Landlord doesn't want to register business lease at land office

[ghworker2010]

We are thinking of taking a 6 yr lease on a business premises. The owner is really wealthy and has multiple properties in the city. 

 

During the negotiations she came across as being really friendly but I can see that she is astute and very business savvy. The only thing that doesn't add up is that she didn't seem keen for us to register our lease at the land office. I know that this is the norm in all cases where the land is NOT on government land. I believe the building we want to rent has the normal chanonte title. When I asked her about this she said 'oh we have never done that before'. Then she said that last yr she rented one of her buildings to a doctor and he didn't register it. 

 

Yesterday when looking around the property her worker told us that the family rented out the premises to workers but there were family issues or something. 

 

If its not registered at the land office does it basically mean that our lease contract would not be legally enforceable? This building needs a bit of work and we would be improving inside. If its not registered anything could happen. 

 

We will obviously take legal advice on this next week but if anyone has any experience with this it would be appreciated if you could comment. 

 

thanks

[Oxx]

If the lease isn't registered with the Land Department it is only enforceable by legal action for the first 3 years.  After that you lose any rights you have.

[blackcab]

The majority of leases are not registered here, because it costs money to do so and it encumbers the owners asset.

 

Expect, instead, to be offered a 3+3 year lease.

 

It is rare to find an owner who will register a 6 year lease.

[Oxx]

1 hour ago, blackcab said:

Expect, instead, to be offered a 3+3 year lease.

 

With the second 3 years not legally binding.

[blackcab]

15 minutes ago, Oxx said:

With the second 3 years not legally binding.

 

Yes and no, but more no than yes :)

 

It's legally binding as a contract right, but not as a real property right. The key consideration, however, is how are you going to enforce your rights, how long will it take and how much will it cost.

 

In reality, most commercial landlords simply want a good tenant who pays on time. There are bad landlords however, just the same as there are bad tenants.

[sfokevin]

They are also redecent to have a registered lease as it is a flag to the tax dept... as for the second lease it apis inforcable... the one unknown is if the landlord will sign it after the three year mark... That being said most landlords just want a good paying tenant and won’t try to jerk you around if they have that..

[VocalNeal]

2 hours ago, ghworker2010 said:

anything could happen. 

 

Yes. This is Asia.

[ghworker2010]

6 minutes ago, sfokevin said:

They are also redecent to have a registered lease as it is a flag to the tax dept... as for the second lease it apis inforcable... the one unknown is if the landlord will sign it after the three year mark... That being said most landlords just want a good paying tenant and won’t try to jerk you around if they have that..

so in light of the fact that if we do a 3+3 and the second term renewal might not happen... do you think we should go for one 6 yr lease?

[sfokevin]

17 minutes ago, ghworker2010 said:

so in light of the fact that if we do a 3+3 and the second term renewal might not happen... do you think we should go for one 6 yr lease?

That alone would not bother me... but W don’t know the entire situation?... is the buiding located in a popular area where rents are high and increasing? ... how much is the monthly rent?... how much are you going to invest in improvements? Are you opening a business? If so what kind of business?

[smutcakes]

You cannot register a 3 + 3.

Only leases in excessive 3 years.

The cost of registration is 1% of total contract value. Accept to pay the entire 1% and the landlord should not have an issue. 

[Oxx]

27 minutes ago, smutcakes said:

Accept to pay the entire 1% and the landlord should not have an issue. 

 

Unless he/she's involved in income tax avoidance.

[sfokevin]

^^^ Agreed!... It’s not just the 1%... What many Thai want to avoid is the land department turning over lease information (possible income sources) to the Thai Revenue Dept... And most small rental situations (under 20k/month) the landlord is small and wants to stay under the tax radar...  

 

If you can get a 3 year lease and you are not putting in huge improvements (say less than half a years lease cost)... I would go for it... if you are a professional (doctor or such)... And pay the rent on time and keep the building in a professional manner they would consider you a jewel of a tenant and a second 3 years would very likely be offered at the same rent...  

Edited March 4, 2018 by sfokevin

[blackcab]

Don't forget that if the owner registers a lease for x years and the lessee defaults because their business fails (and many do fail) the owner is left with a potentially difficult situation. For example, what happens if they want to raise funds by mortgaging or selling the property?

 

If the property has a lease for another x years and no tenant  (because they defaulted) the situation gets much more complicated for the owner.

 

It's not all about tax evasion.

 

The company I work for owns quite a lot of commercial property. One of our tenants is a large, well known convenience store. They have a 3+3+3 lease.

[sfokevin]

One other thing to sort out with the landlord is the TM30 notification... If you as a foreigner are going to reside there make sure you get the Yellow Book (Owner) to complete the form... This will put you in compliance with Immigration and prove that the landlord is the owner of the property... If she doesn’t want to comply I would not rent (and don’t let her tell you that the lease is with ypur Thai spouse and it’s her responsibility - It’s the responsibility of the Yellow Book holder - Owner)

[khunPer]

A lease agreement running more than 3 years can be void if not registered at the Land Office.

3+3 year leasing agreements are not legally binding and void in a Court.

OP can offer to pay the tax at the Land Office, which often is the reason for not registering a lease running more than 3 years. The tax and fee is a small percentage – normally 1.1% – but shall be paid in advance for the whole length of the lease period.

 

Quote

Is an office rent with a term of 5 years (split in a 3 year term with another 2) enforceable for the term of 5 years?

A 3 year lease with an option for another two years is under hire of property laws enforceable by action as a rental with a fixed term of 3 years (section 538 Civil and Commercial Code). The option for another 2 years is considered an enforceable option under general contract law, meaning against the owner of the property who you signed the lease with. Should for any reason ownership of the property hired have been transferred prior to the expiration of the first 3 year term the new owner is not automatically bound by a renewal option given by the previous owner and the option may not be enforceable by legal action.

 

Are 3 consecutive back-to-back 3 year leases enforceable for the total of 9 years?

Entering into multiple back-to-back short-term 3 year leases without registration with the Land Department is generally not enforceable by legal action as this is seen as an avoidance of section 538 Civil and Commercial Code (leases exceeding 3 years must be registered in the Land Registry).

Source and more information, Samui for Sale: Thai Real Estate Lease Leasehold and Rent laws.

[ballbreaker]

Isn't there also a rental tax of 12.5% of annual rental value placed on property rented for commercial use. Property owner owes that tax because its rental income.

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[ghworker2010]

2 hours ago, sfokevin said:

One other thing to sort out with the landlord is the TM30 notification... If you as a foreigner are going to reside there make sure you get the Yellow Book (Owner) to complete the form... This will put you in compliance with Immigration and prove that the landlord is the owner of the property... If she doesn’t want to comply I would not rent (and don’t let her tell you that the lease is with ypur Thai spouse and it’s her responsibility - It’s the responsibility of the Yellow Book holder - Owner)

yes for sure. I specifically asked her about this and she said no problem. 

[ghworker2010]

27 minutes ago, ballbreaker said:

Isn't there also a rental tax of 12.5% of annual rental value placed on property rented for commercial use. Property owner owes that tax because its rental income.

Sent from my SM-P585Y using Thailand Forum - Thaivisa mobile app
 

yes, thats the 'property tax'. the owner usually pays this but... sometimes they ask the tenants to pay it!

[sfokevin]

^^^ That would allay one of you original fears that the property has valid documentation with the land department - Only a House Master with proper documentation can file a TM30... The fact that she is willing to provide that to Immigration is good evidence she is the owner and the property is registered in good order... 

 

Note when someone says a 3 + 3 lease is “invalid” that is not intirely correct... The initial 3 years is valid but any subsequent terms referring to  beyond the 3 years are invalid...  so just sign a 3 year lease and then a new 3 year lease when that one terminates...

 

You do not say where your business property is but if it is anything like Chiang Mai outside the city there are literally thousands of shophouse styled properties unrented/empty and more being built... The LAST thing a landlord would do is raise the rent or ask a tenant to leave in hopes of renting to someone else...

Edited March 4, 2018 by sfokevin

[peterrabbit]

If your lease is not registered on the chanote then the Landlord can sell the property and the new owner can kick you out as you have no rental agreement with them. (Leases over 3 years have to be registered on the chanote by law.)

 

As you are talking about a business which you will no doubt invest a great deal of money and time in then you should insist on it being recorded on the chanote. 

 

My advice to you would be to go and see a reputable lawyer BEFORE proceeding any further so that your interests are properly protected. 

 

Best of luck.

 

[Khun Jean]

The problem is that the reputable lawyer will tell that a 3+3 year lease is no problem at all.

 

My only personal experience with a 3+3+3 year contract was that after 3 years the owner did not want to honor the contract because her son wanted to go live in the building. Business was just taking off and moving it was such a huge problem that it ended up being closed down. We 'trusted' it , meaning we took a gamble as before ti was rented out for 20 years. But as we found out, things can change rapidly.

Lesson learned!

If your business can be taken anywhere (maybe something like manufacturing) and is not really depended on location then a 3+3 can be a good option. Spend the absolute minimum on improvements to make it functional as that investment you will never see back.

 

[realenglish1]

I have been living in my Condo for  6 years  I signed a 1-year lease After the lease expired  the landlord never asked me for another lease

 

She gets paid every month  If I have a repair I do  the repair forward the receipt and deduct it from the rent

 

My guess is most do not register the contract because they do not want to report the income

[ghworker2010]

On 3/4/2018 at 6:10 PM, Khun Jean said:

The problem is that the reputable lawyer will tell that a 3+3 year lease is no problem at all.

 

My only personal experience with a 3+3+3 year contract was that after 3 years the owner did not want to honor the contract because her son wanted to go live in the building. Business was just taking off and moving it was such a huge problem that it ended up being closed down. We 'trusted' it , meaning we took a gamble as before ti was rented out for 20 years. But as we found out, things can change rapidly.

Lesson learned!

If your business can be taken anywhere (maybe something like manufacturing) and is not really depended on location then a 3+3 can be a good option. Spend the absolute minimum on improvements to make it functional as that investment you will never see back.

 

Its good advice your giving. The latest is that the landlord has agreed to register a 6 yr lease at the land dept on the basis that we pay the 1.1% fee. 

 

I hope we are making the right decision re 6 yrs. Is it enough. This woman is mega rich and seems so nice and friendly. I think we have hit the jackpot bc the rent is normal thai  levels. She seems to be really jai dee. 

[smutcakes]

3 hours ago, ghworker2010 said:

Its good advice your giving. The latest is that the landlord has agreed to register a 6 yr lease at the land dept on the basis that we pay the 1.1% fee. 

 

I hope we are making the right decision re 6 yrs. Is it enough. This woman is mega rich and seems so nice and friendly. I think we have hit the jackpot bc the rent is normal thai  levels. She seems to be really jai dee. 

If you are worried its not enough do a 10 or 15 year lease and ask for a no penalty break clause at year 5 or 6 or 10 or whenever. You are paying the registration which will be higher so it will be no skin of the landlords nose.

[ghworker2010]

On 3/4/2018 at 4:23 PM, sfokevin said:

^^^ That would allay one of you original fears that the property has valid documentation with the land department - Only a House Master with proper documentation can file a TM30... The fact that she is willing to provide that to Immigration is good evidence she is the owner and the property is registered in good order... 

 

Note when someone says a 3 + 3 lease is “invalid” that is not intirely correct... The initial 3 years is valid but any subsequent terms referring to  beyond the 3 years are invalid...  so just sign a 3 year lease and then a new 3 year lease when that one terminates...

 

You do not say where your business property is but if it is anything like Chiang Mai outside the city there are literally thousands of shophouse styled properties unrented/empty and more being built... The LAST thing a landlord would do is raise the rent or ask a tenant to leave in hopes of renting to someone else...

This thread would imply that the lessor who registered at the land office is the 'possessor' and thus can sign the TM30

 

 

 

[inThailand]

Since it's a 6 year lease why would anyone consider anything less, or problematic like a 3+3?

It is in the lessor's best interest not to register the lease, hence why it's the norm here.