Usufruct

[oracle]

Good explanation?

Usufruct: Title VII Civil and Commercial Code

What Is

Published May 2 2008

The right of usufruct refers to the rights granted under the Civil and Commercial Code whereby the owner of an immovable property (condominium, land and/or house) grants to another person for a limited period of time the right of possession, use, management and benefits the property may produce without destroying, damaging, or diminishing the property. The benefits ('fruits') of the property could be rental income from the property or in case of farm land the crops etc which are collected from the land.

The right of usufruct is a specific right

Rights of usufruct is a property right that origins from Roman Law and is currently still used (for limited purposes) in most Civil Law systems, including Thailand. Usufruct in Thailand is a real right (attached to the land title) with specific rights and obligations (sections 1417 to 1428 law text). The concept of usufruct does not allow a great deal of freedom of contract between the parties and must be drafted in line and within the elements of the right of usufruct. It is important that the legal professional who is drafting the usufruct agreement is familiar with the concept of usufruct and not, say, draft the agreement using a lease as a template, or what sells or even what sells the property to a client. In Court a wrongly drafted agreeement could be (partly) unenforceable as usufruct even though registered at the Land Department. For example, a usufruct agreement with the elements of a lease could in Court be deemed a lease and a different set of rules would apply on this agreement. It is not a usufruct agreement merely because the parties say it is a usufruct or even because it is registered.

The elements of usufruct

The person who holds the property in usufruct must take care and maintain the property as a person of ordinary prudence would take of his own property (section 1421 Civil and Commercial Code). At the end of the term of the usufruct the property must be returned to the owner (section 1420) and if reasonably possible in the state it was at the time the right of usufruct was granted. Usufruct is in fact for 50% built around the interest of the real owner and the return of the property without depreciation (if possible). The law says in this matter (section 1424), the usufructuary is bound to keep the substance of the property unaltered, and is responsible for ordinary maintenance and pretty repairs. If the usufructuary fails to comply with his obligations and/ or the owners rights are in peril the owner may for example demand security from the usufructuary (section 1423 Civil and Commercial Code). The usufructuary is liable for the destruction or depreciation in value of the property (section 1420), unless he proves that the damage was not caused by his fault. He must replace anything which he has wrongfully consumed, but is not bound to give compensation for depreciation in value caused by reasonable use. The person who holds the property in usufruct has the use and profitable possession of another's immovable property for a limited period of time, but, as part of his right, also has responsibilities towards the property under usufruct and the real owner.

Rights of the usufructuary and renting out the property

The usufructuary can as the manager of the property legally rent out the property for terms up to 3 years (this is not based on a Supreme Court judgment but within the rights of usufruct). Often is referred to Supreme Court judgment 2297/1998 which says that a rental agreement is not automatically terminated together the usufruct. The rental agreement entered into by the usufructuary can continue for the remaining rental term after the usufruct has ended. This ruling, and the fact that the ufructuary can rent out the property without consent of the real owner, is often wrongfully explained as 'with a usufruct you can have the property for your life, + 30 years under a leasehold'. This is not correct as any lease exceeding 3 years must be registered (to be legally enforceable) at the local Land Office and this is not a right the person who holds the property in usufruct has. Only the real owner is allowed to register legal acts (like a registered lease) over the property, not the usufructuary.

I want to have a usufruct interest in the land but own the building in my own name

The right to own or acquire a building on the land owned by another is not a usufruct right and right of usufruct would normally include land and house together. To achieve such a construction you would first have to separate ownership of the house from the land through a superficies, however, in practice, the benefits are limited as when there is no legal ground left for the building to remain on the land (when the usufruct ends) the building remains unlawfully on the land owned by another and must be removed or becomes property of the land owner.

Can a usufruct be for free?

Unless there is a moral duty, like from a Thai spouse, money will almost certainly change hands (even though the usufruct in the agreement is granted for free). A usufruct for free does really not make sense. The Land Department could refuse to register such a usufruct (unless there is a moral duty), and the Revenue Department could investigate this structure and trace the source of the money that is used to purchase the property. I would be careful with this 'usufruct for free' construction as it could lead to potential legal problems and tax fines. Did the foreigner use a Thai national to buy land on his behalf? Is the usufruct not actually a lease? Is it set up to circumvent taxes or the law?

A lifetime usufruct

The maximum term of a usufruct in Thailand is 30 years or for the life of the usufructuary (meaning for the life of the person who holds the property in usufruct). If the usufruct is for the life of a juristic person the maximum term will be limited to 30 years. A usufructuary holding a property under a lifetime usufruct can't leave the property to his or her heirs (also not a via a 30-year lease issued by the usufructuary). By law, in any case the lifetime usufruct comes to an end on the death of the usufructuary (section 1418). Any promise by a land owner to enter into a new usufruct for free with your heirs is legally of no value. Also the possibility of selling a lifetime usufruct to a third person would be practically impossible.

Can I use a usufruct to protect my property investment?

Unless you are married to a Thai national and bought property in his/ her name the right of usufruct offers no benefits for foreigners to own property in Thailand. It is not a suitable legal tool to protect a property investment in Thailand. It merely offers profitable possession of another's immovable property for a limited period of time. Usufruct allows little freedom of contract between the parties and this and a usufruct being a specific right brings more drawbacks than benefits, compared to a proper lease construction combined with a superficies.

[Khun Jean]

How could accurate information be a 'hate mission'?

Please tell me what is incorrect, so i can learn from it.

[ThaiLawOnline]

Good explanation?

"A usufruct for free does really not make sense."

Same as a gift. If you give a 300$ to your best friend, does it make sense? Is it illegal?

Gifts are also in the Thai commercial and civil Code of Thailand...same as usufructs.

If you write a text with so many questions, it looks like you want people to be afraid.

You don't really give an explanation...

There are plenty of considerations that can make an obligation for free and it doesn't need to be in the contract. It is true that the land department can refuse to register it... It is also true that prostitution is illegal in Thailand, etc...

At our Korat office, we did around 50 usufruct in the last 2 years. IT HAS NEVER BEEN REFUSED. Once delayed in Kalasin by a week and twice we had to put some amount but taxes paid by client where LOWER than a lease, much lower. One case was involving a company (the land department said company = profit and they wanted some tea money and the other case was involving a gay couple). If a land department refused to register a usufruct agreement, we will FULLY REIMBURSED the client.

It's written : "I would be careful" who is "I"... a website?

A sentence like "Is this usufruct not actually a lease" reflects the intention of the writer.

Is this CAR not actually a BUS? Could this apple be a pear? Think about it...

A lease is a lease and a usufruct is a usufruct. If you pay a rent, and in return you get possession of a property for a period of time, it sounds like a lease. If you pay an amount of money to get a usufruct, it's a usufruct with compensation. It's not a lease.

This article is alarming and tries to make people afraid: Maybe, possibly, could...

It tries to make leases look better than usufructs. But nothing is further from the truth.

Leases are better is some occasions. Usufructs will be more suitable for some clients.

If you don't look at the needs of the clients, and you have 2 contracts in front of you, ONE USUFRUCT AND ONE LEASE, unless the people writing them are incompetent, a usufruct agreement will give more latiture and rights to the usufructuary than a lease agreement to the lessee. That's the Law and the origin of the usufructs.

Good explanation?

I am sure that people will be more confused after reading this text. It should be the opposite.

[Naam]

How could accurate information be a 'hate mission'? Please tell me what is incorrect, so i can learn from it.

i wouldn't call it incorrect. in my [not so] humble opinion the expression "bullshit" is much more appropriate

[cloudhopper]

Well my atty recommended a lease in my case, but IMO it's ALL bullshit until tested in an actual court case and appealed to the end...

"First, we kill all the lawyers"...Shakespeare

[BL4u]

Good explanation?

"A usufruct for free does really not make sense."

Same as a gift. If you give a 300$ to your best friend, does it make sense? Is it illegal?

Gifts are also in the Thai commercial and civil Code of Thailand...same as usufructs.

If you write a text with so many questions, it looks like you want people to be afraid.

You don't really give an explanation...

There are plenty of considerations that can make an obligation for free and it doesn't need to be in the contract. It is true that the land department can refuse to register it... It is also true that prostitution is illegal in Thailand, etc...

At our Korat office, we did around 50 usufruct in the last 2 years. IT HAS NEVER BEEN REFUSED. Once delayed in Kalasin by a week and twice we had to put some amount but taxes paid by client where LOWER than a lease, much lower. One case was involving a company (the land department said company = profit and they wanted some tea money and the other case was involving a gay couple). If a land department refused to register a usufruct agreement, we will FULLY REIMBURSED the client.

It's written : "I would be careful" who is "I"... a website?

A sentence like "Is this usufruct not actually a lease" reflects the intention of the writer.

Is this CAR not actually a BUS? Could this apple be a pear? Think about it...

A lease is a lease and a usufruct is a usufruct. If you pay a rent, and in return you get possession of a property for a period of time, it sounds like a lease. If you pay an amount of money to get a usufruct, it's a usufruct with compensation. It's not a lease.

This article is alarming and tries to make people afraid: Maybe, possibly, could...

It tries to make leases look better than usufructs. But nothing is further from the truth.

Leases are better is some occasions. Usufructs will be more suitable for some clients.

If you don't look at the needs of the clients, and you have 2 contracts in front of you, ONE USUFRUCT AND ONE LEASE, unless the people writing them are incompetent, a usufruct agreement will give more latiture and rights to the usufructuary than a lease agreement to the lessee. That's the Law and the origin of the usufructs.

Good explanation?

I am sure that people will be more confused after reading this text. It should be the opposite.

This article or your recent 'everything you want to know about usufruct' does NOT give any answers. What is of essential knowledge to foreigners to know = can my right last longer with a usufruct? Right or wrong?

The real aspect worth discussing imo is; you say in your post...so the usufructuary can grant a thirty years lease to a third party. By this way, you could pass on your rights to your children or other relatives even after death if the lease was done before the demise'.

This says: '… any lease exceeding 3 years must be registered at the local Land Office and this is not a right the person who holds the property in usufruct has. Only the real owner is allowed to register legal acts like a registered lease over the property…'

Is it for life + 30 years or is this just ####? I think it is ####

[Khun Jean]

Passing the right to your children is a non issue.

Just give the usufruct to the children and if you not even trust your own kids make a lease contract for 3 years with renewals. As long as the kids don't sell the land (impossible with a usufruct) or transfer the land (impossible with a usufruct) they can not deny these renewals.

The capital words in the above post are not worth mentioning. It is not important how many and with or without problems usufructs are registered. It is what might happen in the future that has to be taken care of.

We all know that people working at the landoffice are not the brightest when law is concerned, so why trust them instead of the written law that is accessible to all who want to read it.

Make sure YOU know everything there is to know instead of someone you pay a few bucks to, they won't be around when things go wrong. (limited companies, remember. Not accountable.)

Edited May 14, 2008 by Khun Jean