Thai lease agreements and lease structures for foreigners

Source: Thai Laws pertaining to lease agreements

Quality lease agreements in Thai and English drafted online by lawyers 6,700 baht

A land or land and house lease agreement is Thailand is a contractual agreement by which the Thai owner of the property transfers land or land and house to another party for a limited period subject to various conditions. The owner receives in exchange rent or a lease price but retains ownership. A lease may be written or oral, but the lease agreement in Thailand must be in writing to be enforceable by action. Some leases must be in writing in Thai script and registered and recorded in the land registers of the local land office in Thailand. Such leases usually concern land or real estate leases for a period of more than three years.

A lease agreement is created when a Thai property owner offers to another party the possession of his property for a certain period of time and for a certain consideration and the other party accepts the offer. In a lease contract in Thailand the party who legally owns the property is usually called the lessor and the person renting the property is usually called the lessee. There are no restrictions or limitations under Thai law for foreigners renting or leasing property.

Lease agreements and Thai laws

Lease agreements are governed by the Civil and Commercial Code and Supreme Court judgments. Property lease agreements in Thailand are subject to the section Hire of Property in the Civil and Commercial Code and may not exceed 30 years.

Termination of the lease agreement

A lease is terminated at the end of the agreed term without notice or at death of the leaseholder. In a normal rental or lease agreement between the owner and the lessee Thai law deems the person of the lessee an essential element of the agreement and if the lessee dies the lease agreements is under Thai law terminated. A lease or rent is under Thai law primarily a contract relationship between the owner and lessee. A lease agreement in Thailand is not by law an inheritable right. The lessor as the owner of the property can in principle regain possession of the property upon the death of the lessee. The section of Thai law allowing this could in specific cases be set aside based on the facts of the case and/ or content of the lease agreement and if a valid succession clause is included in the lease agreement.

In specific situations the Supreme Court has prevented the above and deemed the lease agreement more than a normal lease and approached the lease agreement as a 'special reciprocity contract'. The argumentation involved the potential loss to the lessee and his heirs in certain situations. The lease contract could be deemed more than a normal lease depending on the circumstances and normal hire of property laws could not apply on the contract of lease. In this case the lease will automatically devolve to the heirs of the lessee, even without the necessity of registration of the remaining lease term in the names of the heirs.

There are some other cases where the Thailand Supreme Court granted additional protection to the lessee, therefore make sure your lease contract is drafted by a Thai lawyer with detailed knowledge about real estate lease laws in Thailand and who is able to include these details in the lease agreement. In any case it is recommended to separate ownership over the building from the land. Preferably include a land lease agreement with a right of superficies.

Click here for a professional Thai English lease agreements drafting service online! Either as a custom lease agreement service or to obtain a professional lease agreement template to compare the required clauses with you current lease or to use during negotiations.

Transfer assignment of the lease and sub-lease

A leasehold owner may assign his lease interest or leasehold interest in the property under the lease agreement to a third party (assignee) ONLY if this is agreed in the lease agreement. An assignment of the lease transfers the lease agreement, including all rights and obligations to the assignee for the remainder of the lease term. The assignee enters in this case into a contractual relationship with the lessor. Generally, an assignment is valid by acceptance of the lessor and formal registration of the new lessee under the lease agreement.

An assignment differs from a sublease. In a sublease the lessee gives temporary rights to possess and use the property to a third party. In this case the sub-renter does not have any contractual relationship with the lessor. Also the right to sublease must in principle be allowed by the owner under Thai lease laws in Thailand, otherwise, if nothing is arranged about this matter, the law states that the lessee is NOT allowed to sublease.

90 year lease agreement

One controversial lease is the 30 year land lease agreement with 2 renewal options, usually the renewals are prepaid for a minimal amount. Under Thai law renewal options are not registered against the title of the property but are personal to the parties signing to the lease agreement. There are various contract structures aimed at granting more rights to the leasehold purchaser than just a 30 year rental or lease of the land, however these structures are not recognized under Thai law and have not been tested in a court and the owner may in principle regain possession and ownership of the leased property at the end of the registered lease term which is 30 years, simply because the lease is by law terminated at the end of the registered 30 year lease term.

One important aspect of such long term lease arrangements is ownership over the structures upon the land by the lessee.

Commercial leases in Thailand are in addition to the Civil and Commercial Code governed by a separate Act, the Hire of Property for Commerce and Industry Act by aliens and allow lease periods of up to 50 years. Generally this applies to certain areas in Thailand and to foreigners (foreign corporations) who make large investments into Thailand benefiting the Thai economy.

Taxes

Income from lease is taxed as income. Land office lease registration fees are 1,1% over the total lease price. In case of a land and house lease the property is subject to Housing and Land Tax at a rate of 12,5% of the yearly rental.

Tags See All Tags Add New Tag...

Please Enter New Tags Separated By Comma's
  Or Close

Land lease  Lease Agreements  Real Estate Laws  Rental Laws  Thai law  superficies