Selling Property On A 30 Year Land Lease.

[ArtfulD]

I was curious as to what happens with property that you bought but have leased the land when you wish to sell? Are the clauses written into the contract for transfer of lease etc? What pitfalls are there to be aware of?

Thanks.

[Sumitr Man]

ArtfulD:

A fairly innocuous question which, IMO, opens up a can of worms.

First of all, let me say that this is a highly technical area - so you need to seek the advice of someone far more qualified than I.

That said, although some other posters may say differently, the following are some observations I would have with this:

* the sale of the house/property (which you own) could be done by a simple sale and purchase agreement;

* transferring the land lease to a third party is where you are going to have a problem. Let's assume, for the purposes of this post, that you had an initial lease of 30 years, 5 years have gone by, and now you want to transfer the lease to a third party. Under Thai law you have separate mechanism for the transfer of a right, which can be done by means of a bilateral assignment agreement - with notice being sent to the third party - and the transfer of an obligation, which needs to be done by a tripartite novation agreement. As a lease agreement contains both rights and obligations you need to transfer the remaining land lease period by means of a novation agreement. In other words, you need to seek the consent to the novation from the land owner. In other jurisdictions, one way you may try to avoid seeking the land owner's consent to the transfer is to simply sub-lease the remainder of the lease term to the new third party. However, here again you would have a problem as, under Thai law, the right of the land owner to lease the land is a personal right. Thus, you cannot sub-lease the land without the consent of the landowner. It is likely, therefore, that you'll need to structure this as a novation agreement as well. Therefore, if you are sub-leasing for the remainder of a lease period, rather than a part thereof, it seems kind of pointless!

All of which is a roundabout way of saying that in order to transfer the lease of the land, you'll need a friendly landowner; as a hostile landowner may use this opportunity to get more money out of the transaction, or simply refuse to consent to the transfer of the land lease, which would likely constitute a deal breaker.

Regards

SM

[fleeing]

This question was also troubling me. I have had special articles written into my lease contract to ensure my right to sub-lease or completely sell on the lease, without further agreement from the land owner.....' Lessee may sub-lease or on sell the æease provided the terms and conditions comply with this Land Lease Agreement'

I suggest you contact a lawyer to get the wording set properly, something I would recommend anyway when considering land deals in Thailand.

[Sumitr Man]

As I mention in my initial post, this is an extremely technical area where you not only need advice, but expert advice (something not easy to come by in Thailand and will cost where you can).

However, be careful putting any clause in a land-lease agreement which in effect states that the landowner agrees (at the time of writing the lease agreement) to any sub-lease of the land. As I understand it, from advice provided to me, as the right to lease land is a personal right under Thai law, by operation of law, a landowner cannot agree in advance (by means of a contract) to a sub-lease, but rather must agree at the time the sub-lease is entered into with the third party. Another way of looking at this: yes you can put an agreement to sub-lease clause in your lease agreement; however, if, at the time you enter into the sub-lease (assuming this is even one day after the lease agreement has been entered into) the landowner does not agree/consent to the sub-lease, you cannot enforce the sub-lease clause of the lease agreement against the landowner - as by operation of the law, the Thai courts will strike that clause out.

Again, as I say, this is just advice that was given to me. It could well be wrong, but so far most of the advice I have received has been fairly good - so I'm inclined to believe this is (although I have never had need to test it). Therefore, please take care if this is going to be an issue - and do make sure you use an advisor (a) more qualified than anyone posting to TV; and ( doesn't also include the services of PI in the company brochure

Anyhow, good luck

SM