30 Year Lease Question

[chickencurry]

Is it normal to pay for the full 30 years rent of a land lease up front?

[LoveDaBlues]

no

[goldfinger]

if you are interested in renting the place,

why not- with a good contract okay,

BUT MUST be registered at the Land Office.

[quiksilva]

The truth is there is no standard market practice, as goldfinger states as long as the lease is registered at the land department it is as secure as it can ever be.

However, the terms of payment is up to the two parties involved. I have seen contracts with all kinds of variations on advance rental in Thailand. It all boils down to negotiation.

If the landlord is smart he will ask for a smaller upfront payment and fixed rental escalations throughout the duration of the lease term.

[goldfinger]

If you pay the lease year by year, there could be a problem in the future.

What happens, if the Landlord dies?

Will the contract continue with the same conditions? (and esp. amounts to pay??)

If the land is beautiful, and you want to stay there, you should think about a one time payment,

and in the contract definitely stated, what will happen, if the actual owner dies.

Ask a lawyer(from BKK) also.

[monty]

Sorry to disagree.

A 30 year lease, if you want to have it secured and registered on the back of the land title deed by the Land and House department, has to be paid upfront for the full term.

Once the lease is registered, there is no way for the landlord to get you out of the land, so why would he agree with monthly or even yearly payments!

He has to sign at land and house department that payment has been received in full, and the applicable tax on that amount has to be paid there and then before the land and house department will register the lease. Currently the tax stands at 1% of the full amount, with an additional 0.1% stamp duties to be paid.

[trajan]

technically you do not need to pay all of the 30 years rent up front in order to register the lease....you do need to pay 1.1% lease registration fee on the total 30 years rental, but the rental payments can be periodic (for example yearly)....however, even if the lease is registered, if the lessee defaults (by, for example, not paying its yearly rental), then the lessor can proceed to court to have the lease de-registered and terminated.... (of course court processes take forever and a day)....

[adamskisamui]

Totally agree with Monty this is the safest way pay at the start !!!

[Khun Jean]

Look to your own history about how long you lived in one place.

It is a good indicator to estimate how long you will want to live at the same place.

30 years is a very long time. The lease is an deprecating asset. Every year it will be less interesting.

A 30 year contract does not mean you have to pay everything upfront. Compare it with a 3 year lease which is very common in Thailand. Most if not all of them are just payable month by month.

Locking up your money on something that is deprecating is not the best thing you can do. Putting the money into something that has at least some ROI is better in my opinion.

[goldfinger]

I think, most important fact is,

WHAT shall be done on the land-investment for business or for himself?

If I put a lot of money in the project, there should be a long term lease to be secure for some ROI.

I would not give any chance to the landlord, to push me off after a few years, due to any stupid reason.

[ProThaiExpat]

By paying up front on a 30 year lease, you are avoiding rent increases, however, the present value formula is in play. Notice how on many lotteries the amount "advertised" is the amount payed over 20 years. If you take a lump sum, the amount is substantially less. The reason is the present value principle. The landlord is free to invest your up front lump sum rental payment and over 30 years substantially profit from this approach rather than paying in installments. it is an issue that needs to be factored into the amount of rent payed, taking into account inflation and no rent increases to account for this certainty.

[Old Man River]

Sorry to disagree.

A 30 year lease, if you want to have it secured and registered on the back of the land title deed by the Land and House department, has to be paid upfront for the full term.

Once the lease is registered, there is no way for the landlord to get you out of the land, so why would he agree with monthly or even yearly payments!

He has to sign at land and house department that payment has been received in full, and the applicable tax on that amount has to be paid there and then before the land and house department will register the lease. Currently the tax stands at 1% of the full amount, with an additional 0.1% stamp duties to be paid.

Monty, what if the lease arrangement is not an arm's length transaction, such as a foreign husband leasing the land from his Thai wife? The amount of the lease payment (whether up front or monthly) would be very, very small. Is there a minimum amount that the full 30 year lease must be for?

Thanks,

[ProThaiExpat]

In my "not at arm length" 30 year lease, I had to pay the land registration fees for the lease and another payment for the registration of the mortgage. The monthly rent payment was equivalent to the pro-rated mortgage payment over thirty years, a sale-leaseback concept and much higher than many falang to agree to as rent.

The net effect was a visit from the revenue department to collect tax on the rent payments as well as the land office fees. No good advice from the Thai lawyer I hired.

I have learned since then that not only does the developer undervalue the stated value of the land he sells you, there is no mention of the house built thereon and most know but say nothing about that added value that should be taxed. The monthly rent is minuscule so no rent tax must be paid.

I tried to argue that no money changed hands in my mortgage-rent wash transaction but the law of vat speaks of value not how much money is involved as in many western countries.

[mickba]

My own (limited) experience is where I provided the money to buy the land in GF's name (yes I know). My lawyer drew up a 30 year transferrable renewable (?) Lease to be registered at the Land Office on the Chanote. The rent has been stated as pre-paid for the 30 year term. In my case this was put at 3500/month i.e. 1,260,000 in total and roughly equivalent to the cost of the 1 rai of land (i.e. the same money). His advice was that the rent has to be reasonable or the Land Office can reject the Lease. I also paid the 12,600 tax on it. When the house is built and registered in my name then I understand there will be another amount of tax due.

I imagine that with an arm's length Lease it would be up to the parties involved how the rent was payable?