30 Yr Lease On Gov'T 4 Level Townhouse/Shop

[bushwacker]

Hi to All

I have stumbled on a government program here in Nakhon Sawan and would appreciate receiving any facts or information from Members before contacting the local government. Here in Nakhon Sawan, most of the available land in the city is owned by the government. In order to increase revenues it seems they have started a project to build those 4 level or 3.5 level shop/houses and lease them out for 30 years. The structures that I refer to can be seen through out thailand where the first level is set up as a business and the remain levels are for the family to reside. Here, they have started building these shops around a big permanent market, in the city, near the river, which has been recently diked into a nice walk way. The Market is already quite busy and many of the built structures are already established businesses. I think the area will continue to expand and improve and turn into a great place to live.

From what I have gathered todate, the government wants a 30 year lease and the value of the lease is 2.4 million baht. For an older Farang like myself, the benefits of such a lease would be having a large living structure (with no elevator:() close to markets, doctors, dental, etc for a pretty reasonable amount of money. So, has anybody had any experience with this kind of arrangement? I would be using the building as a residence only with no intention of setting up a business. I am here on a retirement visa. My questions are ....

1. Would the lease be paid in one lump sum to the government or on an annual basis? This is a really big point because if it is annual (which has been suggested by some not-very-knowlegible thais), this means that my current existing capital almost pays for the annual payment, (assuming a 3% dividend rate after tax). In fact it would cost me about 667 extra baht a month or 8000 baht a year. In other words i keep my money in the stock market and earn dividends. Use the dividends + 8000 each year. At the end of 30 years, i still have my capital and have only spent my dividends + 240,000baht. Hmmm ... out of pocket 667baht a month for 30 years ... sounds great to me! So what am i missing?

2. Are there any other charges or taxes in this type of lease with the government?

3. How difficult is it to get out of a lease with the government? One never knows when they might decide to not renew retirement visas.

4. Are there restrictions to capital improvements on the building?

5. Can the lease be in the farang's name?

Any insights would be greatly appreciated.

cheers

[123ace]

I assume you have not been provided with a lease that answers these questions?

If it is a 30 year term the rent should be paid upfront. It can be in a farang name. If you cancel early, expect to lose what you have paid. If you are paying monthly then its not a 30 year lease, but most likley a 3 or 3+3 etc (but not greater than 9) - beware if you take this on monthly and make necessary upgrades etc as you may not receive the renewal if they want it back.

This type of structure costs approx THB 2.4 to build, so any changes you make should not be an issue. Use your own contractor.

Check things like A/C units being installed, a kitchen that is usable and real toilets (not squatters) - the local spec will potentially be dire.

It sounds off-plan? a risk of being isolated if others don't occupy.

[trogers]

Keywords - Local government, market, commercial, shophouses.

Can and will a local government give a 30-year lease to a foreigner? Can a lessee sub-lease the unit, and if yes, under what restrictions to prevent speculation?

The development is geared towards establishing a commercial centre, part of the local town planning, and will not the lease agreement stipulates some restrictions in the use of these shophouses? How would using them fully as residences fulfill the plan?

The answers to most of your questions can be found at the local office handling these leases.

[Farma]

I’ve seen a few versions of the lease situation you describe.

1. The first was an older building the wife rented for a couple of years. The lease holder owned the building and offered the building to us with 12 years land lease remaining.

On purchase, the land lease and building ownership would be transferred to the new owner’s name. At the end of the remaining 12 years it would be up to purchaser to negotiate a new land lease.

Standard modifications to the building were allowed. I.E. Changing the shop front to suit business needs and adding awnings, signs etc. We declined the offer as they were asking more than we could afford at the time.

2. Another version is a series of shop houses being built as part of a program to allow poor people gain access to cheap commercial accommodation. The person buys the building and that payment includes payment for the 30 year land lease. The buyer can access a low interest loan from the government project for the purchase. We didn’t pursue this so I can’t offer further info.

3. A 3rd version is the purchase of a privately built shop house built with authorization of the government land owner. The lease is a perpetual 3 year lease. The land lease payment is made every 3 years. (It took 3 years for the first lease agreement to be signed by the departments BKK HQ, we occupied the building during that waiting period)

The same rules apply as with scenario 1. Awnings, signs etc can be added but modifications such as adding additional construction to the outside is not allowed. The building can be sold and the lease transferred into the buyer’s name.

In our experience, as the building is on leased land, private banks will not finance the purchase or accept the building as collateral for a loan. I was not associated so I can’t offer advice on foreign ownership.

[bushwacker]

Thanks to all that replied with good information. I have found more info out by having my thai partner go and talk to some established businesses at this location. It turns out that the builder of the shops is a very enterprising man with obviously great connections. I say this because this government (Army) land is well situated in the city by the river and such land has not been available for many years. But he was able to secure it on a 30 year lease. He then started building these shops around an existing new market.

The deal is that you buy the structure from him. Over looking the river costs 5.7 Million Baht and not the 2.6 that we were led to believe. A few other shops in not such a good location are going for 3 million baht. When you buy the building, you also take over the lease from the army. At present there is 27 years left on the 30. From a payment perspective .... the shop is paid for in cash .... up to the purchaser to get the funds. The lease is paid monthly to the Army. For the first 5 years the cost is 600Baht per month. Then year 6 to 10 in becomes 700B. Year 11-15 it becomes 800B .... and this escalation continues. The owner we talked to said that at the end of the 30 years ... if the army did not want to renew the lease then they would have to buy back the building at a discounted rate because it has depreciated. Hahahaha .... i do not believe that for a minute

So, this is really a fantastic location BUT a really bad deal for me and I would think most people. Yet the shops are being purchased as fast as they are being built. Mysterious !!!!

Cheers

[trogers]

For the first 5 years the cost is 600Baht per month. Then year 6 to 10 in becomes 700B. Year 11-15 it becomes 800B .... and this escalation continues.

So, this is really a fantastic location BUT a really bad deal for me and I would think most people. Yet the shops are being purchased as fast as they are being built. Mysterious !!!!

I will not be surprised if most of the 'buyers' are sub-letting the premises at 10-12x what they pay monthly to the army.

[Farma]

^Not always the case. It's a very common form of business ownership in the provinces where most of the city land is owned by one government department or another.

In my experience there's a market for these buildings with ones located in good positions snapped up. I lost count of the number of times we received offers on the place mentioned #3 in my earlier reply. Franchises like 7-11,video outlets etc occupy some of these buildings.

The local business people weigh up the cost of the building against profit. The building cost can be written off if the location provides good sales.