Owning A House/business Premises On Leased Land

[keestha]

Trying to find an answer to a question many people asked me.

In Thailand, also if you are a foreigner, you can legally own a house/business premises built on leased land.(talking about the premises, not about the business, and please correct me if I am wrong) But what happens when the land lease expires? Difficult to imagine you remain owner of the premises then, so what happens? Does the landowner become owner of the premises then, and if yes, is he obliged to give you a financial compensation ?

[Farma]

We looked into this option a couple of years ago for business premises but didn’t continue with the plans.

One of the options discussed was greatly reduced land rental with a minimum lease period stipulated on condition the building met with the land owner’s approval. The building would revert to the land owner after the lease expired.

Another option was to build a number of shophouses and the land owner having free use of one of them.

Either way the land owner received the building at the end of the lease.

I think the lease period discussed was 10 or 15 years. In the end we found property that suited our needs better.

[thetefldon]

Trying to find an answer to a question many people asked me.

In Thailand, also if you are a foreigner, you can legally own a house/business premises built on leased land.(talking about the premises, not about the business, and please correct me if I am wrong) But what happens when the land lease expires? Difficult to imagine you remain owner of the premises then, so what happens? Does the landowner become owner of the premises then, and if yes, is he obliged to give you a financial compensation ?

I lease land on which I have a three bedroom bungalow. The initial lease is for 30 years with the option to renew up to 90 years. The lease is registered on the land documents held at the local land office. Since I doubt I will be around in 30 years time it doesn't worry me too much, but to be on the safe side I have registered the lease in my partners name as well.

After 90 years the house would revert to the lessor, but in all fairness with the initial price I paid, the home will have paid for itself within 10 years (based on renting similar property) so I am not too worried about that.

I firmly believe never invest more than you are prepared to loose in LOS.

[Deke]

I think that it simply depends on the terms that you negotiate in the lease contract.

[chiangmaibruce]

In the situation you are talking about, with land leased from a non-related entitiy (i.e NOT a Thai spouse), the owner would be unlikely to agree to the lessee having ownership of the building (via the usual formal process as described in other TV threads).

The more likely scenario would be:

Prior to signing the lease you would indicate that you want to build a structure within the leased area, and you would provide the owner with details of that proposed structure. This arrangement, plus your right to exclusive use of the structure, would be written into the lease. If you intend (for example) to sub-let shops within the new structure then this right should also be written into your lease.

You would negotiate the term of the lease & a rental amount based on the improvements that you would be making to the land

The building would be owned at all times by the owner of the land, and there would be no compensation payable to the owner at the end of the term - unless this was a special condition of the lease. (Good luck with getting anything back at that stage - refer other TV threads on the difficulty in just getting back condo rental deposits.)

Clearly anyone contemplating this process should first seek qualified legal advice

[simon43]

My small Phuket hotel is on leased land. The land lease specifies nothing about surrender of the buildings to the landlord when the lease expires - only that I must return the land to them. I am perfectly entitled to demolish all the buildings if I want to do this

Realistically, the buildings will be rather 'worn' after 15 years. If I want to continue the business, I will either negotiate a lease renewal or rent another bit of land nearby and build a new hotel with the same name....

Simon

Edited March 2, 2009 by simon43