3 Year Lease Contract - How To Guarantee Fair Renewals

[simon43]

I'm currently considering lease contracts for 3 different properties in Phuket which are either operational hotels, or have the potential to become such.

- One of the properties is an existing small resort, offers a 15 year lease (registered at the land office), no key money, but a high monthly rent

- The second property is an existing small resort, location so-so, offers a 15 year lease (registered at the land office), 2 million baht key money (paid in 4 installments over 4 years), and a low monthly rent, but with great expansion potential on 5 rai of land.

- The third property is not yet operating as a resort/hotel, but is in a very good location. No key money, fair rent, but only 3 years initial lease contract.

The last property interests me the most because of it's location, new buildings, and opportunities for me to grow the new business from scratch. But the 3 year lease period concerns me. I know that this will be since the owner does not want to register the lease at the land office, thus avoiding tax. OK, up to him. But I am considering the scenario where I build up the hotel, and at the end of the 3 year contract, the owner either refuses to renew the lease, or demands key money (for MY business), or increases the rent by an unacceptable amount.

My question is this:

If a 3 year lease contract is implemented, is there any legal requirement that can be imposed in that contract which requires the property owner to give me first refusal on a lease renewal, forbids implementation of key money, and forbids a rent increase by an unacceptable amount?

If there is no such legal option, then I will walk away from property 3, because I'm not going to give someone the present of a profitable business at my expense

Please do comment about the legal options. Don't worry commenting about whether it's a good time or not to open a new resort/hotel. For me, given the right location, this is absolutely the right time...

Simon

[Canada]

You can write your own contract......

[kuffki]

1. In the contract you scan make clause stipulation the % of increase, ie 10% or so

2. you can do a 3x3 lease with no increase

3. alternatively you can do any year lease, ie 5 year or 10 year. all comes down to negotiations

[Khun Jean]

Walk away or make your own contract. Include some 'treats' like a percentage of the profit/turnover, yearly increase rent with a percentage or inflation number etc...

Not registering for tax purposes is a non issue (just include it in the rent) but can be a mental block for the owner. Overcoming that mental block may need one or more 'treats'. The BIG bonus for the owner is what you will leave behind at the end of the contract.

If you are building the business from scratch nothing less than 20 years seems viable.

Renewals are not solid enough to base a business on.

The words guarantee and renewals don't go well together.

Edited June 20, 2010 by Khun Jean

[moe666]

How good is that paper your lease is written on. Leasers and leasee ignore the legal obligation they have agreeded to all of the time and I am talking the States here.