Is Key-money Common Practice In Bkk?

[supermichel]

Hi,

I just wondered if you know whether it is common practice to ask for key money for ratail spaces in BKK's popular tourist places such as Kao Sarn, Sukh etc. We currently rent two shops on Koh Samui and the key money there is just crazy! Now we are thinking of relocating our businesses to Bangkok and I want to do some homework on rental prices here.

Let me clarify what key money is: The landlord asks for 1 big lump sum at the time of signing the contract and you still have to pay monthly rent on top of that. Usually your contract is limited to a number of years. Once it's up for resigning and renegotiation, your landlord will ask for keymoney again. This is practically one big lump sum shop tenants have to pay on top of their rent. It does not mean that you actually bought something for it (like aircon units etc.). It's just extra money into the pockets of the landlords.

How is it here in Bangkok or other places, like Chiang Mai, Hua Hin etc?

Cheers!

[astral]

I believe is a common practice on commercial property.

[torrenova]

Key money is effectively advance rent that the landlord does not have to declare. Leases over 3 years have to be registered and thus the income declared. That is why it is commen to see 3+3+3 year leases with key money being paid every 3 years.

It is not difficult to work out the effective rent over the length of the lease.

The problems come when leaseholders want to make considerable investments to the property as 3 years or less is not long enough to justify the investment. Knowing what the key money will be at each contract entension as well as the rent is necessary or a longer, registered lease with more key money should be negotiated.

[quiksilva]

Actually Key money is very common in the retail market, both here and abroad.

Most retailers want prime locations with great exposure to high foot traffic, the problem is that these great locations tend to be occupied.

True Key money then comes into play to persuade the existing tenants to relocate. Perhaps the landlord prefers how the new retailer will fit into their desired tenant mix for their project.

As torrenova mentioned what your landlords in Samui are doing is evading tax. Its not really Key Money, it would be better described as advance rent, but that would be tantamount to be being a good citizen and paying tax...