Renting our building to a business. Should we register at land office?

[ubonr1971]

I read this thread and still a bit confused:

 

I think that thread was written from the perspective of a tenant. 

 

But Im asking from the perspective of a landlord. I dont understand the 3 yr rule and a few comments by different members contradicted each other a bit. 

 

At the end of the day.... can I assume, from the perspective of being a landlord, its best not to register a lease at the land office as then we can evict them if things dont turn out right ie if they dont pay the rent. 

 

What happens if we register a lease at the land office and they dont pay the rent on time. I assume we would have something in the contract to cover this but still....

 

If someone asks for a 8 to 10 yr lease I assume we can still evict if they ever stop paying the rent if its in the contract (thats not registered at the land office)

 

thanks

 

[blackcab]

From a landlord's perspective you don't want to register the lease. Indeed it is unusual to do so unless the lease is longer than 10 years or so.

 

One reason is that you will have to pay 1.1 per cent tax on the entire rent sum received for the entire duration of the contract at the time you register. So 50,000 baht a month for 10 years is a 66,000 baht tax payment.

 

Another more important reason is that once a lease is registered it become a real property right, as opposed to a contract right. This means that if you want to enforce part of the lease, for non payment, for example, you will have to pay to take the matter to Court. This will take many months and you will have to prove your complaint to the satisfaction of the Court.

 

Even then, you will only get a Court order to remedy the situation. If the tenants do not comply you will have to return to Court for enforcement.

 

Why would you, as a landlord, put yourself in this situation when you could offer an unregistered 3 year lease like everyone else?

 

If the tenant wants a nine year lease, offer them a 3+3+3, the same as other landlords. If the tenant wants certainty you can fix the price of each lease period in the initial contract.

[ThomasThBKK]

9 hours ago, blackcab said:

If the tenant wants a nine year lease, offer them a 3+3+3, the same as other landlords. If the tenant wants certainty you can fix the price of each lease period in the initial contract.

Well,

 

It's totally usual for leases to be paid upfront in one go for the whole duration at the land office. So there should be no issues with payments then.

[ubonr1971]

2 hours ago, ThomasThBKK said:

Well,

 

It's totally usual for leases to be paid upfront in one go for the whole duration at the land office. So there should be no issues with payments then.

sorry, but I dont understand your comment. 

[thedemon]

3 hours ago, ThomasThBKK said:

Well,

 

It's totally usual for leases to be paid upfront in one go for the whole duration at the land office. So there should be no issues with payments then.

 

It's usual when the lessee is a foreigner and is registering a lease because they otherwise can't own the property.

 

In a normal registered commercial lease (without the foreign ownership issue) it is not normal.

[ThomasThBKK]

15 minutes ago, thedemon said:

 

It's usual when the lessee is a foreigner and is registering a lease because they otherwise can't own the property.

 

In a normal registered commercial lease (without the foreign ownership issue) it is not normal.

High keymoney is absolutely normal for 10 year registered leases, even for thais, if it's done professionally.

 

Recurring 3 year leases are illegal, doesn't matter if thais do it, the contracts aren't valid. Cannot be enforced, if you want proper 10 year rental/lease you have to register it at the land office and then upfront key money is the norm. If someone can't pay that, you shouldn't rent to him. Most businesses go broke within 2 years anyway. 

 

So you either just do a 3 year lease or you do it properly, nothing else is enforceable. 

 

if someone doesn't do that, don't take him serious and just decline, he isn't serious either.

 

[smutcakes]

16 hours ago, ThomasThBKK said:

High keymoney is absolutely normal for 10 year registered leases, even for thais, if it's done professionally.

 

Recurring 3 year leases are illegal, doesn't matter if thais do it, the contracts aren't valid. Cannot be enforced, if you want proper 10 year rental/lease you have to register it at the land office and then upfront key money is the norm. If someone can't pay that, you shouldn't rent to him. Most businesses go broke within 2 years anyway. 

 

So you either just do a 3 year lease or you do it properly, nothing else is enforceable. 

 

if someone doesn't do that, don't take him serious and just decline, he isn't serious either.

 

Please tell me what is illegal about it? 99.99% of every single multinational corporation, including Global lawyers in BKK use this 3 + 3 + 3 lease, including when leasing off CPB and other Government agencies. I would be interested to hear why its illegal?

 

In addition any lease over 3 years HAS to be registered, it is not an option it is a legal requirement that leases in excess of 3 years be registered.

 

Upfront 'key money' on commercial leases on buildings is not the 'norm' outside of renting crappy shop houses in tourist destinations which for obvious reason tend to go bust at an alarming rate.

[ThomasThBKK]

6 hours ago, smutcakes said:

Please tell me what is illegal about it? 99.99% of every single multinational corporation, including Global lawyers in BKK use this 3 + 3 + 3 lease, including when leasing off CPB and other Government agencies. I would be interested to hear why its illegal?

 

In addition any lease over 3 years HAS to be registered, it is not an option it is a legal requirement that leases in excess of 3 years be registered.

 

Upfront 'key money' on commercial leases on buildings is not the 'norm' outside of renting crappy shop houses in tourist destinations which for obvious reason tend to go bust at an alarming rate.

Yeah sure dude even mall group takes key money....

 

 

What is illegal with 3+3+3 leases? Nothing. They are simply not enforceable. For the same reason 30+30+30 leases are a a scam. Only the first 3/30 years are enforceable. It's junk, get over it.

 

A renewal clause is NOT A REAL RIGHT, it's a non-lease right. The moment the property get's sold it's not enforceable.

 

Quote

In addition any lease over 3 years HAS to be registered, it is not an option it is a legal requirement that leases in excess of 3 years be registered.

yes of course, like everone already said. That's why upfront money or 3 year lease, easy, everything else is stupid.

 

 

Quote

 

I have signed 3 consecutive back-to-back 3 year lease agreements, is this 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 as this is seen as an avoidance of section 538 Civil and Commercial Code (e.g. Scj. 6451/ 1995 ), unless the lessee finds protection in supreme court judjements (e.g. Scj. 5770/ 1996).

https://www.samuiforsale.com/lease-law/property-lease-agreement-registration.html

 

 

[smutcakes]

4 minutes ago, ThomasThBKK said:

Yeah sure dude even mall group takes key money....

 

 

What is illegal with 3+3+3 leases? Nothing. They are simply not enforceable. For the same reason 30+30+30 leases are a a scam. Only the first 3/30 years are enforceable. It's junk, get over it.

 

A renewal clause is NOT A REAL RIGHT, it's a non-lease right. The moment the property get's sold it's not enforceable.

 

yes of course, like everone already said. That's why upfront money or 3 year lease, easy, everything else is stupid.

 

 

https://www.samuiforsale.com/lease-law/property-lease-agreement-registration.html

 

 

So recurring 3+3+3 are not illegal like you said. Thank you.

[ThomasThBKK]

7 minutes ago, smutcakes said:

So recurring 3+3+3 are not illegal like you said. Thank you.

23 hours ago, ThomasThBKK said:

Recurring 3 year leases are illegal, doesn't matter if thais do it, the contracts aren't valid. Cannot be enforced, if you want proper 10 year rental/lease you have to register it at the land office and then upfront key money is the norm. If someone can't pay that, you shouldn't rent to him. Most businesses go broke within 2 years anyway. 

 

So you either just do a 3 year lease or you do it properly, nothing else is enforceable. 

 

Nitpicking BS, they are invalid contracts and not enforceable, only a scam lawyer or someone who wants to rip off his naive tenants would use them.

 

avoidance of section 538 Civil and Commercial Code (e.g. Scj. 6451/ 1995 ) - call it illegal, call it invalid, call it unenforceable, call it a a scam, whatever, the gist it only an idiot would use them or tell someone else to use them.

 

 

Quote

Supreme Court Judgment 6451/ 1995′

Should both parties have made 10 agreements at the same time, each contract has a three year term and pre-specified dates of execution consecutively for 30 years, it will only be enforceable for the first three years’

This will be deemed an avoidance of 538 CCC and therefore not enforceable. If a lease over 3 years is not registered with the competent official only the first 3 years is enforceable by action.

 

[smutcakes]

52 minutes ago, ThomasThBKK said:

 

Nitpicking BS, they are invalid contracts and not enforceable, only a scam lawyer or someone who wants to rip off his naive tenants would use them.

 

avoidance of section 538 Civil and Commercial Code (e.g. Scj. 6451/ 1995 ) - call it illegal, call it invalid, call it unenforceable, call it a a scam, whatever, the gist it only an idiot would use them or tell someone else to use them.

 

 

 

Nearly every single multinational in Bangkok are happy to use them, so if its good enough and sure enough for them its good enough for me. If all of them collectively are ok legally with it and all of their collective internal and external legal teams ok it, then i tend to side with them. If you dont want to use them, then you can either wave good bye to your office space or you can do a longer year lease an absorb the registration fee.

 

I think many of them are aware that legally they could possibly be a problem at the end of year 3, but landlords would generally have no reason to kick out any tenants or prevent them continuing to the second and subsequent 3 year terms.

 

It works for both parties, most companies like flexibility and not committing long term especially for things like office space. They get the flexibility and so does the landlord.

 

So what lease would you advise?

 

 

[blackcab]

2 hours ago, ThomasThBKK said:

only a scam lawyer or someone who wants to rip off his naive tenants would use them

 

You are correct that a 3+3+3 year lease is unenforceable at the end of the first 3 year period, and that a sale of the property could leave the lessee of an unregistered lease exposed. The actual reality is that with commercial leases this happens infrequently.

 

I've personally handled many commercial 3+3+3 leases between very reputable lessors and lessees. When both parties are established and well known entities it is a straightforward process.

 

You have to consider that if a commercial lessee is making money they will to stay. In addition, lessors like regular rent payments without complication. That's the commercial reality.

 

I'm not saying it never happens, and I'm not saying it is a risk that should be ignored, but in my experience the situation is nowhere near as bad as what you say.

[ThomasThBKK]

18 hours ago, blackcab said:

 

You are correct that a 3+3+3 year lease is unenforceable at the end of the first 3 year period, and that a sale of the property could leave the lessee of an unregistered lease exposed. The actual reality is that with commercial leases this happens infrequently.

 

I've personally handled many commercial 3+3+3 leases between very reputable lessors and lessees. When both parties are established and well known entities it is a straightforward process.

And that's how my thai friend lost his hotel in Hua Hin when the land owner noticed it makes serious money, both well known thais. 

 

Fact is, there is not reputability when money is involved, 1 disagreement between both parties is enough and old friends are bitter enemies.

 

18 hours ago, blackcab said:

You have to consider that if a commercial lessee is making money they will to stay. In addition, lessors like regular rent payments without complication. That's the commercial reality.

 

I'm not saying it never happens, and I'm not saying it is a risk that should be ignored, but in my experience the situation is nowhere near as bad as what you say.

 

Until it makes too much money and the landlord wants to have it for himself. 

 

20 hours ago, smutcakes said:

So what lease would you advise?

The same every lawyer will advise you that isn't a scammer.

 

Register it at the land office, pay your taxes, split it with the tenant, and take enough security deposit upfront. What's the problem?? Just do it correctly.

 

Or live with a 3 year lease that will be renegotiated when it's over.

 

 

Granted i am talking from the perspective of a Tenant here, i know landlords don't  want to have it registered for various reasons ... 

[smutcakes]

2 hours ago, ThomasThBKK said:

And that's how my thai friend lost his hotel in Hua Hin when the land owner noticed it makes serious money, both well known thais. 

 

Fact is, there is not reputability when money is involved, 1 disagreement between both parties is enough and old friends are bitter enemies.

 

 

Until it makes too much money and the landlord wants to have it for himself. 

 

The same every lawyer will advise you that isn't a scammer.

 

Register it at the land office, pay your taxes, split it with the tenant, and take enough security deposit upfront. What's the problem?? Just do it correctly.

 

Or live with a 3 year lease that will be renegotiated when it's over.

 

 

Granted i am talking from the perspective of a Tenant here, i know landlords don't  want to have it registered for various reasons ... 

In 15 years in a related business in Thailand i have never once ever seen a 3+3+3 lease in Bangkok not be honored if the tenant wants to continue. In 99.9% of lease agreements with proper landlords the terms of the renewal are included in the original lease.

 

If you came to Bangkok and wanted an office and stipulated you wanted a lease registered, in the vast majority of cases you would be told to find another building or at the very least you would be paying for the registration yourself. (Obviously if you are taking 5,000 sqm and are a global name you have more leverage on that)

 

Even Government agencies, Government Pension Fund, CPB do 3+3+3....

 

Whilst i agree their is potential for conflict it is highly unlikely when dealing with proper landlords.

 

I would accept in land lease cases, or BTS situations long lease is advisable by both parties, and then of course it needs to be registered.

 

In your case i have no idea why your friends would invest presumably serious money in a hotel on a 3+3 scenario, that is just stupid. If investing money renovating or anything like that i would of course only do it on a longer lease.

Edited January 23, 2020 by smutcakes

[ifmu]

if i were you i would research it with the land office . and then everyone else .. immigration, god  ...lawyer and then triple check it with everyone and get the results in writing .. 

[khunPer]

On 1/20/2020 at 3:40 PM, ubonr1971 said:

But Im asking from the perspective of a landlord. I dont understand the 3 yr rule and a few comments by different members contradicted each other a bit. 

Any lease/rent period under three years don't need to be registered.

 

Ane lease/rent period agreed for more than three years need to be registered, as otherwise the agreement can be legally void.

 

Quote

Does the lease need to be registered with the Land Department?

Any lease exceeding the term of 3 years must be in writing and needs to be registered with the Land Department to be enforceable for the term exceeding 3-years (section 538). The lease will be noted on the backside of the title deed of the owner and on the original land title deed as held by the Land Office. There will also be an official one page land lease document in Thai (with the government’s Guaruda symbol) that parties need to sign with the basic details of the private lease agreement between the parties. This Thai land office document must refer to the private lease agreement between the parties. At the Land Office everything is done in Thai, even your name is usually written in Thai script.

[ ... ]

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: "Thai Real Estate Lease Leasehold and Rent laws"

 

Quote

Section 538. A hire of immovable property is not enforceable by action unless there be some written evidence signed by the party liable. If the hire is for more than three years or for the life of the letter or hirer, it is enforceable only for three years unless it is made in writing and registered by the competent official.

Source": "Thai Law Translation Civil and Commercial Code 'rent of property'"

 

I've however seen commercial Thai rent contract written as the rent continue until terminated by (some agreed term) month's notice.