What Happens To Your Long Lease When You Die? Part 2

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WHAT HAPPENS TO YOUR LONG LEASE WHEN YOU DIE? Part II:

How to fix the problem

By James Finch & Nilobon Tangprasit

You'll recall that last time we concluded that to avoid losing a long lease on a house or a condominium you should do two things:

Have the lease provide that if the tenant dies the lease will go to his or her heirs; and,

have more than one tenant, so that if one tenant dies, there will be an additional tenant to continue with the lease.

Let's continue with our discussion of leases and succession. First, who should the additional tenants be?

For starters, if you are married, you might make your spouse a tenant. But what about those in the next generation? Since it is likely that they will die long after you, your children and grandchildren are good candidates for co-tenants.

We are talking here, by the way, about when you have a foreign spouse. If your spouse is Thai, this is a different matter, and it will be the subject of a future column.

Let's take an example. Let's say you and your spouse are both in your mid-seventies and have moved to Thailand to retire. You're considering entering into a 30-year lease for land in a development and building a house on it. You have two children, one living in Australia and the other in England. They are both married and you have three grandchildren, between the ages of 12 and 21.

You could have your spouse, your children and your grandchildren sign the lease as co-tenants. There are two advantages to this. First, if you die, the lease automatically goes to the others on the lease. Because of their ages and diverse geographical locations, it is likely that at least one of your family members will live for the entire 30 years of the lease, and that it therefore won't go back to the landlord.

Second, if your heirs inherit by being co-tenants, there won't be any property taxes and fees in Thailand, as there would if they weren't co-tenants but just inherited your interest and then had to register their names as tenants at the land office. To give you a rough idea, these fees and taxes would run about 1.1% of the calculated value of the annual rent multiplied by the number of years remaining on the lease.

There are a couple of things, though, to keep in mind if you are going to put all of these people on the lease:

You will need their signatures on the lease, either by having them in Thailand at the time the lease is registered at the land office, or by power of attorney, signed while they are in Thailand or at a Thai consulate outside. The power must be in the form used by the land office, in the Thai language only. The land office will, moreover, require the power of attorney to have been executed within a few months of the date of the execution of the lease, if it has been signed in Thailand. If the power of attorney is executed outside of Thailand at a consulate, the consular officials won't legalise it unless it is complete, including the date, in the Thai language. This may, of course, create logistical difficulties.

If any of your tenants are below the age of 20, the age of majority in Thailand, a court order will be required to transfer the lease if you wish to transfer the lease to another tenant. Although this is possible to get, it will involve time and expense. You should, therefore, only have children under 20 on the lease if you are reasonably sure there will not be a need to transfer the lease before they reach the age of majority.

In light of the above, you may want to limit those signing the lease to a few relatives only _ those such as your spouse who will really use it right after you die, and one or two youngsters who will ensure that the lease will continue for its full term.

Next time we'll discuss some refinements on your lease and the possibility of getting more than 30 years.

James Finch of Chavalit Finch and Partners ([email protected])and Nilobon Tangprasit of Siam City Law Offices Ltd ([email protected]).For more information visit www.chavalitfinchlaw.com.Comments? Questions? Contact us at the email addresses above.