then speak to a property lawyer first as the laws are very complicated.
Ownership to real estate properties in Thailand is generally limited to Thai nationals. Foreigners are thus prohibited from acquiring real estate properties in Thailand.
Though there are exceptions to this prohibition against foreign ownership, the same still should conform to the basic requirements of Real Estate Laws of Thailand. Amendments introduced to Thai Land Code now permit an alien to acquire certain real estate properties in Thailand subject to limitations imposed by Thai laws. A foreigner now may own a land in Thailand, provided that he invests in the country money in the amount of not less than 40 million baht. The foreigner is thus allowed to own a land for residential purposes but that does not exceed one (1) rai. The investment of the foreigner is required to be beneficial to the social and economic development of Thailand.
Foreigners are also allowed to purchase Condominium Units situated in Thailand. The purchases, however, by foreigners shall not exceed forty nine percent (49%) of the total area of all the units in the condominium. Nevertheless, foreigners are not permitted to register in their names the land in which the houses or building structures sit upon. If the foreigners wishes to acquire a house in Thailand and has intention in registering the same, it is easier if they set up a limited company because the house can be registered in the company’s name. However, there are still limitations using this method and it may not be for everyone.
One of the most common ways to enjoy real estate properties in Thailand is to conclude a Lease Agreement with the Thai nationals. A lease agreement, however, must be in writing and requires registration in the Land Department if the period is more than three years. Otherwise, it cannot produce legal effect and can be enforceable only for a period of three years.
Usually it is permitted for 50 years if it is for commercial purposes and 30 years for non-commercial purposes.
Marrying a Thai national will not make a foreigner a co-owner of a real estate property in Thailand. When a Thai national marries a foreigner, she is allowed only to purchase real estate property in Thailand only if she executes a letter stating that the property to be acquired will become separate personal property of the Thai national. This is a strict law to prevent circumvention of laws in Thailand. However, the foreigner spouse can enter into a Usufruct Agreement with his Thai spouse in order to enjoy, and use the real estate property.
A foreigner may buy and own a condominium in Thailand. Intended to boost the country’s foreign investment, the Thai government have for some time, gave a leeway for foreigners to own real estate in the country.
Nevertheless, “caveat emptor” should still be kept in mind. Selling a condo has been a lucrative business in Thailand given its asset wielding potential.
Buying a Condo in Thailand
Thus, a buyer, especially foreigners who may not be familiar with local markets should exercise utmost diligence in purchasing units here. There are some caveats for foreigners when they purchasing condominium units in Thailand that must be borne in mind. These caveats will serve as the guiding principles for expats before buying condominium units in Thailand.
First caveat: A foreigner is permitted to own a condominium unit in Thailand only if he has met the qualifications stated in the Condominium Act of Thailand. That is, he must be given permission to reside in the country or that he is a certified resident of Thailand according to the Immigration Laws of the country.
Second Caveat: Once a foreigner was permitted to purchase a condominium unit in Thailand, he cannot own more than the limited percentage for foreigners. It must be remembered that there is a 51/49 rule in condominium ownership in Thailand. Foreigners are permitted only to own 49% of the total space of apartments in a condominium. Beyond the limit is permitted only in cases where the condominium is located in Bangkok Metropolis, or any of its municipality, or administrative local area under the provisions imposed by a ministerial regulation.
Third caveat: Since selling a condominium unit in Thailand has been considered as a lucrative business, inexperienced developers have been quick to emerge taking advantage of the market demands. It is beneficial for the buyer to consider the reputation of the real estate firm as well as the financial capacity of the developer to avoid future litigation regarding the property. Buying a condominium unit directly from an established developer is more advantageous as these developers are more experienced in the field or have greater financial backing.
Fourth caveat: Distinguish whether you are buying the condominium unit in leasehold or a freehold capacity. Leasehold condominium units are for lease only. The ownership of the property is not transferred to you. You are only given the right to use the property as a lessee. Hence it is beneficial for a buyer to choose a freehold condominium unit so that title to it may be transferred in his or her name.
Fifth caveat: Know your reason for your purchase. This is important because this will determine the right location for your condominium unit. If you consider buying condominium units to resell later, and then consider the province in Thailand where there are lots of condominium buyers. Otherwise, if you intended a place to live in, consider the community as a whole. The location of the units determines the right costs of the purchase.
Sixth Caveat: Buyers sometimes fall into deceitful terms of payment for the purchase of their condominium units. Thus, evaluate the terms of payment, the time allotted for you to pay, the system of deposit, as well as monthly maintenance fees. All agreements relating to payment of the mentioned fees shall be put in writing. This caveat will prevent sellers from charging hidden costs.
Last caveat: Ministerial regulation pertaining to foreign acquisition of condominium is changing as time passes by. To avoid conflicts in the future, it is beneficial to consult with a lawyer and engage his services before buying a condominium in Thailand.
Real Estate laws in Thailand makes it difficult for a foreign national to acquire real estate property in general. However, because of its successful tourism industry that contributed to the rapid growth of its economy, a foreigner may be able to own a condominium unit in Thailand.
Foreign ownership of condominium units in Thailand is regulated by the Condominium Act of Thailand which defined condominium as a building that can be separated into units for individual ownership which include personal and common properties. Under Section 19 of the same act, the following foreign nationals are permitted to own a condominium in Thailand:
An alien who is a permitted to reside in Thailand under its immigration laws;
Immigrants, when they are permitted to enter Thailand under the BOI laws;
Registered alien juristic person of Section 97 and 98 of the Registered Land Code who will become Thai juristic person;
Alien juristic person which has been qualified under the Announcement of the Revolution Committee No 281;
Alien or Alien Juristic person who brought foreign currency in Thailand or aliens who withdraw their money from their bank accounts in Baht currency or aliens.
The same section also provides that the aforementioned foreigners can only acquire 49% of the total space of apartments of the condominium. However, ownership beyond 49% is permitted in limited circumstances. Such condominiums must be located within the Bangkok Metropolis or municipalities or other administrative local areas and subject to the provisions of the Ministerial Regulations such as: that the condominium has no less than 40 units, registered for not less than one year prior to the day the foreigner applied for the transfer of ownership of the condominium and the same is not located in a military zone.
Condo Ownership in Thailand
Condominiums can also be transferred by Thai nationals to foreign nationals, provided that the former report the name of the latter or alien juristic person to the registration official. The Thai national is also required to report the percentage of ownership the alien will hold. Evidence such as documents showing that the alien possess the qualifications stated in Section 19 of the Condominium Act must be presented to the registration official.
A foreigner who acquired a condominium unit through succession or inheritance as a statutory heir, legatee or devisee must report the acquisition to the registration official within 60 days from the date he or she received the property and must sell the same within one year form such acquisition. Also, where a foreigner acquires a condominium unit that exceeds the percentage of limitation for foreign ownership of condominium units, or when his or her permission to reside in Thailand has been cancelled, or in case his or her residential right in Thailand has been revoked, or if he or she was ordered to be expelled in the country, the condominium must be disposed within one year from the date the abovementioned causes occur.
Foreign ownership of condominium unit in Thailand is evidenced by a certificate issued to the foreigner. After issuance of the certificate, it must be registered by bringing the same certificate to the Registrar. Thailand government permits foreign ownership of condominium to encourage investment in the country.
Registration of Condominium titles in Thailand is governed by the Condominium Act of Thailand, specifically, Section 6 to 11. The following are the step by step guide in registering condominium titles in Thailand.
Step 1: The owner will file an application of Registration with the state officer appointed by the Ministry with the following supporting documents:
Land Title Deed
Ownership ratio to common property held by the individual owner
Description of the unit, personal property or common property
Testimonial of the applicant certifying that the building was not mortgaged, and if so mortgaged, it is mortgaged together with the land.
Step 2: Within 30 days from receipt of the application, if there is a mortgaged creditor or preferred creditor, the officer in charge will announce and notify the creditors of the existence of the said application. The officer may conduct an investigation or inspection to the premises of the condominium. They also have the power to order any person to testify or submit necessary documents in order to determine if there exists a mortgage over the property.
Registering Condo Titles in Thailand
Step 3: If the officer is satisfied that there exists no mortgage over the land and building, or that there are no objections from any creditor, he shall accept the application. Otherwise, he shall deny the application with notice to the applicant stating the reason for the denial.
Step 4: When the application has been accepted, the application shall be forwarded to the local official who has jurisdiction over the condominium units within 15 days after registration is made. The land title shall be recorded falling under the Condominium Act. Likewise, the approval of the application shall be published in the Official Gazette. In cases where there is mortgage over the property but the creditors nevertheless raise no objection, the land title shall be kept in the Land Department.
However, when the application for registration has been denied, the applicant is given 30 days to appeal in writing such denial to the Ministry of Interior after receipt of notice of denial. The Minister of Interior is given 60 days to decide and his decision is final.
Upon completion of the registration, no further act or recording of rights is required unless the same is permitted under the Condominium Act of Thailand. You should also ask about Escrow in Thailand when buying property. The provision of the Land Registration Code shall apply to enforce the legal act of registration under the Condominium Act.
Laws relating to real estate properties in Thailand are strict in the sense that ownership of the same is limited to Thai nationals and foreigners are relatively prohibited from acquiring title to the same.
Foreigners sometimes think that when they marry Thai nationals they could become co-owners of the real estate property. It is, however, not true in Thailand. Co-ownership of real estate in Thailand by Thai nationals and foreigners is still prohibited.
Prior to March 23, 1999, when a Thai national marries a foreigner, she is strictly prohibited from acquiring real estate property in Thailand.
Usufruct in Thailand
A Ministerial Regulation was however passed by the Minister of the Interior on said date, revoking such restriction to Thai nationals. It is a condition sine qua non however that when a Thai national with a foreign spouse buys a real estate property, she has to execute a letter of confirmation together with the said alien spouse that the property will become a separate property of the Thai spouse. This rule is intended to insure that prohibition against foreign ownership of real estate properties is not circumvented.
You may ask “can there be no instance that a foreigner like you will enjoy real estate property in Thailand?” Under certain circumstances, enjoyment of real estate property can be had but without actually possessing title over it. There are other means of securing rightful enjoyment of the property without actual conveyancing of title as we know it. With such rights, you are given the right to possess, use, enjoy and manage the property in Thailand. But you cannot own it. This right is often called a usufruct contract or agreement.
Under the Civil and Commercial Code of Thailand, a real estate property can be a subject of a Usufruct agreement. Hence, a foreign spouse may be a usufructuary of the real estate property owned by his Thai spouse. Entering in a usufruct agreement with a Thai spouse in order to be valid must be registered in the Land Department of Thailand where the title to the property is located. A usufruct executed in favor of a natural person is valid until the expiration of the period intended by the parties.
If no time is fixed by the parties in the usufruct agreement, it is presumed that it is intended to be enforceable during the lifetime of the usufructuary. Hence, a foreigner who is designated to be a usufructuary of a property of his Thai spouse may enjoy the right to use the property subject to a condition that he will exercise reasonable or due diligence over the property. Through usufruct agreement, a foreigner may at least enjoy to the fullest his stay in Thailand. Speak to a lawyer in Thailand before you decide on your property.
Lease Agreements In Thailand
Owning Land In Thailand
Basics Of Thai Real Estate Laws
Buying A Condo In Thailand
Condo Ownership In Thailand
Condo Titles In Thailand
Usufruct With Your Thai Wife
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