The ins and outs of renting property

[george]

The ins and outs of renting property

Foreigners have few choices but to lease. Here are a few things to keep in mind

BAKER & MCKENZIE

Most foreigners who have stayed in Thailand for an extended period of time have quite likely come to the conclusion that owning land in the country is not a viable option. Although the Thai Land Code permits foreigners to acquire land by virtue of the provisions of a treaty giving them the right to own immovable property for residence and other limited purposes, no such treaty rights exist.

Aside from the special exceptions to own condominium units under the Condominium Act, which should be approached with the aid of qualified legal assistance to ensure such an investment is secure, few alternatives exist to the majority of foreigners who wish to own land in Thailand.

Consequently, the vast majority of foreigners living and working in Thailand are faced with the prospect of renting or leasing an apartment, condo or house. Anyone who has undertaken the arduous process of locating a suitable abode, soon realises that there are an overabundance of available properties in a variety of locations. The range of prices is often confounding, and the terms and conditions of rental or lease agreements vary widely. Apart from identifying an affordable unit, it is critical for a lessee to consider the terms and conditions of their agreement in order to ensure they will be treated fairly throughout the term of the agreement.

In this regard, common sense should play an important role; deposits, tenure, causes of termination, rights to eviction and duties of the parties should be seriously considered when entering into a contract for hiring property. It cannot simply be assumed that lease agreements in Thailand are standardised and that the duties and obligations of the parties will be well balanced. Close scrutiny and thoughtful consideration are the best ways to know what you are getting into. It is also helpful to be generally familiar with the basic obligations set out under Thai law, in particular, the Thai Civil and Commercial Code, which functions as one of the core pieces of legislation in Thailand and among other areas, stipulates basic laws regarding the hiring of immovable property.

One of the first things to notice is that an agreement to hire immovable property is not enforceable unless there exists written evidence signed by the liable parties. More importantly, a hire of property for more than three years will not be enforceable unless it is registered with the competent official, i.e. the Land Department, and a registration fee is paid. Although immovable property cannot be hired for longer than thirty years, it may be made for the life of the owner or the lessee. If a lease is made for a lifetime term, however, it still must be renewed after thirty years _ renewal is not automatic.

Once a binding agreement is made, the owner of the property is obligated to deliver the property in a good state of repair. If the owner of the property fails to do so, the lessee is entitled to terminate the agreement. Nevertheless, the lessee must be careful to first inspect the property, since he or she will not be entitled to terminate an agreement due to a pre-existing defect later discovered if the lessee would have known of it if he or she had exercised ordinary care in examining the property before entering into the contract. In the event a defect arises during the term of the agreement, which would customarily be repaired by the owner, the lessee needs to notify the owner by sending a letter requesting that the defect be rectified. If the owner fails to do so within a reasonable time, the lessee can terminate the agreement.

In terms of the duties of the lessee, he or she can only use the property for normal uses or those stipulated in the agreement, and is obligated to take reasonable care of the property and to make petty repairs. If the lessee fails to do so, the owner may request compliance in writing within a reasonable time and, if the lessee fails to comply, the owner can terminate the agreement. In those circumstances where the owner voluntarily wishes to make some urgent repairs to the property, the lessee is bound to allow the owner to do so. On the other hand, the lessee cannot alter or add to the property unless he or she first receives the permission of the owner.

One common scenario that arises in renting or leasing property is when the term of the agreement has expired yet the lessee remains in possession, continues to pay rent and the owner does not object. The lessee might be inclined to develop a false sense of security that the agreement has just been renewed for an additional term equal to the first. In reality, the parties are deemed to have renewed the contract for an indefinite period, and either party is entitled to terminate the contract at the end of a normal payment period, provided that at least one period of notice is given. If the rent is paid on a yearly basis, the contract will be deemed to have been renewed for another year upon payment by the lessee, but if the rent is paid monthly, the renewal is essentially undertaken on a month-to-month basis.

The key to foreigners ensuring a hired property in Thailand becomes a safe retreat rather than a burden is to keep your eyes wide open when inspecting the premises, scrutinise any contract and form an accurate opinion of what sort of landlord you will be interacting with in the future.

- To The Point is Baker & McKenzie's weekly column covering current and vital legal topics, offering clear commentary for readers. A member of Baker & McKenzie's Real Estate Practice Group prepared this article. Comments and questions are welcome at:

Source: [email protected].

[ThaiAdventure]

Good article George.

The only major difference that I can see between western (I can only qualify the UK) and Thai is the renewal based on the payment period.It doesn't really apply in the uk since all rental is monthly but I have come accross yearly rental in Thailand.

I fully understand about reading the contracts fine print but the greatest problem is that generally that fairly priced rental property agreements are in Thai (of course). It is worth pointing out that it is always wise to get a translation if you are serious about renting and get the landlord to sign the translation as being true.

I wouldl be interested to hear some of the forum members experiences and pitfalls.

[KenUdon]

Very useful info George.

The problem is, getting these things enforced when they go wrong.

It is highly unlikely that any legal decision will go in favour of the foreigner regardless of what any contract says.

[Axel]

Knock on wood, I never had real problems although, I did move appartment every two years or so.

Some landlords have been a bit slow with returning deposit, mainly afraid of bills for telephone etc. still to come.

All agreements signed for 1 year at a time and actually I did always move at the end of the agreed time. No need to give notice, jus a verbal hint, that I will not renew.

A yes, the very first one. Left after one year and heard the nonsense that the deposit, following Thai laws, could only be returned after deduction of 10%.

Had a little bit stronger talk to he landlady and got the full amount bag. Afraid she did not like me after that.

[en184]

WHY NOT BUY ?

Why not buy a condo?

At least then, nobody can kick you out of it and you have a permenant home in thailand..

[ThaiAdventure]

WHY NOT BUY ?

Why not buy a condo?

At least then, nobody can kick you out of it and you have a permenant home in thailand..

I personally don't like condo's. I want a house with two floors and a garden for the elephant.

To generalise, most farang view guying a property as an invetment as well as a place of abode. There is a conbination of things that make the prospect of buying unattractive not least being the ability to re-sale and the prospect that if you loose your job you may have to leave. In addition, unlike the western countires where renting is more expensive than having a mortgage. In Thailand it is cheaper to rent.

Most farang would not contemplate living in the type of house which would be considerd the low to middle end of the market. Therefore they tend to opt for the high end market where the re-sale value is unstable. In addition, most farang feel uneasy about not being able to own the land and this leads to complications with legal rights (most opt for 99 year leases).

I have considered buying but decided agianst it...for now at least. I will make sure that I have made a comfortable life then probably build a house rather than buy.