Points in a 30 year lease contract

[STD Warehouse]

We have a small commercial property we want to lease for 30 years, most likely to a foreigner, its just a wooden shop house situated on a relatively buy tourist street, apart from registering the lease at the land office what kind of points would go in a 30 year lease contract?

 

1) Should the lessee get permission to lease the property to someone else?

2) What happens if the building burns down? who pays? and if the lessee pays, how? (they could say they have no money to pay and just leave thailand)

3) If there is a problem with the electric or water, some fault, who sorts this out?

4) improvements to the building. what happens if they want to renovate the bathroom or lay new floor tiles, do they have to ask us first?

 

I just find it difficult to think about these questions, as situations for these points may arises in say 27 years time, I might be dead by then and my daughter who would inherit the property might be overseas with no desire to be contacted by the lessee who wants to install a new door or sublet the building for the last 3 years, etc..

 

And with subletting, surely they must be allowed to sublet as if made a restaurant then changed their minds in 15 years time and they wanted to turn it into a small guesthouse, then by definition they would be subletting to any guest who stayed.

 

Or do we just not bother with a contract for a 30 year lease and instead just collect the payment in full at the start and make the 30 year lease at the land office, no other contracts?

 

Also if the sales value for the property was 2m baht, what would a 30 year lease valuation look like approximately?

 

Edited September 17, 2019 by STD Warehouse

[blackcab]

You really do need a proper commercial contract. In general these extend to several pages and they cover all foreseeable eventualities.

 

Writing a few paragraphs and getting the Lessee to sign it will probably end badly.

 

You are not talking about a simple 3 year lease here where not much is at stake. If the Lessee breaches a substantial covenant and you cannot easily evict them you will regret the day the contract was signed.

[CharlieH]

Depends how far you want to go, and of course that's reflected in the price.

 

Your comment on "leaving the country and not paying" could apply to any scenario, even a months rent.

Personally I doubt very much you would get anyone to take an old building for that length of time unless it was really cheap, and then what about rent reviews? or do you intend on keeping to the same amount for 30 yrs ?

 

There are so many variations to this, you need to narrow it right down to what you want and what is practical, then start from there.

Next is a formal contract and getting it all legal and buttoned down.

[STD Warehouse]

1 minute ago, CharlieH said:

Depends how far you want to go, and of course that's reflected in the price.

 

Your comment on "leaving the country and not paying" could apply to any scenario, even a months rent.

Personally I doubt very much you would get anyone to take an old building for that length of time unless it was really cheap, and then what about rent reviews? or do you intend on keeping to the same amount for 30 yrs ?

 

There are so many variations to this, you need to narrow it right down to what you want and what is practical, then start from there.

I intend on taking full payment at the start of the 30 years.

[CharlieH]

Just now, STD Warehouse said:

I intend on taking full payment at the start of the 30 years.

Which makes it imperative you button it down in a legal contract.

30 yrs payment up front ??? really people will do that ? again, that comes back to the figure you want I suppose as to whether thats a realistic expectation.

[STD Warehouse]

1 minute ago, CharlieH said:

Which makes it imperative you button it down in a legal contract.

30 yrs payment up front ??? really people will do that ? again, that comes back to the figure you want I suppose as to whether thats realistic.

The property value is 2m, (we had a few offers of 2m over the last year).

 

So for a 30 year lease paid upfront I was thinking of 900k, what do you think? too high?

[CharlieH]

Just now, STD Warehouse said:

The property value is 2m, (we had a few offers of 2m over the last year).

 

So for a 30 year lease paid upfront I was thinking of 900k, what do you think? too high?

2500 a month, thats seems really cheap and in 5 years will be nothing. Of course the location, size and facilities etc and current condition all play a part in any valuation.

Why not post some pics if you can and get some feedback from the members.

[STD Warehouse]

Just now, CharlieH said:

2500 a month, thats seems really cheap and in 5 years will be nothing. Of course the location, size and facilities etc and current condition all play a part in any valuation.

Why not post some pics if you can and get some feedback from the members.

thats a good idea, Its just been painted up and new front doors going on, after that I'll post some pics on this thread and see what price people think is fair.

 

Its difficult though, as its worth 2m, but then I cant ask for 2m for a 30 year lease, 900k might be too cheap (maybe).

 

[ThePioneer]

5 minutes ago, CharlieH said:

2500 a month, thats seems really cheap and in 5 years will be nothing. Of course the location, size and facilities etc and current condition all play a part in any valuation.

Why not post some pics if you can and get some feedback from the members.

But he has 900K he can invest from the start. At only 3% that would add another 2250 Baht per month and accumulates , and today interest rates are low but who knows what they will be in 10 years time

[ThomasThBKK]

4 minutes ago, STD Warehouse said:

thats a good idea, Its just been painted up and new front doors going on, after that I'll post some pics on this thread and see what price people think is fair.

 

Its difficult though, as its worth 2m, but then I cant ask for 2m for a 30 year lease, 900k might be too cheap (maybe).

 

longterm lease is more like 80% of the current value.

 

 

[CharlieH]

If I had to throw a figure at it, without more info as mentioned above, it would be 1.2m

 

I would sell the house to them and rent/lease the land. The building etc is then none of your concern, and the land comes back in 30 yrs. Whether they choose to leave the house or knock it down etc is upto to them.

[STD Warehouse]

4 minutes ago, ThomasThBKK said:

longterm lease is more like 80% of the current value.

 

 

Im not sure how likely it is that someone is willing to pay me 1.6m upfront for 30 years, when they could just buy it (or something similar) for 2m. 

 

It seems to me the lease price has to be pretty attractive to find a taker to pay in full upfront.

[STD Warehouse]

2 minutes ago, CharlieH said:

If I had to throw a figure at it, without more info as mentioned above, it would be 1.2m

I accept, sold!

[Peterw42]

OP, I would strictly forbid any sublets (or on selling of the lease). It never ends well.

People often try and profit from sublets, I realise your property isnt a house but recent history with airbnbs is very relevant. People get a property at a monthly rent then put it on airbnb for daily etc. In pattaya the same thing goes on with bars and restaurants, people get hold of a failed bar/resturant (complete with fitout from the last guy) with a cheap lease then do a sublet to a fresh off the plane expat for twice the rent, just sit in the middle collecting rent. That guy goes broke then they do it again.

Or worst case scenario they sell the same business (thats not actually making money) every couple of years with a new lease etc.

 

Using your figure of 900k, they could pay that amount then wait a year until the area/economy improves then do their own 30 year sublet for 1,000,000, then walk away. A lazy 100k for doing nothing. You are left with a series of failed leases and businesses in your property.

 

 

[Matzzon]

Why not just take the help from a real estate lawyer?

[Henricus]

Why bother to put a lease on just rent it out 

[inThailand]

Any lease must be signed by the property owner or legal leasee with sublet authority? Are you either? If not, then it's especially imperative you specify in the lease to who and where the 30 year lease payment goes. 

Typical leases here put all maintenance, insurance, tax and liability responsibility on the leasee. Also, spell out specifically what happens if the leasee breaches the lease terms. 

I have yet to see a comprehensive professionally written lease here, even from Thai attorneys or falang legal advisors. Write your own. 

Edited September 21, 2019 by inThailand