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

[thaigene2]

It dawned on me the other day why the 30 year max lease law is unlikely ever to be changed.

It has little to do with farangs wanting long leases on houses they buy or build, and everything to do with Thai owners of land who currently benefit from the 30 year rule. This covers everything from private dwellings to multi-billion Baht commercial plots of land . Everything is leased for a maximum of 30 years and can be renewed or re- let at an increased rent on expiry. The whole economics of the leased property sector in Thailand functions on this premise, and any change in the law would undoubtedly upset many land owning dignitaries who would stand to lose money.

So it ain't gonna happen folks.

100% agreement.. The powers that be benefit from this, it encourages systems like key money and the same old feudalist mentality of landownership and serfdom and will be very tough to change IMO.

I think the only thing that would change it would be the total overhaul allowing anyone to own land and I simply do not see that on any realistic time horizon.

In a nutshell, it allows a Thai landowner to lease his property for money up front AND still retain ultimate ownership.

Its called "having your cake and eating it, too", something the Thais mastered long ago.

Yes I think Mobi makes a good point here. Perhaps a banker can confirm or correct, but is it not true that if the land "owner" (the lessor) can use that land as collatoral/leverage to do other deals, get loans, etc? If it were 50 or 99 years leased to someone else that would be less attractive to a bank or lender as collatoral. Make sense?

[A_Traveller]

Interesting point.. Imagine..

I am a usufruct holder.. I want to give a 30 year land lease.. Can I go, without the land owners assistance or permission, and register a lease on my own to a 3rd party ?? Even if the Thai expressly does not want it to happen ??

I have a gut feeling that says even though I have the right of use, I would have a hard time in the land office telling Somchai the land office worker to process my lease and record it onto the land title thats not in my name, doubly so when the land owner is telling him not to ?? This can be legally forced ??

In short, I believe the answer to this is no you can't, or more accurately, given land law here, the 'real' owner would have a strong legal challenge to such an arrangement, therefore making it moot.

Regards

[A_Traveller]

Yes I think Mobi makes a good point here. Perhaps a banker can confirm or correct, but is it not true that if the land "owner" (the lessor) can use that land as collatoral/leverage to do other deals, get loans, etc? If it were 50 or 99 years leased to someone else that would be less attractive to a bank or lender as collatoral. Make sense?

The technical term would be unencumbered v encumbered. In brief, any land which has a charge {in this example a lease} is by definition encumbered, and therefore would be subject to a discounted valuation.

Regards

Edited February 27, 2008 by A_Traveller

[LivinLOS]

Interesting point.. Imagine..

I am a usufruct holder.. I want to give a 30 year land lease.. Can I go, without the land owners assistance or permission, and register a lease on my own to a 3rd party ?? Even if the Thai expressly does not want it to happen ??

I have a gut feeling that says even though I have the right of use, I would have a hard time in the land office telling Somchai the land office worker to process my lease and record it onto the land title thats not in my name, doubly so when the land owner is telling him not to ?? This can be legally forced ??

In short, I believe the answer to this is no you can't, or more accurately, given land law here, the 'real' owner would have a strong legal challenge to such an arrangement, therefore making it moot.

Regards

So that this "giving your hiers the land for 30 years lease after your death" or in fact arranging any form of lease is purely with the owners assistance anyway, hence comes under the 'not very likely' category ??

[Abrak]

I have never used a 'usufruct' as a means of ownership but correct me if i am wrong...

(1) It is an extremely efficient means of ownership whereby you retain ownership in your lifetime but pass it on to your wife afterwards...

(2) There is one distinct disadvantage - say you were to fall out with your wife there is little chance you could sell the property given that the land is in her name.

Is that correct?

[thaigene2]

Yes I think Mobi makes a good point here. Perhaps a banker can confirm or correct, but is it not true that if the land "owner" (the lessor) can use that land as collatoral/leverage to do other deals, get loans, etc? If it were 50 or 99 years leased to someone else that would be less attractive to a bank or lender as collatoral. Make sense?

The technical term would be unencumbered v encumbered. In brief, any land which has a charge {in this example a lease} is by definition encumbered, and therefore would be subject to a discounted valuation.

Regards

Sure - The discouted valuation makes sense. BUT, the main point is that the land-owner can still "tout" the land as "his" and so can still "use it" as collatoral to get loans and do other (probably silly) things/investments.. Correct? AND if it were a "longer" lease, it would be MORE encumbered than a shorter (30 year) lease. no? I think that's gott be the case...and so completes that hypothesis of Mobi..

Edited February 27, 2008 by thaigene2

[mickba]

Interesting point.. Imagine..

I am a usufruct holder.. I want to give a 30 year land lease.. Can I go, without the land owners assistance or permission, and register a lease on my own to a 3rd party ?? Even if the Thai expressly does not want it to happen ??

I have a gut feeling that says even though I have the right of use, I would have a hard time in the land office telling Somchai the land office worker to process my lease and record it onto the land title thats not in my name, doubly so when the land owner is telling him not to ?? This can be legally forced ??

In short, I believe the answer to this is no you can't, or more accurately, given land law here, the 'real' owner would have a strong legal challenge to such an arrangement, therefore making it moot.

Regards

So that this "giving your hiers the land for 30 years lease after your death" or in fact arranging any form of lease is purely with the owners assistance anyway, hence comes under the 'not very likely' category ??

That's the point I was trying (failing I think) to make :- whether it's a Usufruct or a Lease, I don't believe you can enact any of the clever clauses without the owner's co-operation. The Land Office won't be interested if the owner doesn't go with you to agree any changes, so you'd have to go to Court to get any joy in the case of non-compliance. How easy that would be I have no idea. Leaving it to distant relatives/heirs to sort when you've gone would be optimistic?

[mickba]

Yes I think Mobi makes a good point here. Perhaps a banker can confirm or correct, but is it not true that if the land "owner" (the lessor) can use that land as collatoral/leverage to do other deals, get loans, etc? If it were 50 or 99 years leased to someone else that would be less attractive to a bank or lender as collatoral. Make sense?

The technical term would be unencumbered v encumbered. In brief, any land which has a charge {in this example a lease} is by definition encumbered, and therefore would be subject to a discounted valuation.

Regards

Sure - The discouted valuation makes sense. BUT, the main point is that the land-owner can still "tout" the land as "his" and so can still "use it" as collatoral to get loans and do other (probably silly) things/investments.. Correct? AND if it were a "longer" lease, it would be MORE encumbered than a shorter (30 year) lease. no? I think that's gott be the case...and so completes that hypothesis of Mobi..

Quite so, but provided the Lease (or Usufruct) has been done correctly, would it make that much difference if the land did change hands?

OK you might worry about who the new owner is, but probably no worse that a spiteful ex?

[jitagon]

Supposing someone had entered into a 30 year lease agreement (which had been sold as a 30 plus etc), and then the plans for building on it went pearshaped just one year into said lease, would there be any problem getting the owner to agree to transfer to a third party?

From what I understand, the only thing actually registered at the Land Registry is the Landowner to the Lessee? Nothing about 30 pluses or third parties. How is this usually done? Must one approach the landowner and ask for their permission/agreement to such transfer?

[Khun Jean]

Supposing someone had entered into a 30 year lease agreement (which had been sold as a 30 plus etc), and then the plans for building on it went pearshaped just one year into said lease, would there be any problem getting the owner to agree to transfer to a third party?

From what I understand, the only thing actually registered at the Land Registry is the Landowner to the Lessee? Nothing about 30 pluses or third parties. How is this usually done? Must one approach the landowner and ask for their permission/agreement to such transfer?

In these cases it is easiest when you just think about money and not about other things that can cloud the obvious.

Is the owner profiting from what you want or not. Answers all questions.

"getting to agree", yes when the owner profits from it.

A lease is between two parties. If one wants to transfer it can only be done when the other party agrees. And again only when the owner makes more profit from the new deal than the old one will it be interesting for the owner to do that. Nothing strange about that, happens everywhere in the world. It is called "doing business".

[Irene]

Supposing someone had entered into a 30 year lease agreement (which had been sold as a 30 plus etc), and then the plans for building on it went pearshaped just one year into said lease, would there be any problem getting the owner to agree to transfer to a third party?

My comments are in bold type:

From what I understand, the only thing actually registered at the Land Registry is the Landowner to the Lessee? Nothing about 30 pluses or third parties. How is this usually done? The agreement inclusive of 30 pluses or third parties is also attached to the official lease and forms part of the terms and conditions of the official lease.Must one approach the landowner and ask for their permission/agreement to such transfer? The agreement normally includes a condition of a sublease and subject to permission of a lessor.

[mickba]

Supposing someone had entered into a 30 year lease agreement (which had been sold as a 30 plus etc), and then the plans for building on it went pearshaped just one year into said lease, would there be any problem getting the owner to agree to transfer to a third party?

From what I understand, the only thing actually registered at the Land Registry is the Landowner to the Lessee? Nothing about 30 pluses or third parties. How is this usually done? Must one approach the landowner and ask for their permission/agreement to such transfer?

You can be forgiven for not reading all the posts but this has been covered one way or the other I think.

As I understand it, you cannot t/f the 30 year lease to ano' party or, in fact, enact any of the clever clauses in your lease agreement which require registration at the Land Office, without the co-operation/agreement of the lessor i.e. they would have to trot down to the Land Office with you and sign everything. If they've already agreed to do such things but don't comply your only recourse is in court. It's not impossible that they'll agree to do it but why? - for a lot of money of course.

Is that about right Irene?

Mick

[Irene]

Mick,

Under section 544 of the Civil and Commercial Code, it is stated that:

"Unless otherwise provided by the lease contract, a lessee cannot sublet or transfer his rights in the whole or part of the leased property to a third person.

If a lessee acts contrary to this provision, the lessor may terminate the contract."

As many have already stated in the forum, if there is a clause allowing the sublease, it is still only a promise by the lessor. The lessor can still make life difficult for you by refusing to do so and leave you to take him to court for the court's order of the sublease and damages. So, you are about right, money may have to flow to the lessor to avoid a court case.

Anyway, in practice, I have never seen a permission of subleasing being incorporated in a leasing contract. Most lessors are careful of who a lessee shall be and the court in this area tend to respect the lessor's caution on the personality of a sublessee.

[mickba]

I appreciate Khun Jean's good intentions and good info' on this topic.

[mickba]

I appreciate Khun Jean's good intentions and good info' on this topic.

Sorry - don't know what happened to the other 4 para's I wrote - gone forever.

[WilliamJarvis]

The agreement normally includes a condition of a sublease and subject to permission of a lessor.

Very dangerous thing to say. Under the CCC, a Lease Agreement has to expressly provide you with the right to sub-lease, otherwise you do not have that right. Not the same as other vehicles used. So, I would disagree, an agreement would not normally contain this provision, unless you pointed out that you wanted it.

[Irene]

[

The agreement normally includes a condition of a sublease and subject to permission of a lessor.

Very dangerous thing to say. Under the CCC, a Lease Agreement has to expressly provide you with the right to sub-lease, otherwise you do not have that right. Not the same as other vehicles used. So, I would disagree, an agreement would not normally contain this provision, unless you pointed out that you wanted it.

WilliamJarvis,

My statement coincides with your meaning that a sublease is possible if agreeable by the lessor. That coincides exactly with the wording of the CCC. It is put there just to warn a lessee not to sublease without the lessor's permission. This is common with Crown Property's leases, Siam Square's leases and leases at all the Malls. It is also recommended to put in my clause if you are a lessor to warn a lessee not to attempt even to hide a sublease contract! What is so dangerous about that when you are saying the obvious.

[WilliamJarvis]

^actually, you state the agreement normally includes such a clause. All I say is that - "no, it does not", unless you request it.

Edited March 13, 2008 by WilliamJarvis

[Irene]

^actually, you state the agreement normally includes such a clause. All I say is that - "no, it does not", unless you request it.

WilliamJarvis,

Below is a clause of a standard lease agreement used by two leading estate agents and also used by Crown Property Bureau, all the Mall lessors and all my hundred lease agreements I have concluded with all my tenants currently and in the past and also leases that I have concluded with my lessors.

(g) Not to assign or sublet the Premises or any part thereof without the written consent of the Landlord;

Now you tell me that "no, the agreement normally does not include the above clause, unless requests it"

Why should a lessee request such a clause when it is at his detriment?

[WilliamJarvis]

^exactly proves my point.

The words I would have used (quickly banged-up) are:

"Has the absolute right to assign or sublease the Premises for the remainder of the Contract Term without the need of the consent of the Landlord or Premises owner." [certain defined terms therein being assumed]

Different ways of looking at things.

Edited March 13, 2008 by WilliamJarvis

[A_Traveller]

OK I'll ask, maybe I'm foolish but these two statements appear to be mutual exclusive.

Irene's states that the holder of the lease may not sub-let, without permission, William's says that they may without permission.. I think Therefore William's provides a right, whereas Irene's prescribes a right.

I'd add that my understanding, which may be flawed, is that under the law her no subletting is permitted without the express specific permission of the property owner, so Irene's clause reiterates this for clarity, {not a restrictive covenant per se} where as William's actually grants the holder of the lease the rights and benefits of the ability to sub-let.

Regards

edit// Add second line//

2nd edit /Para 3 added after WJ post below//

Edited March 13, 2008 by A_Traveller

[WilliamJarvis]

also Irene, if I'm not mistaken, your clause is a restrictive covenant, mine is a right.

[WilliamJarvis]

this should act as an edit to the above post - but I'm having problems with the system:

[EDIT due to AT's useful post above]

Section 544 of the CCC

Unless otherwise provided by the contract of hire, a hirer cannot sublet or transfer his rights in the whole or part of the property hired to a third person.

Thus, IMO, Irene's clause is restrictive covenant. Mine is a right prescribed by law

[/EDIT]

Edited March 13, 2008 by WilliamJarvis

[thaigene2]

Here we go again. "I'm going to buy in a company name if it kills me...or I have a mental breakdown" and both are a distinct possibility in LOS.

I know of another guy who is determined to pay more than a million US for beachfront property in Patters in a company name..go figure.

[Khun Jean]

love is blind. Very dangerous when it is your last money. If it is peanuts then probably just a lesson in how things work in Thailand.

[Irene]

As a long time reader and sometimes poster, "user" of land owned by my wife i find it amazing how many times this "30+30+30 years lease" is mentioned.

Even more amazing is that people seem to get these leases. If you are wel informed you will NEVER do this as it is not guaranteed.

My intention for this thread (Thread is a big word, this post should be enough) is to

END this SCAM!

So please don't try to defend this "30+30+30 years lease", you will only make a fool of yourself. On second thought, yes defend it, then at least we know you are talking BS and all the rest you say can be ignored.

First things first, the lease itself:

Be sure the land title is "Nor Sor Sam", "Nor Sor Sam Gor" or "Chanote". All other lower titles can not register a lease.

Make sure you register the lease! Otherwise it is only enforceable for a maximum of 3 years.

If the land is sold to a new owner the lease is transfered with all the rights for the one who leases. (There is a catch!)

So far so good.

Time for some negatives.

We have to make a distinction between "real lease rights" and "non lease rights".

NEGATIVE NUMBER 1.

--------------------------

A renewal clause is a "non lease right"!

This means that when the land is sold to another this renewal "right" is lost.

An example to make it more clear for the people who are doubtfull.

You lease land for 30 years and make an extra clause for a renewal. In this clause you might mention the new lease amount, up to you.

After about 20 years the owner dies. The land is now his daughters. His daughter at the end of your lease decides that it is in her best interest to not renew your lease and request you to please remove all buildings and other items within one month.

Oke another example where the owner not dies, just to be fair. First make sure the owner you lease it from is healthy and will probably live for at least 30 years.

After 30 years minus 1 week the owner starts to think about this stupid lease he signed. His land was very difficult to sell all this time it was occupied. This 'farang with his new girlfriend' that visited last week was really interested in the land. He offered 50 million cash. How to get rid of this 'renewal'. Better call a lawyer. This lawyer says, "no problem, just transfer the land to your daughter". Ah yes. The owner can sleep good again and dreams of his 50 million in the bank, and a mercedes in front of his new house.

There are so many possible scenarios to get out of this renewal right i think that the 2 easiest are enough.

NEGATIVE NUMBER 2!

-------------------------

You HAVE TO PAY RENT!

This means the money you paid when you signed this lease is for 30 years! Remember that is the maximum!

After 30 years if you are able to get a renewal you will HAVE TO PAY AGAIN!. And be sure it is a lot more than the first time. Count on at least 3 times as much, but prepare for 10 times or even 50 times.

The good thing is you will not have to worry about this "negative number 2", "negative number 1" takes care of that.

But just to make it clear it is not only a negative when it is renewal time.

If you GIVE the money to buy the land to your girl/boy friend or wife/husband so you can have a lease, you also HAVE TO pay rent.

And it should be at least the amount the landoffice valuates it for. So pay the fees, and the tax. But also to be fair, this si probably not a very high amount, but it should be calculated before you decide to buy the land.

There are more negatives, but would you decide to get this lease construction after reading the first 2!

If you are satisfied with a 30 year lease, go for it. It is as secure as it gets. But there are also negatives with this scenario. These are not 'risks' that you have with the law. But to not be to negatieve lets call them warnings.

WARNING NUMBER 1!

-------------------------

You get fed up with the place. Consider your money gone. (The case when you not happily married but just lease from stranger (developer))

WARNING NUMBER 2!

-------------------------

The relationships is not what it used to be. You decide for a divorce. You leased the land so you dont need to go. But first pay the ex-partner 50% of the value of the house.

WARNING NUMBER 3!

--------------------------------

'she is NOT different!' (Oke just joking!!!)

WARNING NUMBER 4-1000!

-------------------------------

Read everything on this website. (And that is not a joke!!)

A good law reference is www.samuiforsale.com. Required reading!

As some other poster mentioned and asked. Yes it is the 'BIBLE on LANDOWNERSHIP for foreigners'.

There is some hope, saty tuned for another topic soon.

What do you think? Should this be pinned?

[Irene]

WilliamJarvis's contention:

"^exactly proves my point.

The words I would have used (quickly banged-up) are:

"Has the absolute right to assign or sublease the Premises for the remainder of the Contract Term without the need of the consent of the Landlord or Premises owner." [certain defined terms therein being assumed]

Different ways of looking at things."

My previous contention was that the below clause is common in all leases:-

"(g) Not to assign or sublet the Premises or any part thereof without the written consent of the Landlord;"

Now you tell me that "no, the agreement normally does not include the above clause, unless requests it"

Why should a lessee request such a clause when it is at his detriment?

No lessor in his right mind would give a lessee a free hand of picking his sublessee to take possession of his property by granting his lesseee " the absolute right to assign or sublease the Premises for the remainder of the Contract Term without the need of the consent of the Landlord or Premises owner." [certain defined terms therein being assumed].

Because it is a prime privilege of a lessor to pick and chose a character of his tenant and certainly as a seasoned lessor, I will never pass this right absolutely or otherwise to my lessee to pick a sublessee without my approval. Therefore, WilliamJarvis's contention is unusual and rare. I have yet to see one lease in that form of absolute permission

[LivinLOS]

From my perspective.. It doesnt matter what additional clauses you write.. If the owner doesnt want to accompany you to the land office he wont. So the 30 year lease option is now something you have to force in court. Forget it !!

Only the 'lease rights' are guaranteed.. Everything else, the +30+30, the first purchase options, the lease options, the ability to sell the plot, all these are based on a promise, my experiences in Thailand tell me a Thai promise is worth less than the air used to say it.

[Khun Jean]

It is my experience from reading peoples lease contracts that anything is written in it to give false security. Especially by lawyers who work closely with developers, as many are in tourist places.

The law and diference between real rights and a 'promise' is unknown to many and people really think that once it is in a contract they can rely on it.

It will be a rude wake up call when you really have to use one of those worthless clauses.

[WilliamJarvis]

No lessor in his right mind would give a lessee a free hand of picking his sublessee to take possession of his property by granting his lesseee " the absolute right to assign or sublease the Premises for the remainder of the Contract Term without the need of the consent of the Landlord or Premises owner." [certain defined terms therein being assumed].

Because it is a prime privilege of a lessor to pick and chose a character of his tenant and certainly as a seasoned lessor, I will never pass this right absolutely or otherwise to my lessee to pick a sublessee without my approval. Therefore, WilliamJarvis's contention is unusual and rare. I have yet to see one lease in that form of absolute permission

If you are the Landlord then I agree with your comment. I was looking at things as the Rentor. If I were the Rentor, I simply would not agree to the clause you refered to. I would not agree to requiring the LL's consent to a sublease.

A similar subject. As a LL you would never agree to allowing a Rentor to sublease at a rent higher than that the LL is receiving (because, why not rent it yourself for the higher amount if you know you can get it ). As a Rentor I say that has nothing to do with the LL.

And while it may not be common, the lease agreement I have for my house in Bangkok both gives me the absoulte right to sublease, without the consent of the LL, and the right to sublease at a rent higher than that I pay the LL.

But in that case I am the Rentor, as the LL I would never agree to those clauses. So what my case proves, if it proves anything, is that in contract negotiations I had the stronger bargaining power, which is reflected in the terms of the agreement.

Edited March 14, 2008 by WilliamJarvis