Leasehold developer not paying the landowner?

[digbeth]

After a  high profile case in Bangkok surfaced this week where a leasehold condo run by a REIT funds were found to be unable to pay the annual rent towards the ultimate owner they were built on, which could mean dissolution of the condo,

 

apparently this is common practice in leasehold condo where the lessee paid upfront or mortgaged and the bank paid upfront for the value of the room for 30 years, but the contract between the landowner and developer is for annual payment and provision for increases later on, why would developers expose themselves for a risk like this? the landowner might get better deal ultimately but I don't see any upside unless the the developer intend to invest in their customers' money to do something else 

 

So if you're 'buying' a leasehold condo and the developers/Reit's finance is rock solid you could find yourself being kicked out before the lease is up? Granted most of the leasehold in Bangkok is on very high profile plot rented from you know who, but the fact that this even happen is a big question mark on the whole scheme 

[digbeth]

for developments like office building, hotels and malls it's understandable that the landowner expects increase and re-negotiation every now and then, but for a wholly residential building where most of the lessee paid upfront, I don't see why would periodic rent increase be in the contract between the landowner and the developer, it's not like they can magically find the extra money 

[digbeth]

If what I understand is true, would this make leasing long term worse than renting or buying freehold? you own nothing, your rent is paid upfront and if <deleted> hit the fan you're left with nothing, sure you might end up being a 'creditor' to the company/trust if they goes under but when it comes to that I doubt the company have any assets left, at least with a freehold condo, there's the value of the land that can be divided up should the worse come to worst. 

[khunPer]

On 3/19/2024 at 9:15 AM, digbeth said:

So if you're 'buying' a leasehold condo and the developers/Reit's finance is rock solid you could find yourself being kicked out before the lease is up?

Yes. Therefore, don't BUY leasehold condos or something sub-leased. There are earlier cases where people have lost their investment, some even their luxury house investments. Your contract will be with the leaseholder of the original lease, not the real land owner; so, any claim would be against the leaseholder than haven't paid the landowner.