60 Years Leasing

[katabeachbum]

As a few weeks ago it is now possible to register 60 years lease in property land deed.

In Phuket you first have to register 30 years lease until 2039 at 1,1% tax. Next day register 30 years lease until 2069 at 1,1% tax. Anyone with other experience in other land offices?

[LennyW]

Is this legal or a new found loophole?? Any official statement on this?

If it is as simple as you make it out to be, why not go again the following day and register another 30 years giving you 90????

Quicksilva - have you any knowledge of this as your info always seems to be the most accurate and factual?

[katabeachbum]

Legal, but 60 years only went through, not 90 years as suggested by government over a year ago

[InterestedObserver]

And of course this has been supported by a court case affirming a 60 year lease. I have not seen any mention of changes to the Civil and Commercial Code regarding leases.

[quiksilva]

Is this legal or a new found loophole?? Any official statement on this?

If it is as simple as you make it out to be, why not go again the following day and register another 30 years giving you 90????

Quicksilva - have you any knowledge of this as your info always seems to be the most accurate and factual?

Yup I have seen this done a few times, for both individual units and entire large scale projects. In fact I mentioned it here as an option sometime last year. I even mentioned it as an option at a business lunch with eminent lawyers, who said it was impossible but in fact it went through just fine, because it does not break any laws.

Although as others have reported we have only been able to get 60 years.

[Crossy]

So, if I am reading this correctly you are actually registering two 30 year leases, one of which is post-dated by 30 years to start when the first finishes.

Has any law changed to allow this, or is simply a new interpretation loophole?

[InterestedObserver]

So, if I am reading this correctly you are actually registering two 30 year leases, one of which is post-dated by 30 years to start when the first finishes.

Has any law changed to allow this, or is simply a new interpretation loophole?

And what happens after 30 years if the two parties cannot agree upon terms for the next 30 years. This is, after all, still two separate 30 year leases, the second of which cannot be accepted (consummated) until 30 years in the future.

[quiksilva]

The two parties have already agreed terms, its in the second contract which is registered at the land department. No need for the first to be renewed at all.

This second agreement is a free standing contract, has already been formally agreed, and some consideration should be paid in advance (in the form of deposits and advance rent) so it has in strict terms already been consummated, but the term itself does not formally commence until a future date. Paying consideration for goods and / services on agreed terms makes it a binding commitment, regardless of when it happens.

The idea is not new, the 'post dated' term is very apt. Think post dated cheques, or irrevocable letters of credit (as used in trade) (Although admittedly the latter's not a great example).

In the commercial world it is not unusual to commit to a lease before the term and rent commences, examples of where we see this the most are in pre-commitments in new office buildings, or agreeing to rent prior to a factory being built) although usually the difference between the date of signing a lease and the lease commencement date is just a few weeks, months or sometimes a year or so, but in this case its decades.

The eminent lawyers I referred to earlier, worried that the land department would take the view that it was against the 'spirit of the law' and look at the application as a single tenancy*, and decide to block it on those terms, but in practice that has not proven to be the case and it seems some land departments have no issue with this (although I cant speak for all of them).

(*perhaps this is why the OP had to register the second agreement a day later.)

Edited May 25, 2009 by quiksilva

[InterestedObserver]

You are stating that the second 30 year lease is accepted (consummated) from the day it is registered at the Land Office by the payment of the deposits and advance rent. That makes the total lease length 60 years, thus clearly illegal under Thai law. Also, what will be the fair market value of the property 30 years in the future? The lessor has the absolute right to ask fair market value, increase the rent, for the property before the beginning of the second 30 year period. Additionally, if the original lessor sells the property or dies, then the second 30 year lease is basically unenforceable. The heirs or new owner are not a party to the original lease(s).

IMO, unless the Civil and Commercial Code and Land Code Act are changed to support a 60 year lease, then this is just a fiction by the real estate sector and won't survive the first Supreme Court case.

Edited May 25, 2009 by InterestedObserver

[thaiwanderer]

IMHUO

The distinction between making this for 30+30 instead of 30+30+30 (or multiples of 30 ad infinitum) would of course appear to be political only. And fundamentally it is for political reasons that i believe this route cannot be relied upon despite any registration.

Registration of the additional lease (although I doubt its widespread) is a fundamental step nonetheless and is a missing link from renewals to a certain extent because the lessor's co-operation in 30 years time is apparently not needed (the whole argument in favour is of course that these are not a renewal rather separate leases).

However the unlawful / impossible actions of a lessor are voidable and error by a competent official is always subject to reversal and carries no liability. Also supreme court judgements are not binding precedent (and the actions of land office officials are certainly not binding on the supreme court). That such a situation is not specifically addressed (nor perhaps 'anticipated' in full, when land is involved ) in legislation makes this all a weakened protection.

The supreme court has considered multiple leases effectively aimed at rolling periods and their view was that such entered into at the same time were not enfoceable in the way anticipated. Separating them by a day (contracting and or registering) would apear not to provide sufficient separation in time or circumstance in my view as it is absolutely clear what the intention is.

As to the letter of the law it can of course be argued (successfully or otherwise) that it does not offend if it is accepted as a seperate lease rather than a renewal.

Without a doubt it offends the spirit of the law and (for political reasons alone) a ministerial announcement that this must not be done may well be expected if it becomes widespread.

No matter any deficiencies in or 'clever' interpretations to Thai law there will always be some who tout farang false hope.

[quiksilva]

You are stating that the second 30 year lease is accepted (consummated) from the day it is registered at the Land Office by the payment of the deposits and advance rent. That makes the total lease length 60 years, thus clearly illegal under Thai law. Also, what will be the fair market value of the property 30 years in the future? The lessor has the absolute right to ask fair market value, increase the rent, for the property before the beginning of the second 30 year period. Additionally, if the original lessor sells the property or dies, then the second 30 year lease is basically unenforceable. The heirs or new owner are not a party to the original lease(s).

IMO, unless the Civil and Commercial Code and Land Code Act are changed to support a 60 year lease, then this is just a fiction by the real estate sector and won't survive the first Supreme Court case.

I hear your concerns and understand them. I am not here to tout the use of such practices or indeed invent them, I am just stating facts.

It HAS happened, and not just for two bit housing or condos either (although I understand that some projects do sell on this basis) but for very large projects in the heart of the CBD.

Edited May 25, 2009 by quiksilva

[InterestedObserver]

Believe what you choose, but it HAS happened.

I'm not the one investing my life savings in a questionable real estate venture that may collapse in 30 years when the lessor or his heirs or new owner wants out.

[klikster]

This second agreement is a free standing contract, has already been formally agreed, and some consideration should be paid in advance (in the form of deposits and advance rent) so it has in strict terms already been consummated, but the term itself does not formally commence until a future date.

If the amount paid in advance is nominal, this doesn't seem to be a huge risk if properly planned for, assuming the land department registers both contracts. I wonder if they reference both agreement on the chanode?

Quicksilva, do you have any knowledge about the minimum acceptable up-front money?

[klikster]

Believe what you choose, but it HAS happened.

I'm not the one investing my life savings in a questionable real estate venture that may collapse in 30 years when the lessor or his heirs or new owner wants out.

What real-estate venture in Thailand is not questionable?

[thaiwanderer]

What real-estate venture in Thailand is not questionable?

none of it is questionable unless you are confused or wish to believe that it is not what it is or wrongly compare it to different things abroad

obviously real estate agents and some legal advisors encourage over reliance on shaky legal structures but a buyer cannot really say they were duped if they choose to rely on nothing more than sales patter

[klikster]

What real-estate venture in Thailand is not questionable?

none of it is questionable unless you are confused or wish to believe that it is not what it is or wrongly compare it to different things abroad

I'm not confused at all, except perhaps by your statement.

[thaiwanderer]

maybe my english is off

if you understand what you are buying none of it is questionable

[katabeachbum]

This second agreement is a free standing contract, has already been formally agreed, and some consideration should be paid in advance (in the form of deposits and advance rent) so it has in strict terms already been consummated, but the term itself does not formally commence until a future date.

If the amount paid in advance is nominal, this doesn't seem to be a huge risk if properly planned for, assuming the land department registers both contracts. I wonder if they reference both agreement on the chanode?

Quicksilva, do you have any knowledge about the minimum acceptable up-front money?

If you go by the amounts accepted by landoffice for a sale, you should be safe.

In Kata, Phuket thats 4.000 baht/tw and 6250 baht/sqm according to sqm in buildingpermit (if you lease the building too).

[pkrv]

It HAS happened, and not just for two bit housing or condos either (although I understand that some projects do sell on this basis) but for very large projects in the heart of the CBD.

Yes I have heard this too for CBD condos whose Farang quota sells out instantly and yet more wish to buy - Tricky stuff, on all sides.

[loverboy44]

Yes sure! And soon we will have the 180 years leasehold where the land office gets the fees paid and the officer will get some lunch money and after 110 years someone comes from Bangkok to check and revokes the title.

[katabeachbum]

Yes sure! And soon we will have the 180 years leasehold where the land office gets the fees paid and the officer will get some lunch money and after 110 years someone comes from Bangkok to check and revokes the title.

110 years is fine with me. I think 60 years is much better than only 30 years, and 60 years in the Chanote feels safer than having savings in a US or UK bank account. Espesially when its 49% my co ltd who is the owner before lease is registered.

[loverboy44]

To make it clear and maybe you didn't get what i was trying to say.

The Thai law says clearly that you can only register 30 years leasehold. Anything else can maybe be registert with some table money but is not valid.

[katabeachbum]

To make it clear and maybe you didn't get what i was trying to say.

The Thai law says clearly that you can only register 30 years leasehold. Anything else can maybe be registert with some table money but is not valid.

Since you where writing about 180 and 110 years, I guess I had a problem to get what you where saying. And I dont need to get what you are saying.

"Table money" has not been payed. Thai law has been followed by registering 30 years lease. Twice. In the same land deed. With different times of start and expire. Covered until 2069. Wether Supreme Court would accept this is yet to be seen. Maybe I should bring my own holding company to court for 5 years to check it out. Nahh, I leave that to you loverboy. You seem to be the one with a Thai law degree here.

[Mobi]

To make it clear and maybe you didn't get what i was trying to say.

The Thai law says clearly that you can only register 30 years leasehold. Anything else can maybe be registert with some table money but is not valid.

Since you where writing about 180 and 110 years, I guess I had a problem to get what you where saying. And I dont need to get what you are saying.

"Table money" has not been payed. Thai law has been followed by registering 30 years lease. Twice. In the same land deed. With different times of start and expire. Covered until 2069. Wether Supreme Court would accept this is yet to be seen. Maybe I should bring my own holding company to court for 5 years to check it out. Nahh, I leave that to you loverboy. You seem to be the one with a Thai law degree here.

How do you know that table (tea??) money has not been paid?

If it were paid they are not going to admit it.

I'd bet a pound to a penny that table (sic) money was paid, and the land officer also did a good deed by collecting some more tax revenue for the government, and out of the hands of venal farang developers.

It may hold good if it remains unchallenged, but I wouldn't like to be the leaseholder if it goes to the supreme court.

As our the "Chief land officer" said the other day, there will not be a witch hunt on so-called illegal land registrations by foreigners or wives of foreigners, unless there is a dispute and someone lodges a complaint.

The same will apply to these 30 + 30 leases. If the lessor decides to challenge the second lease, I think he would win the day.

The advice to buy a condo or to settle for a 30 years lease is good advice if you want to sleep easy.

[katabeachbum]

To make it clear and maybe you didn't get what i was trying to say.

The Thai law says clearly that you can only register 30 years leasehold. Anything else can maybe be registert with some table money but is not valid.

Since you where writing about 180 and 110 years, I guess I had a problem to get what you where saying. And I dont need to get what you are saying.

"Table money" has not been payed. Thai law has been followed by registering 30 years lease. Twice. In the same land deed. With different times of start and expire. Covered until 2069. Wether Supreme Court would accept this is yet to be seen. Maybe I should bring my own holding company to court for 5 years to check it out. Nahh, I leave that to you loverboy. You seem to be the one with a Thai law degree here.

How do you know that table (tea??) money has not been paid?

If it were paid they are not going to admit it.

I'd bet a pound to a penny that table (sic) money was paid, and the land officer also did a good deed by collecting some more tax revenue for the government, and out of the hands of venal farang developers.

It may hold good if it remains unchallenged, but I wouldn't like to be the leaseholder if it goes to the supreme court.

As our the "Chief land officer" said the other day, there will not be a witch hunt on so-called illegal land registrations by foreigners or wives of foreigners, unless there is a dispute and someone lodges a complaint.

The same will apply to these 30 + 30 leases. If the lessor decides to challenge the second lease, I think he would win the day.

The advice to buy a condo or to settle for a 30 years lease is good advice if you want to sleep easy.

Thanks You ow me a pound!

I go to landoffice myself, and pay the taxes myself. The landoffice collects correctly double tax on 2 x 30 years leases.

I m the owner of the company who lease out the propety to myself, my gf is managing director since 5 years. The company is not planning to bring my lease or any other lease to supremecourt.

I will sleep very well in an hour. Thanks

[Burgernev]

Thanks You ow me a pound!

I go to land office myself, and pay the taxes myself. The land office collects correctly double tax on 2 x 30 years leases. I'm the owner of the company who lease out the property to myself, my gf is managing director since 5 years. The company is not planning to bring my lease or any other lease to supreme court.

Hi, genuinely hope this is allowed to go ahead at other land offices and become the norm as I have a vested interest. Playing devils advocate and not trying to pick holes in your set-up, more a case of having my doubts answered, can I ask the following:

1) Does the following section from the Civil and Commercial Codes not mean the 2 no. separate 30 year leases do not have a sound legal standing in the event of dispute, irrespective of the Land Office registering them both on the back of the Chanote ? - Section 540: The duration of a hire of immovable property cannot exceed thirty years. If it is made for a longer period, such period shall be reduced to thirty years. The aforesaid period may be renewed, but it must not exceed thirty years from the time of renewal

2) I'm also interested to know the advantages of leasing back to yourself the land your Limited Company already 'owns' and you presumably control via voting rights (as is my set-up). So long as the companies do not get investigated, which doesn't even enter my thinking, then you control the land anyway, should they get investigated and we're ordered to dispose of the land (due to nominee irregularities or whatever), then surely the lease/s will be adjudged irregular and not of legal standing too, and therefore will not be imposed on the new land owner the company disposes the land to ?

3) Also is a Thai Limited Company that has a foreigner controlling it via voting rights allowed to issue a lease to himself, nominee-wise ? Seems to me it falls foul of item 5 of following Ministry of Interior regulation introduced last year:

Subject: Acquisition of land by juristic persons (legal entities) having foreign shareholders - Attention: All provincial governors

Reference: The very urgent letter no. Mor.Thor. 0515/Vor 2530, dated 21st July 2006

Item 5 - In cases where foreign juristic persons take the lease or hold other rights for the long period of time, the investigation will be made about the business objective of the lease if it is the holding of land on behalf of a foreigner or in violation of the Foreign Business Act 1999.

Cheers,

Burgernev

Edited June 18, 2009 by Burgernev

[katabeachbum]

Thanks You ow me a pound!

I go to land office myself, and pay the taxes myself. The land office collects correctly double tax on 2 x 30 years leases. I'm the owner of the company who lease out the property to myself, my gf is managing director since 5 years. The company is not planning to bring my lease or any other lease to supreme court.

Hi, genuinely hope this is allowed to go ahead at other land offices and become the norm as I have a vested interest. Playing devils advocate and not trying to pick holes in your set-up, more a case of having my doubts answered, can I ask the following:

1) Does the following section from the Civil and Commercial Codes not mean the 2 no. separate 30 year leases do not have a sound legal standing in the event of dispute, irrespective of the Land Office registering them both on the back of the Chanote ? - Section 540: The duration of a hire of immovable property cannot exceed thirty years. If it is made for a longer period, such period shall be reduced to thirty years. The aforesaid period may be renewed, but it must not exceed thirty years from the time of renewal

Reply. Im not a lawyer, and I started this topic to see how other land offices handles the tax and registration of 2 x 30years. My answers is from own experince and understanding of the law only.

A:

One 30 years lease is registered from 2009 to 2039. One lease is registered from 2039 to 2069. No lease is longer than 30 years, thus legal. The second lease is renewed according to the law.

2) I'm also interested to know the advantages of leasing back to yourself the land your Limited Company already 'owns' and you presumably control via voting rights (as is my set-up). So long as the companies do not get investigated, which doesn't even enter my thinking, then you control the land anyway, should they get investigated and we're ordered to dispose of the land (due to nominee irregularities or whatever), then surely the lease/s will be adjudged irregular and not of legal standing too, and therefore will not be imposed on the new land owner the company disposes the land to ?

A:

A and B shares controlling voting is as I understand illegal, if A shares are on farang. If a company sole purpose is to hold land on behalf of farang, I am sure there will be a crackdown some day. If the company has a legal ownershipstucture with farang having shares and votes not exceeding legal limit, and the company has a turnover/profit (like maintance or leas-income) lease can not be revoked. Lets say a company owns 8 apartments, and each farang recives shares according to sqm purchased. 2 x 30 years lease in addition to secure ownership.

3) Also is a Thai Limited Company that has a foreigner controlling it via voting rights allowed to issue a lease to himself, nominee-wise ? Seems to me it falls foul of item 5 of following Ministry of Interior regulation introduced last year:

Subject: Acquisition of land by juristic persons (legal entities) having foreign shareholders - Attention: All provincial governors

Reference: The very urgent letter no. Mor.Thor. 0515/Vor 2530, dated 21st July 2006

Item 5 - In cases where foreign juristic persons take the lease or hold other rights for the long period of time, the investigation will be made about the business objective of the lease if it is the holding of land on behalf of a foreigner or in violation of the Foreign Business Act 1999.

A:

A co ltd with farang vote majority is as I understand illegal anyway. The business of the co ltd should not be solely to hold land, and income should not come from land lease alone.

When co ltd acquire land, it should have thai shareholders only.

There are many aspects to 2 x 30 years lease, but its seems safer than 30 years only, and the reg tax 1,1% is not much. Income tax on lease can be payed year by year.

2 X 30 years lease from a thai national seems problemfree, but an overlap between the 2 leases should not exist to protect from creditors in case of thai nationals bankrupsy. IOW first lease expire same day new lease starts.

Cheers,

Burgernev

[Mobi]

Thanks You ow me a pound!

I go to landoffice myself, and pay the taxes myself. The landoffice collects correctly double tax on 2 x 30 years leases.

I m the owner of the company who lease out the propety to myself, my gf is managing director since 5 years. The company is not planning to bring my lease or any other lease to supremecourt.

I will sleep very well in an hour. Thanks

Well done, I will give you the pound next time we meet. I wonder what it will be worth by then?

Burgernev has eloquently raised all the points I would have raised myself.

In effect, you are looking for double protection in case your first line of defence, ( i.e. a farang controlled company that owns land), falls through.

I am frankly extremely surprised that the land officer has rubber-stamped all this without needing some tea money, but I will take you at your word. (He isn't one of the shareholders, or has some other vested interest from this or previous transactions, or is he a close friend or distant relative of your GF by any chance? )

I'm impressed with the lengths you have gone to to give you a "sleep easy" in your old age, and follow the logic of your legal arguments.

But for my money (the ever depreciating pound), putting one transaction of dubious legality on top of another transaction of dubious legality is adding fuel to the fire that will ignite if there is ever a witch hunt, or God forbid, you fall out with your girl friend and she disputes your ownership.

Anyway, good luck.

I will sleep easy with my lifetime usufruct.

Edited June 19, 2009 by Mobi

[katabeachbum]

Falling out with my gf is not going to change anything. She is employed with case to case proxys from the board, payed as a managing director, and the board can replace her at any time.

The registration takes place with different landoffice employees, pending on which quenumber recieved. I guess it was some hard work for the first ones to register before me, but now it works smoothly.

The length of the lease is not for me, I just need another 30-40 years. Its for my children. And in case of a sale.

An usufruct for me with a lease for one of my children (or opposit) would also work, but if falling out with someone, an usufruct is only for lifetime. Lifetime can be short. A lease continues after one or both parties are dead.

An usufruct alone seems to dangerous to me. Its like putting a price on ones life.

An usufruct in combination with a loan seems ok, but a loan is very expensive to register (10%), except presently (tax brake) if done at day of transfer ownership.

[Gary A]

I would think that an illegal company that may or may not be investigate/prosecuted would not be able to issue a legal lease. If the company has a problem, the lease would also have a problem. That little thing mentioned many time, against the spirit/intent of the law probably has sharp teeth. Better you than me. I have an aversion about giving crooked lawyers big fees.