The 30+30(+30) Year Lease (final) Discussion

[Khun Jean]

A sample contract extract - This was for a friend who was thinking of buying -

.....

Thinking of 'buying'?? sounds more like leasing.

I did not quote the the whole contract because it is not worth keeping.

See NEGATIVE NUMBER 1 and 2.

The contract reads well and sounds very though out. It is just a pity it is not 100% guaranteed enforcable

The one who wrote it doesn't care because the problems will be 30 year in the future.

Your friend will have the problem, that is quaranteed! There are at least 5-6 parts (3.2,3.3 etc) in the contract that are 'non lease right'. You can find them yourself. Anything that has to do with renewals, payments in the future, etc.

I would throw it in the garbage and go find a real lawyer who does know the law in Thailand and knows the possibilities the owner has to get out of these clauses.

Please tell your friend not to sign this worthless piece of paper.

I dont know if it is allowed, but it would be really nice to name and shame the person who wrote that contract.

Edited January 29, 2008 by Khun Jean

[Khun Jean]

Do you know if it is possible to put a clause in the contract stating that in the event of a sale of the lease it is agreed that it will be renewed for a new 30 year period starting then? Seem like that would make it easier to sell.

I can answer that.

It is possible to write it in the contract but it is not guaranteed to be enforcable. The owner can get out of that clause very easy. It also seems to have no advantage for the owner to do that.

He might be willing to make a new lease for 30 years, but expect to pay money for that. Maybe he even asks the same amount as the for the first lease. It is not his problem someone cant seem to sell it. He already cashed the money and is happy.

[churchill]

A sample contract extract - This was for a friend who was thinking of buying -

.....

Thinking of 'buying'?? sounds more like leasing.

I did not quote the the whole contract because it is not worth keeping.

See NEGATIVE NUMBER 1 and 2.

The contract reads well and sounds very though out. It is just a pity it is not 100% guaranteed enforcable

The one who wrote it doesn't care because the problems will be 30 year in the future.

Your friend will have the problem, that is quaranteed! There are at least 5-6 parts (3.2,3.3 etc) in the contract that are 'non lease right'. You can find them yourself. Anything that has to do with renewals, payments in the future, etc.

I would throw it in the garbage and go find a real lawyer who does know the law in Thailand and knows the possibilities the owner has to get out of these clauses.

Please tell your friend not to sign this worthless piece of paper.

I dont know if it is allowed, but it would be really nice to name and shame the person who wrote that contract.

Thank you will pass on .

[Gary A]

Hi Gary A

I'm halfway to being that already lol cos wifey gets half my pension for the rest of her natural when I croak it.

Be happy...Larry

When I went through a farang divorce, my lawyer did a HORRIBLE job. He agreed to child support and temporary alimony that amounted to as much as I earned. After the dust settled, I went to his office and told him the only good thing about the settlement was that he wasn't going to get paid at least until the temporary alimony finished. I asked him what good I got from the deal. He told me that my retirement pension ALL belonged to me. Maybe he wasn't all bad??

[BEENTHEREDONETHAT]

Khun Jean;

Thanks for that bit of info. The owner will be a very good Thai friend who will be willing to handle it about any way we want as all the money involved is ours. I prefered this method to leasing it from a corporation. While the Corp. is willing to lease it I think I will have a more responsive leaseholder in the individual that is a good friend. Thanks for the advice.

[ThaiLawOnline]

There are few things to add here:

1) About article 1469, it applies for ALL agreements (including leases). I don't have the code beside me but it's something like: all agreements made between spouses while being married can be cancelled at the demand of one of the parties if they don't affect third parties. The litigious point is "affecting third parties". Does publicity (registration) affect third parties? I intend to say yes. That is the normal civil law but we are in Thailand!

If you have a child, I would suggest to draft a usufruct on 2 names. I don't think I've read that anywhere on Internet...

2) Someone wrote that usufruct violates a law: you worth less alive than death... With respect, I would suggest that it applies to leases too. You don't own the land if you lease it and the owner has to let you there. Especially that most law firms draw contract with the rent paid in advance so it would be profitable for the lessor to kill the lessee. This logic can apply to wills too. Why should you make a will and tell your heirs about their inheritance? They will kill you? As you can see, this is not the best argument I've seen... You surely have more chances to be killed by lightning than signing a property contract.

[Khun Jean]

I was thinking about this article 1469.

Is this scenario possible?

Register land in the name of mother/father/brother/sister in law.

get a usufruct for live.

Mother/father/brother/sister in law writes a will to leave the land to your wife/husband/girlfriend/boyfriend.

or, if you have children with Thai nationality:

Register land in the name of child/children

get a usufruct for live. (Would that be possible? Can as an example a foreign father decide that for his child(ren))

Never read before on internet too.

[thaigene2]

A usufruct violates my number two rule for living in Thailand;

NEVER be worth more dead than alive.

This is so very true. People shouldn't assume the wife is the one who has it in for you..could be the in-laws, or other would-be gainers...like the freeholder, etc.

And your point also brings me back to the often overlooked point - When one "buys" a house/land from a developer, etc, via 'leasehold' they are effectively just signing a 30-year rental agreement. The big difference is they are paying all 30 years of rent UP FRONT.

Some suggest they get a better deal this way, but is it? You have to fix everything that breaks or goes wrong. You have lost interest on 30 years worth of savings/investments. So if you paid 300,000 dollars (US) for a place in Phuket, that's like giving the 'owner' 450,000 USD if you reckon on a 50% gain over 30 years (and yes - owner - cause and he'll STILL be the owner after you give him your money - and he'll invest it for himself).

So what would rent be per month given 450,000? It would be 1,250 or 41,000 Baht per month. So still not bad you think given the nice place you have?

But if you decided to rent a house in Bangkok, and you knew you would be here for say 5 years on a work contract and I said to you ok I'll rent you this house for 41,000 Baht per month but you must sign a five-year lease - how many would agree to that? Some but not many - so why pay 30 years up front? To me it beggars belief. There is no logic at all.

[Tony121]

Buying a condo sounds more dangerous from the worth more dead than alive situation how many foreigner's seem to fall from them with some dodgy story from there thai g/f.

Maybe a usufruct on a one storey building is better

[BL4u]

The problem with foreigners buying leasehold property in Thailand is hat they think they get more than 30 years, meaning 90 years or more. This is the scam that is pointed out by Khun Jean.

All promises in the lease suggesting more than 30 years are like IOU’s (I owe you) - or promises to pay back a debt after 30 years. From a legal point of view these 'guarantees' are not worth the paper it is written on. If the property changes hands, the owner of the land dies, or changes his mind the lease is terminated after 30 years, irrespective the IOU that is written in the lease.

Anything beyond 30 years is made up to generate sales.

Just look at how foreign real estate/ property sellers own property, unless it is a condo or they have a Thai family they don't own but lease short term! Just recently I saw again 2 prominent Samui foreign real estate sellers living in 15,000 thai baht a month bungalows!! Why do they not invest if it is such a good investment? Because buying property in Thailand is a stupid investment unless you like to rent for 30 years and pay upfront.

[maori]

....I would say unless you are dealing with reliable developer....the developer with reliable history...

....only with such developer also being as your landlord you will get a good return from your investment...

....i know a few villas owners in Phuket.They've already made averagely 5,000,000 BHT each for one year on reselling their properties...

[Khun Jean]

....I would say unless you are dealing with reliable developer....the developer with reliable history...

....i know a few villas owners in Phuket.They've already made averagely 5,000,000 BHT each for one year on reselling their properties...

'Flipping' works in a booming market. A developer is not reliable because he sells property for a high price that they were able to sell even higher. The developer will learn from his mistake and will start with a higher price. That is what you can 'rely' on.

Did the people who bought it for 5Mb more also make a profit? Or are they stuck with it?

I have seen places for sale for 10Mb that were sold and the next day the price was 15Mb. Takes some time, who knows, maybe in a few days another sucker walks by with money burning in his pockets and no idea about realestate prices. Great for people who have the cash. Beats the stockmarket. And most have no problem with the laws, it isn't catching them because they 'flip' quickly.

For normal people who want to buy something to live in that doesn't really work. The company route owners prominently advertised for a long time for instance will get into trouble. Again not for the 'flippers'. They sell too quickly to get caught.

BL4U:

The long term lease paid upfront is indeed too silly for words.

I just had a 'bidding' session with a landowner. The opening deal was 30.000 baht a YEAR! for 200 sqm beachfront land on a 3+3+3 year contract. I countered 30 years with yearly rent increses. He want to leave it for his kids so the max was 20 years. Agreed price 50.000 baht a year. All the time it was 'understood' the rent would have to be paid yearly. However as a few 'farang' around him paid everything upfront (Thank you very much!!), he decided to only lease it for 20 years if everything is paid in one time. That is a million baht! So we went back to the 3+3+3, but nothing fancy will be built. Now it is in the 'thinking about it' phase because after 3 years a new lease has to be determined. If we are successfull, the owner will want a big piece of the profit. If not successfull, another party will probably offer more.

[thaigene2]

....I would say unless you are dealing with reliable developer....the developer with reliable history...

....i know a few villas owners in Phuket.They've already made averagely 5,000,000 BHT each for one year on reselling their properties...

'Flipping' works in a booming market. A developer is not reliable because he sells property for a high price that they were able to sell even higher. The developer will learn from his mistake and will start with a higher price. That is what you can 'rely' on.

Did the people who bought it for 5Mb more also make a profit? Or are they stuck with it?

I have seen places for sale for 10Mb that were sold and the next day the price was 15Mb. Takes some time, who knows, maybe in a few days another sucker walks by with money burning in his pockets and no idea about realestate prices. Great for people who have the cash. Beats the stockmarket. And most have no problem with the laws, it isn't catching them because they 'flip' quickly.

For normal people who want to buy something to live in that doesn't really work. The company route owners prominently advertised for a long time for instance will get into trouble. Again not for the 'flippers'. They sell too quickly to get caught.

BL4U:

The long term lease paid upfront is indeed too silly for words.

I just had a 'bidding' session with a landowner. The opening deal was 30.000 baht a YEAR! for 200 sqm beachfront land on a 3+3+3 year contract. I countered 30 years with yearly rent increses. He want to leave it for his kids so the max was 20 years. Agreed price 50.000 baht a year. All the time it was 'understood' the rent would have to be paid yearly. However as a few 'farang' around him paid everything upfront (Thank you very much!!), he decided to only lease it for 20 years if everything is paid in one time. That is a million baht! So we went back to the 3+3+3, but nothing fancy will be built. Now it is in the 'thinking about it' phase because after 3 years a new lease has to be determined. If we are successfull, the owner will want a big piece of the profit. If not successfull, another party will probably offer more.

Pay attention folks..this is the type of free info you won't get anywhere else. There are afew others on the board (not me) who have this kind of experience and aren't pitching th constant up-up-up crap at you.

[Khun Jean]

So what you people think, should this be pinned (maybe after a rewrite, english is not my native language)?

[Irene]

I think you need some modifications before pinning the statement. It is too generalised since there are exceptions to the rules.

I entered into two leasehold contracts for 30 years plus an option of another 30 years (the conditions are at the pleasure of the lessors). I have been having full benefits for the rental income for the two properties which are in Rajprasong and Rajdamri area.The lessors are Crown Property and one leading Thai family. I went in with full assurance of the 30 year benefits which has turned out to be most profitable for one and another not so great. Before the purchase, I knew full well that the option of 30 years would be at the mercy of the lessors. But that option has never come into my calculation for a decision-making of to lease or not to lease. My calculation was based on the cast iron benefits of the first 30 years that could accrue to me. However, if the lessors turn out to be kind on the option date, (which is unlikely), then I could have a windfall.

I have no desire to defend the concept of the lease. At the same time, I dislike generalised statements that could mislead readers unduly especially when one prejudges the case that in all circumstances it is unfavourable. I just give out the facts of my experiences and up to each reader's matured judgment.

On the whole, I like this thread's list of the negatives on leasing but just like to open the window a bit to know of the exceptions.

[Khun Jean]

30 years can be enough in many cases. AND you did it with knowing the renewals were not guaranteed. I met many people who were scammed and made to believe it was guaranteed.

This topic was intended for people who want to retire or stay a long time in Thailand. For those, some even spending ALL their savings on a nice house should at least know the details about what they are going to do. The 30+30(+30) is used by almost 100% of the developers and brokers (Do a search on internet and you will be amazed how many have this in their 'legal advice' pages.)

Just an hour ago i spoke to someone who bought a house in a resort/moo ban. He paid 5 million baht for it. And yes it was a 30+30+30 year lease. He is 30 years old. (i kept my mouth, because it will burst his bubble). The house needed some small repair, he found out later it needed a lot of repair, at least 500.000 baht. So he spend 5.5 million baht and 30 years later when he is 60 he will find out that to renew the lease he probably have to pay 10 million baht or more. I rent a house there for 8000 baht a month, just 50 meters away. I got 1 bedroom and 1 bahtroom more, and the garden is about 2 times bigger. Right next to the resort there is land for sale for about 1 million baht for 400 sqm. He didn't by it because he 'knew' he could not own land in Thailand. A pity i did not speak to the guy before he bought, i would advice him to buy the land for 1 million build a nice house for a million and get a usufruct. 3.5 million cheaper and a lot more piece of mind.

I could give 20-30 more examples. It is very bad what is happening. A topic should be pinned. It should be on the homepage with big letters, etc... I feel it is almost a duty for a website that has so many members.

[Mobi]

I could give 20-30 more examples. It is very bad what is happening. A topic should be pinned. It should be on the homepage with big letters, etc... I feel it is almost a duty for a website that has so many members.

I completely agree.

Especially when the unwary are subjected to a host of "advice" in both newspaper articles and directly from the realtors and lawyers that 30 + 30 is perfectly legal, and enforceable. (well it might be legal, but certainly isn't enforceable).

In any other country, these guys peddling misleading information would be sued and shut down.

[Abrak]

I think the OP's understanding of this issue is overly simplistic.

I am a Director of a publicly listed Thai company and we recently entered into a 30+30 lease contract with the Crown Property Bureau in a multi million US$ dollar deal. The structure was obviously more complicated than in the OP's example with much of the payment for the second 30 year lease being made up front. At the time, there was concern amongst the Directors whether such a deal was 'legal' or left the Director's personally liable for entering a transaction that could not be registered under the initial lease. We engaged to international lawyers for opinions.

Their view was unanimous. While Thai law presents no way for the existing extension of the lease to be registered (and by extension there can be no guarantee that it can be extended), the contract was clear and formed under good faith by both parties and was likely to be upheld by a Thai court. (Unfortunately the lawyers could go no further than that because such contracts have never been truely tested in Thai courts.) More importantly, from our perspective of course, they considered the contracts fair and reasonable for us to have entered into.

If the OP's case was that 30+30 contract's should be very carefully read (especially if terms of the second 30 years are left open - never advisable) I would whole heartedly agree but the idea that they are all a scam is simply ridiculous.

[Khun Jean]

Thank you for confirming that a renewal is not guranteed. Even international laywers agree on that.

So what you are saying is you got a 30+30 lease paid everything upfront and even a part of the second term knowing that there is no guarantee that it can be extended, can not be registered and relying on good faith.Well that just says it all. Better to be overly simplistic i think.

I think your multi million dollar company is only counting on the first 30 years, and HOPING it can extend it later.

The only good think is that the company did it KNOWINGLY!

Crown property Bureau is credible so i give you that, but how many people who want land & house lease from the CPB?

And AGAIN, i am talking about private persons who want to live in Thailand. NOT about a multi million US$ company that leases with knowing it can not be guaranteed and rely on faith. pfff...

Edited February 5, 2008 by Khun Jean

[Abrak]

Well personally I quite like the 30+30+30 option for private individuals living in Thailand.

Lets first make a couple of assumptions.

1. You want to buy a house plus land in Thailand despite the legal impediments

2. You are reluctant to go down the company route because of the cost/legal challenges.

Then 30+30+30 combined with 1. an option to convert the lease to longer if the law changes and 2. an option to convert to a freehold if the law changes seems about the best option especially for houses under say about Bt25m.

You need to structure the lease so if the value of the land is say Bt9m you pay Bt3m for each 30 year lease.

Incidentally I own 3 houses with three different legal structures (and a number of condos (all freehold)). Houses, by and large tend to be a better investment. I tend to go the company route because my properties are larger - but peopple on TV could easily argue about their legality etc... going forward. Most people who bang about the legal structures here have never bought and have no intention of buying. It is very easy to point out that there is no perfect way to buy a house here.

But, in general the only really silly way to lose money is to buy a place in your 'tilacs' name....

[Irene]

My observations are in bold type:

Thank you for confirming that a renewal is not guranteed. Even international laywers agree on that. Yes, you are correct, definitely not a guarantee, but you can take a lessor to court for breach of contract, if the lessor is of substance. So the benefit of the renewal is based on the substance of the lessor. It is not definitely that the renewal clause is of a zero benefit. Currently, there are a few property funds that are listed on the Stock Exchange and based on a period of lease with a renewal clause. Are they scam?

So what you are saying is you got a 30+30 lease paid everything upfront and even a part of the second term knowing that there is no guarantee that it can be extended, can not be registered and relying on good faith.Well that just says it all. Better to be overly simplistic i think. There is no guarantee of the extension but merely as a contractual promise of a renewal. If it is the Crown Property or a company of a reliable stature, it can be more than good faith.

I think your multi million dollar company is only counting on the first 30 years, and HOPING it can extend it later.

The only good think is that the company did it KNOWINGLY! If you are a finance man, you don't count the value of the renewal period unless the lessor is of substance and the terms and conditions are definitely spelt out right from Day One.

Crown property Bureau is credible so i give you that, but how many people who want land & house lease from the CPB? There are thousands of households who have their leases with the CPB. If the area is not of commercial value, most tenants practically live there for life.

And AGAIN, i am talking about private persons who want to live in Thailand. NOT about a multi million US$ company that leases with knowing it can not be guaranteed and rely on faith. pfff... Definitely, avoid leasing if you can buy at a price acceptable to you. Furthermore, the resale value of a lease is terrible unless you have got a lease right at the Sunday market or at Mah Boonkrong for your trade.

The forewarnings are good for any prospective property purchaser but don't overdo it by calling it as a scam when there are exceptions that leasing is necessary.

[Abrak]

My Grandfather owned 50,000 acres in China - wonder what happened to that? Noone is going to guarantee anything in 30 years - certainly not lawyers who it is difficult to get a straight answer out of at the best of times.

My point is simple. The OP refers to the 30+30 contract as though it is a scam used by fly by night developers that you will be lucky to see tomorrow. The Crown Property Bureau is offering 30+30 contracts on its land in the centre of Bangkok. Now it is up to you if you think the CPB is actually issuing contracts to reputable companies that it has no intention of honoring - personally I think not.

To some extent I sympathise with the premise of the thread - shall we say that there is limited legal backing for a 30+30 lease and there may be room for a crook to use it mislead investors. However, the way the OP has phrased the thread implies that everyone using 30+30 leases is a charlatan.

Simply - he asks for this practice to stop - but to be replaced by what? Given a choice between a 30 year lease and 30+30+30 (and no option of a 90 year lease) what does an investor choose?

[Khun Jean]

If a practice is not right it should stop, even if there are no good alternatives.

Again my concern is for the private person. Shall i name a few areas where this scam is used.

Phuket, Samui, Hua hin, Pattaya, Bangkok etc..

I can name and shame at least 50 developers and realestate agents with false statements on their websites and using contracts that are not worth the paper written on it.

Irene and Abrak give samples about people/companies that KNOW the law about renewals. Good for them, they go in knowing the risks.

It is the normal people without knowledge of the thai law that believe these developers and brokers.

Those are the people that should be made aware.

I meet many people, many retiress and couples, and a lot of them have dodgy contracts and certainly not with reputable listed companies or the CPB, so i know it is happening a lot.

Again this should STOP!

[Abrak]

Ok maybe I should rephrase my question.....

If you want to buy a house here knowing the risks....

(1) What is the best structure if the house and land is worth under Bt15m?

(2) If the house and land is worth Bt30m or more?

It is not an easy question to answer imho.

[Irene]

If a practice is not right it should stop, even if there are no good alternatives.

Again my concern is for the private person. Shall i name a few areas where this scam is used.

Phuket, Samui, Hua hin, Pattaya, Bangkok etc..

I can name and shame at least 50 developers and realestate agents with false statements on their websites and using contracts that are not worth the paper written on it.

Irene and Abrak give samples about people/companies that KNOW the law about renewals. Good for them, they go in knowing the risks.

It is the normal people without knowledge of the thai law that believe these developers and brokers.

Those are the people that should be made aware.

I meet many people, many retiress and couples, and a lot of them have dodgy contracts and certainly not with reputable listed companies or the CPB, so i know it is happening a lot.

Again this should STOP!

I can now see your points. But I wonder whether those investors in Phuket, Samui, Hua Hin, Pataya and even Bangkok ever consulted their lawyers prior to entering into the lease contract. Second, whether their first 30 years also subject to challenge of possession.

Am I right to say that at least they have the unencumbranced right of possession for at least 30 years? If they have that rights, they may still think the prices are still cheap (comparing with what they are used to in their own countries) and therefore could not care less about losing of renewal rights. Those investors in Samui and Phuket are mostly high flyers with worldwide contacts and it would be unusual for them not to understand what they have entered into.

[WilliamJarvis]

Interestingly, the Revenue Department will allow you to amortise rental payments over a 60 year period if you have a renewal clause (30+30). The won't over 90 years (30+30+30) as they do not see the second renewal as being enforceable - so if you have a 90 year lease, then you need to amortise this over 60 years.

Any decent accountant in Thailand should be able to confirm this is the policy of the Revenue Department.

Edited February 5, 2008 by WilliamJarvis

[churchill]

If one has a 30 year lease it is normally agreed per contract that if a sale takes place another 30 year lease will be granted ? Is this enforcable in law ?

[A_Traveller]

^ To the best of my knowledge the answer to this is no. Any purchaser, by law, is required to observe the terms of any extant lease, however, unless the originating contract is so written, and accepted as part of the transfer of ownership by the incoming purchaser, the only 'right' would be for the lease to continue, not for any extensions. To my mind this is the key point here, which is often misunderstood.

Unless a contract is so drafted, and in my view, an additional specified consideration paid at the time of contractual signature then the lease is for 30 years plain and simple. Any option to extend is legally solely within the grant of the owner. There is, I believe, no register of easements {though charges e.g. mortgages, loans, secured upon the land are registrable interests} under which a lease renewal might be placed. Ultimately, in this situation all calculations should be on the first 30 years only, with the view that any subsequent extension is a bonus, though subject to a further payment/negotiations.

Regards

/edit clarity//

Edited February 5, 2008 by A_Traveller

[churchill]

or could a contract be drawn up for 30 years that is renewed each year to keep it at 30 years ?

[A_Traveller]

^ Possibly, but this would not solve the underlying issue, {and probably complicate the issue further} unless the contract was recognised and formed part of the transfer. The land deeds and the law associated with them would potentially take precedence, especially if the new owner wanted you out, and denied knowledge of such a contractual agreement.

Regards

/edit amend last sentence//

Edited February 5, 2008 by A_Traveller