How Safe Is 30 Year Lease And Is It An Option For Me

[123ace]

This issue for you depends ultimate objectives, if you are looking for a retirement home and re-selling is not an issue, and you are sure Samui is the location, and the land title is crystal clear, the neighbours are ok, and you have a trustworthy builder etc etc, then i would say take a standard lease with the renewal option and have it registered at the Land Department.

No amount of clever planning today will change the law or a judges inerpretation of foreign property rights. So many expats have soul searched on this issue that I just would not bother going down this road at the present time.

[123ace]

I would say the lease is better based on teh prevailing enviroment. The company structure is more easy to sell though, but if a crackdown happens it will not likley stand up to scrutiny - depending on the nature of the crackdown and how the 51% was funded.

[sleepyjohn]

Quiksilva and Oracle...

if one went the lease route, would it be possible when you set it up with your Thai owner friend to ask for just a couple of things in future?

1. To sell the freehold if required (interested how one could control the funds from the sale if things were now pear-shaped and the evil junkie nephew had inherited.....any ideas?)

2. Every say ten years to renew the lease completely for a further 30 years.

This way one would always have 20 years notice of a problem, with the possibility of paying the evil nephew off for the renewal with him knowing he's got a real long wait ahead....

BTW anyone know the present tax or fees for the 30 year lease?

thanx in advance......

[123ace]

Quiksilva and Oracle...

if one went the lease route, would it be possible when you set it up with your Thai owner friend to ask for just a couple of things in future?

1. To sell the freehold if required (interested how one could control the funds from the sale if things were now pear-shaped and the evil junkie nephew had inherited.....any ideas?)

2. Every say ten years to renew the lease completely for a further 30 years.

This way one would always have 20 years notice of a problem, with the possibility of paying the evil nephew off for the renewal with him knowing he's got a real long wait ahead....

BTW anyone know the present tax or fees for the 30 year lease?

thanx in advance......

1. yes you can sell the freehold, but you as have pointed out the trust issue here with the nominee, as the lessor has migrated in to a relative, i.e a party that did not benefit from the original sale of rights to the land. There is very little you can do to protect yourself. A lease may be viewed as pre paid rent by the courts and as I keep mentioning, the terms of the lease may be invalidated by the courts anyway as it may be concived as against the spirit of the law.

2. This is common practice, I know of some Lessee's that make a new 30 year lease every 12 months, or after 5 years etc for this precise purpose. It has been a method by locals as well, where a high profile local buyer of a long standing exsiting long lease was able to have the Lessor grant a new 30 years where there was only about 20 years remaining.

This approach is a very good way of making it possible to resell at any time by simply granting a new 30 years at any time. However, if this became prevalent I expect the Land Office would put a stop to it. Also if the Lessor / Nominee or whatever has changed the evil nephew would want to cash in to benefit at that time.

Tax is 0.01& of total lease value - often fudged by assigning multiple agreements such as a construction contract, services etc, limiting the rental portion.

[Langsuan Man]

Every time I bring up this "trustworthy Thai person" argument here on Thai Visa I get the old refrain that I cannot use a nominee to get around the legal restrictions

I do not quite understand what you mean? The person I would use is not a nominee?

Don't worry someone will soon chime in explaining that if your " trustworthy Thai person" is not able to prove that they obtained the property INDEPENDENT of you, then they are considered your nominee, and thus in violation of Thai law

[OKF]

@langsuan man:

Oh I see, no problem, actually the guy would not be nominee, it would be a straight forward deal, the guy is not poor and he is educated and well aware of the property issues.

@123ace:

Okay I got you and we are bottoming my problem. As a further explanation, yes it is not meant for resale and not meant for investment it is for retirement purposes and maybe rent it out here and there to cover some of the cost. I have looked for 3 years for good people on the island and finnally found them so I would think I have the right people for building supervision, the right guy for plumbing and electricity (which is a key issue from what I know) and will find the right building company through all these people. I stay away from all the developing and keyturn ready builders with their nice drawn concepts which can hardly be built in Samui and which are not feasable for the tropics and so on and on and on. So you seem to understand the issue very well and come to the point precisely. Coming back to my main point, is the sale and leaseback or staying with the companies better? Maybe keeping the sale and lease back as an exit strategy?

[oracle]

Oh I see, no problem, actually the guy would not be nominee, it would be a straight forward deal, the guy is not poor and he is educated and well aware of the property issues.

If your Thai friend is not poor and well aware of the property issue, why not ask your Thai friend to become a shareholder in your company and remove the holding company as shareholder. This way you are covered and you got someone who is not a nominee and a person you trust and you still control the land. Unless your Thai friend wants only the land and not wants to become shareholder in your company

Can you explain why you think it is illegal to control a company that owns land?

[123ace]

Oh I see, no problem, actually the guy would not be nominee, it would be a straight forward deal, the guy is not poor and he is educated and well aware of the property issues.

If your Thai friend is not poor and well aware of the property issue, why not ask your Thai friend to become a shareholder in your company and remove the holding company as shareholder. This way you are covered and you got someone who is not a nominee and a person you trust and you still control the land. Unless your Thai friend wants only the land and not wants to become shareholder in your company

Can you explain why you think it is illegal to control a company that owns land?

On the basis that non-Thais are not allowed to own land (or control land). The company approach is widely looked at as being against the spirit of law and has been in the spotlight frequently since April 2006. Whilst it is common practice, this does not mean it has the blessing of the authorities. Unlike a 30 year lease which does. If you are in any doubt pop in to your local Land Department and as ask them directly.

[OKF]

@123ace:

Coming back to my question. As explained above it is not meant for resale and not meant for investment it is for retirement purposes and maybe rent it out here and there to cover some of the cost etc. see above...

So is the sale and leaseback or staying with the companies better?

Maybe keeping the sale and lease back as an exit strategy?

@oracle:

I do not think the guy is looking for any investment so why should he involve his money into my company?

[123ace]

A lease basis will likley allow you to take comfort that you are in line with the approach permitted by the authorities. The company approach is at risk in the event that local pressure groups raises the issue and there is a backlash against foreign company ownership, as has been the case in 2006 & 2007.

As such and in light of your indicated psotion I would go with the lease as it will best ensure a hassle free 30 years of use and good chance of renewal etc.

[OKF]

so you would also rule out using it as exit strategy and start to proceed with the company structure and respond to possible problems by switching over then?

[123ace]

OKF,

based on your usage needs you should not have to worry about 'exit stratagies' etc. If you are looking for a nice peaceful retirement go for a 30 year lease with the option to renew.

Add a clause for automatic conversion to any new form of improved foreign ownership that the Govt introduces during the term of the lease, or just renew the lease every 12 months or 5 years etc, and certainly as long as your Thai friend (I assume will be the Lessor) is compliant etc.

So if you sell it, sell it with a new 30 years to the new buyer.

[OKF]

Thank you for your thoughts. I will certainly investigate and discuss that issue when I am in Samui next week.

You say 12 moth or five years. I have read that some people after 10 year renew the formerly done 30 year lease for another 30 years, what I do not understand how the payment is done? So if you do a 3ß year you pay for exampel 2 million Baht. If you renew it afre 10 year for new 30 year you have lost 2/3 of what you paid or how does it work?

[donx]

Can you explain why you think it is illegal to control a company that owns land?

I don't know how OKF pulled it off but he claims that he controls the majority of shares for both of his companies. I assume one of the companies is listed as owner of the land and the other company owns shares in the land-owning company. Thus neither company has Thai majority ownership and is therefore not allowed to own land.

I don't really understand his dual company ownership structure, but if what I discribe above is the case, then if I was OKF I would try to find a way to establish a Thai limited company (with actual Thai majority ownership) that takes control of the land.

[OKF]

I do have a Thai majority but still more or less full control. I explained it briefly in another thread here. I will send you a PM to explain in detail if you are interested.

Edited February 17, 2010 by OKF

[donx]

I do have a Thai majority but still more or less full control. I explained it briefly in another thread here. I will send you a PM to explain in detail if you are interested.

I read your explanation on the other thread that you are referring to and to be honest I was quite confused. I thought you were saying you owned significantly more shares than all other share holders but perhaps you were actually referring to the number of votes corresponding to each share. I know that many Thai companies set the votes per share such that even though a foreign director owns only 40% of the company, each share owned by the director counts as 10 votes. Thus if the total number of shares is 100, the Thai majority only has 60 votes while the foreign director has 400 votes.

Go ahead and send me a PM if I'm still not understanding your share holder structure correctly. I do realize you have two companies and they each hold stock in the other company.

[Naam]

I do have a Thai majority but still more or less full control. I explained it briefly in another thread here. I will send you a PM to explain in detail if you are interested.

I read your explanation on the other thread that you are referring to and to be honest I was quite confused. I thought you were saying you owned significantly more shares than all other share holders but perhaps you were actually referring to the number of votes corresponding to each share. I know that many Thai companies set the votes per share such that even though a foreign director owns only 40% of the company, each share owned by the director counts as 10 votes. Thus if the total number of shares is 100, the Thai majority only has 60 votes while the foreign director has 400 votes.

Go ahead and send me a PM if I'm still not understanding your share holder structure correctly. I do realize you have two companies and they each hold stock in the other company.

the done thing is that you have the thai share certificates as well the blank but signed transfer documents stored in a safe place.

[Naam]

Every time I bring up this "trustworthy Thai person" argument here on Thai Visa I get the old refrain that I cannot use a nominee to get around the legal restrictions

I do not quite understand what you mean? The person I would use is not a nominee?

Don't worry someone will soon chime in explaining that if your " trustworthy Thai person" is not able to prove that they obtained the property INDEPENDENT of you, then they are considered your nominee, and thus in violation of Thai law

i wonder what date "soon" is? i am hearing this bla-bla from those "holier than you" since 1½ decades

[Langsuan Man]

See this thread

http://www.thaivisa.com/forum/Issues-Nomin...ei-t295344.html

This post

http://www.thaivisa.com/forum/Issues-Nomin...t&p=3159121

[OKF]

thnaks for the link, very interesting thread