30 Year Property Leases

[Khun Bob]

Hi I have a bit of a predicament at the moment : There is an apartment I am very

interested in which is in a good location in Bangkok. From communication with

the sellers so far i have ascertained that :

* The apartment is leasehold and a 30 year lease will be given initially

* The seller does not know exactly what will happen at the 30 year point. I

have copies of the contract for the apartment and services in English and as

far as i can remember the renewal of the lease is not mentioned. The seller

will just tell me that he cannot say anything and that it is up to the land

owner.

* I have asked why it is leasehold and other apartments nearby are freehold.

The response has been that the land is owned by the government and/or king and

therefore the apartment cannot be freehold - i understand that the land cannot

be but i am struggling to understand why the apartment (property) has to be

leasehold. I have seen on the contract the name of the land owner and it does

not look like the king or the government owns it - but this is just a gut

feeling.

If you could give me any advice from past experience or point me in some

direction I would appreciate that tremendously. Further if you have used a

Thai legal person in dealing with leases for apartments or houses and had a

positive experience, I would be interested to hear from you and what you

experienced.

My primary concern is that I don't want an apartment purchase to turn into a 30

year rental.

Further, I understand that it is possible to have an extension to the lease at

the 30 year point and this can be put into the lease contract. However, from

reading TV before this appears to be a little shaky and not legally binding -

more of a gentleman's agreement ?

[Dragonman]

Hi I have a bit of a predicament at the moment : There is an apartment I am very

interested in which is in a good location in Bangkok.  From communication with

the sellers so far i have ascertained that :

* The apartment is leasehold and a 30 year lease will be given initially

* The seller does not know exactly what will happen at the 30 year point.  I

have copies of the contract for the apartment and services in English and as

far as i can remember the renewal of the lease is not mentioned.  The seller

will just tell me that he cannot say anything and that it is up to the land

owner.

* I have asked why it is leasehold and other apartments nearby are freehold. 

The response has been that the land is owned by the government and/or king and

therefore the apartment cannot be freehold - i understand that the land cannot

be but i am struggling to understand why the apartment (property) has to be

leasehold.  I have seen on the contract the name of the land owner and it does

not look like the king or the government owns it - but this is just a gut

feeling.

If you could give me any advice from past experience or point me in some

direction I would appreciate that tremendously.  Further if you have used a

Thai legal person in dealing with leases for apartments or houses and had a

positive experience, I would be interested to hear from you and what you

experienced.

My primary concern is that I don't want an apartment purchase to turn into a 30

year rental.

Further, I understand that it is possible to have an extension to the lease at

the 30 year point and this can be put into the lease contract.  However, from

reading TV before this appears to be a little shaky and not legally binding -

more of a gentleman's agreement ?

<{POST_SNAPBACK}>

If you are to buy leasehold what is the lease rental. This is exactly what you will get, is an apartment for 30 years for a fixed sum if the rental is negligible. It is not unusual to have leasehold apartments in many countries, but the fact that it is leasehold is reflected in the price. The option of 30 years is slightly more than a gentleman's agreement, but lets say a shrewd landlord will get around it with good legal advice. I would not advise anyone to buy leasehold in any Country.

[Sumitr Man]

From the details you provide the owner of the land will be the Crown Property Bureau (in English) and the land is likely [although it doesn;t "have"] to be located in or around Chula Uni and the World Trade Centre.

[PhuketRealEstate.com]

It all sounds a little strange to me.

Some quick advice regarding leases: Make sure the lease is registered in the land department and it is fully transferable to the next of kin. Do not sign any agreemeent without the lease being signed by other family members. You need to lock the lease in for 90 years and the only way to do that, is to get the family to carry the lease after the current "owner" has died.

Regarding the rest of your post, Im not sure what advice to give, as "kings Land" cannot be bought by anyone, whether Farang or Thai national.

Check, check and check again.

Good Luck.

[Dragonman]

It all sounds a little strange to me.

Some quick advice regarding leases: Make sure the lease is registered in the land department and it is fully transferable to the next of kin. Do not sign any agreemeent without the lease being signed by other family members. You need to lock the lease in for 90 years and the only way to do that, is to get the family to carry the lease after the current "owner" has died.

Regarding the rest of your post, Im not sure what advice to give, as "kings Land" cannot be bought by anyone, whether Farang or Thai national.

Check, check and check again.

Good Luck.

<{POST_SNAPBACK}>

Bob, I have to agree it sounds a strange arrangement.

Is this correct:

The owner of the land has leased the land to a Developer who has then built apartments and is leasing them on a capitalised lump sum basis with a nominal rent? Have you seen the Developers lease? It seems to me that the only way any Developer would undertake this route is by Building Agreement where profits are shared with the owner. He then ducks out when the condos are sold leaving you with a Ground Landlord and only a 30 year lease on the flat.

Be Careful

[Thaipwriter]

From communication with

the sellers so far i have ascertained that :

* The apartment is leasehold and a 30 year lease will be given initially

* I have asked why it is leasehold and other apartments nearby are freehold. 

What you are buying is a "30 year rental" no more no less.

the land story is irellavent.

Is the building one that will allow 100% farang ownership or is it 49%

if it the latter than all freehold units are sold and you are being offered the leasehold units that make up the other 51%?

it's fair to say that you would only be able to agree an "option" to renew to 60 years so that would more than likely only see you getting 30 years for your money. forget about 90 year leases, they are fiction,see section 540 of CCC

when the developer says "he does not know" what happens at 30 years, what he is really saying is, "you move out and i re-sell the unit"

I would walk away and find one that suits you that you can have freehold on.

Bangkok is awash with condo's, go find one that will be YOURS!!!!

good luck.

[Sumitr Man]

In the area behind the Regent Hotel in Bangkok this type of agreement is standard.

The owner of the land is the Crown Property Bureau - who lease the land on a non-renewable 30 year lease to a developer. In some cases the developer is a JV with the CPB (but not always). The developer then leases the units on a non-renewable 30 year lease to the purcahsers of the units.

It is also a popular method [in Phuket] for foreign developers to develop projects and sell on to foreign buyers. The Thai company owns the land, leases it to the foreign developer on a 30 year lease with the right to sub-lease and the foreign developer then "sells"the sub-lease to foreign and Thai purchasers.

IME there is nothing strange with this structure if you are dealing with (a) the CPB; or ( a foreign developer. The big question is, does the price refelct the fact that you are only buying a 30 year lease and are you happy to accept that?

Also, IME, so far as the CPB is concerned, they never give an option to renew for an additional 30 year period.

Again, I see nothing strange with the structure (provided the sub-leasing is valid). The decision is a commercial one of whether or not you wish to pay for a 30 year lease - which I gues would be the same as buying a residual 30 years in an original UK 99 lease.

Either that, or I'm completely missing something.

[Sumitr Man]

If you are interested in learning more about the Crown Property Bureau their website is here: http://www.crownproperty.or.th/ (but it is very slow downloading and also in Thai)

SM

[Dragonman]

In the area behind the Regent Hotel in Bangkok this type of agreement is standard.

The owner of the land is the Crown Property Bureau - who lease the land on a non-renewable 30 year lease to a developer.  In some cases the developer is a JV with the CPB (but not always).  The developer then leases the units on a non-renewable 30 year lease to the purcahsers of the units.

It is also a popular method [in Phuket] for foreign developers to develop projects and sell on to foreign buyers.  The Thai company owns the land, leases it to the foreign developer on a 30 year lease with the right to sub-lease and the foreign developer then "sells"the sub-lease to foreign and Thai purchasers.

IME there is nothing strange with this structure if you are dealing with (a) the CPB; or ( a foreign developer.  The big question is, does the price refelct the fact that you are only buying a 30 year lease and are you happy to accept that? 

Also, IME, so far as the CPB is concerned, they never give an option to renew for an additional 30 year period.

Again, I see nothing strange with the structure (provided the sub-leasing is valid).  The decision is a commercial one of whether or not you wish to pay for a 30 year lease - which I gues would be the same as buying a residual 30 years in an original UK 99 lease.

Either that, or I'm completely missing something.

<{POST_SNAPBACK}>

Thanks SM. This explains their reasoning. I just wonder how many purchasers get a professional valuation of the lease value based on projected rentals. I fear not many. Not experienced this on non commercial properties in Uk due to provisions in Leasehold Reform Act. Happily leasehold sales are declining in number.

[Sumitr Man]

Not sure why I cannot edit an ealier post of mine, but anyhow the corporate name of the CPB is Mongkhol Chaipattana Co., Ltd. so I guess you'd want to see that name somewhere...

[simcity]

A friend just ring me today , he said they have new condo near pantip plaza , on thirty years contract , price 1.5 million for one bedroom , and 2.4 million for 2 bedrooms .

Not sure of outgoing !

I think it is cool for some peoples, no messy will or succession problem, if something in this order are in huahin I will look at it .

As it is said , if it is cheap , why not !

[Digger]

I agree with Sumitr man - these are highly likely to be CPB lands - I looked at buying one by the Regent/Four Seasons hotel couple of years ago. The leases are sound and the legal view at that time was that the lease COULD be extended after 30 yrs with another payment to be determined assuming the CPB wanted to keep the buildings in place. Personally I thought they were a bargain and at that time I was only interested in generating an income out of it from rent. You basically cover the cost of purchase in about 5/6 years and then the rest is profit for the remainder of the lease. By now though they will be looking more like having only 20 yrs left on the leases. Many are still shells and never fitted out.

As I say though, for that location they are a steal, assuming of course you understand it just gives you the right to use it for the remainder of the lease period.

[The Skipper]

The benefits of buying a 30 yr. lease on Crown Property should be location and a better price per sq meter.

[Khun Bob]

Hi and thanks for all your replies - some great info there...

Funny thing is i have copies of the lease contract and the service contract and the name of the property owner is mentioned but it is not one of the names mentioned in this post so far. However the land is close to world trade plaza and one of the selling points from the sales people is that the leasehold reduces the price of the room.

I have made enquiries at another appartment being developed very close to the one i am interested in. These are freehold and the company is aiming to produce a '6 star' appartment where a 1 bed appartment of about 55 sq m wil be 4M THB. However completion is not for 2 years, as currently predicted and alot could change between now and then.

There is also another development right next to the world trade but i have no info on that.

I'm interested in one of the earlier posts that seems to state that 51% of units may be freehold and 49 leasehold - from my research so far it seems to indicate that all are leasehold. However i know that a significant number of units that are all together were sold by 1 agent - this looks a little suspicious.

If i am to go for this then it will be on the basis of a 30 year rental, which i have calculated is a very reasonable price for the area.

However, I am concerned about what will happen at the 30 year point and who will decide what happens. I dont like the fact that i may have little or no rights at that point and should i wish to keep the appartment may have to fork out another significant amount.

I would like to post copies of the lease contract and the service contract to see what you think and the name of the property owner. I.m out of thailand at the moment but will be back in just over a week, so will try and do it then.

Thanks for all your help.

[thedude]

Good post Sumitr Man. Not many people know this but The Crown Property Bureau is the main but not the only entity holding land for His Highness. For example some land in the vicinity of the Four Seasons are actually held by The Privy Purse (sort of like a treasurer of the household), who would also lease it out for typically 30 year terms.

Regarding Khun Bob's confusion over the name appearing as the developer, its quite simple, the CPB or the Privy Purse may not be the developer themselves. They sometimes allocate a master lease to an individual or company, who will then either develop the land in their own name, or in some cases, enter into a joint venture with a professional developer to build a hotel or an office building, or a condo as in this case. The developer, having put a building on the land, will then apply to sub-divide the individual stratified space into condominium titles for sale. These titles carry a right to use the subject property for a period corresponding to the remaining tenure of the master lease.

As was well pointed out by Sumitr Man, the title is kosher, but the real issue is whether you are paying good money for the leasehold title. My research puts the market differential at around 30% to 40% between comparable NEW prime leasehold and freehold units. Because leasehold properties depreciate according to the remaining tenure, the lower entry price makes the rental yield far superior to a comparable freehold unit. People buy leasehold units for appreciating rental yield instead of capital appreciation. You have to do your own calculations, but i venture that there is probably a sweet spot on the yield curve within which it may be favourable to trade in such properties.

[Khun Bob]

Thanks for all your replies and help.

I'm changing my mind about this as i know that for the amount involved i can buy a number of properties in other locations that will satisfy my requirements. I am not a budding landlord and dont really want the hassle associated with that.

When I get back to BKK, i will try to get the docs scanned and posted as it will be interesting to hear what everyone has to say and I'm not sure yet that I will totally avoid leasehold - so i still have a vested interest in this topic.

I also have a few photos of this developemnt that I was told initially i could not take, but on a returning visit was told no problem - well that was after i took the photos anyway...