Usufruct Question For Sunbelt

[ricklev]

Sunbelt could you please explain your statement: "A usufruct grants the user a lifetime use of the property, even allowing the usufructary the right to lease the property that would remain legal even after his death."

I have never understood how a lease granted by the holder of a usufruct could last after his death beyond 3 years. And, even then, for a lease less than three years, where is the privity of contract between the owner of the property and the lessee?

All leases over three years must be registered by the holder of the chanote, isn't that so? Even if the owner of the land agrees to a lease with a third party, the land office isn't going to allow both a usufruct and lease on the chanote.

Could you clear this up for me....

Thanks!

[Mobi]

I'm not a fan of Sunbelt but I see no legal conflict here.

Normally, the rights of a usufruct holder are extinguished once he or she dies. However, if during his life time he grants a lease and then dies, the lease so granted is legal until it's expiry. I think Sunbelt is thinking of 99% of leases which are for a maximum of 3 years, so if the usufruct holder dies after, say, 1 year of granting the lease, then the lease is still good for the remaining 2 years.

I admit I have never considered the situation where the lease may be for more than 3 years, for as you point out, this would need to be registered at the land office. But in principle, I see no conflict. The usufruct holder issues a lease for (say 10 years) gets it registered at the land office, and then dies. So the lease is still valid until it expires. No different to if the actual owner of a property issues a long lease and then dies. The owner's heirs would have to honour the lease.

I do agree that the usufruct holder may have a problem getting the land office to register such a lease,especially if the usufruct holder is a franag and is in his dotage, but in theory, I see no reason why it shouldn't be possible.

[ricklev]

I'm not a fan of Sunbelt but I see no legal conflict here.

Normally, the rights of a usufruct holder are extinguished once he or she dies. However, if during his life time he grants a lease and then dies, the lease so granted is legal until it's expiry. I think Sunbelt is thinking of 99% of leases which are for a maximum of 3 years, so if the usufruct holder dies after, say, 1 year of granting the lease, then the lease is still good for the remaining 2 years.

I admit I have never considered the situation where the lease may be for more than 3 years, for as you point out, this would need to be registered at the land office. But in principle, I see no conflict. The usufruct holder issues a lease for (say 10 years) gets it registered at the land office, and then dies. So the lease is still valid until it expires. No different to if the actual owner of a property issues a long lease and then dies. The owner's heirs would have to honour the lease.

I do agree that the usufruct holder may have a problem getting the land office to register such a lease,especially if the usufruct holder is a franag and is in his dotage, but in theory, I see no reason why it shouldn't be possible.

[gotlost]

There have been reports of some land offices not recognizing a usufruct, particularly in the Bangkok area.

[ricklev]

Thanks Mobi, but the usufruct holder has no rights to register a lease with the land office.

And why would the land owner honor a 3 year or less lease after the usufruct holder dies?

[Sunbelt Asia]

The usufructuary is the manager of the property and is allowed to rent out the property without the consent of the real owner (unless restricted in the usufruct contract.) The usufructuary is a real property right where the owner of a real estate property (condominium, land and/or house) grants by agreement to another person the right of possession, management and benefits the property may produce for a limited period of time. Unless restricted by the usufruct contract, the right of usufruct grants all the rights of use and management of the property to the usufructuary as per the Thai Civil and Commercial Code sections 1417 to 1428.

Even if the usufruct will end at the death of the usufructuary the usufructuary can lease out the land to a third party and this second agreement will NOT end when the usufructuary is deceased as per the Supreme Court ruling 2297/2541

Supreme Court Judgment No. 2297/2541:

The plaintiff who is the owner of the land and the townhouse has been registered the right of usufruct on the land to Tor. After registration of the lease Tor as the usufructuary has made a 30 years lease to the defendant, the lease agreement was made in writing and registered with the competent official, thus the lease agreement is enforceable and binding upon the plaintiff who is the owner of the land. Although during the lease term Tor. was dead and the usufruct is extinguished according to section 1418 paragraph 4 of the Civil and Commercial Code, however, the death of Tor does not to affect the right of the defendant who is the third party and the registered lease agreement is not to be terminated.

Do not forget that all leases over 3 years must be registered at the land department.

You also need to be aware that on some occasions, officers at land departments may not accept registration of a lease against the land by foreigners. They feel this is not a right given to a foreign usufructuary and the land office officer will deal differently with a foreign usufructuary and a Thai national as the usufructuary.

However, in the Civil code and Supreme court rulings, no difference is established between a Thai usufructuary or foreign usufructuary and both have the same rights.

[ricklev]

Sunbelt, have you ever actually registered a lease from a usufruct holder to a third party? I bet not! If I'm wrong I apologise but I imagine that the supreme court case addressed enforcement of a Improperly registered lease and not the rights of the usufruct holder to register a lease.

[Mobi]

The case quoted by Sunbelt sounds pretty clear to me. Are you disputing that this actually happened? Why are you so convinced that such a lease would not be properly registered by the land office, especially as it is between Thais?

I accept that land office officials are notoriously difficulty and 'flaky' and often put their own, incorrect interpretation on laws which no one can apparently challenge. (I have personal experience of this).I also accept that it could prove difficult, if not impossible for a farang holder of a usufruct to register such as lease. But it does seem as though it is legally 'doable', even though in practise it may never go through, unless of course the required 'bung' was paid - and once having been registered, it would then be legally enforceable.

So to answer your question, the land owner should honour such a legally granted 3 year lease in the same manner as any law abiding Thai citizen should abide by any other Thai law, or face legal redress......

[ricklev]

I might be wrong, but I sure wouldn't pay for a three year or less unregistered lease without knowing I was wrong. Thai courts have consistently ruled that there must be privity of contract between the parties or the contract is unenforceable. That's why the whole 30 year renewal option fell apart. There is no privity between the chanote holder and the lessee after the death of the usufruct holder. There might an arguement that the chanote holder has granted management rights to the usufruct holder, but this sure isn't a normal interpertation of usufruct law anywhere else, that I'm aware of. Is this settled law in Thailand?

I might be wrong but I wouldn't do a usufruct with the idea that I can get back some of my investment at any time by selling a thirty year lease without knowing that its actually possible and been done. The Supreme Court case as I've read it doesn't address that at all. Therefore it would be useful to know if Sunbelt has actually ever registered a lease for a usufruct holder or if they know of it having been done, except for the case that needed to go all the way to the Supreme Court to be resolved......

The reason I’m doubtful about the land office allowing the registration of a lease by a usufruct holder is because the idea violates the basic rights of the property owner by extending the definition of a usufruct into uncharted areas.

Edited March 4, 2011 by ricklev

[Mobi]

Your post makes a lot of sense.

I'm sure it was never envisaged that a usufruct holder would lease the property for 30 years. I may be wrong but it was my understanding that usufructs were devised as a means to protect a spouse in the event of the husband or wife who owned the land pre-deceasing the spouse and someone other than the surviving partner inheriting. If I am correct then it is hardly surprising that land officers would be reluctant to register such a lease on the title deeds.

Of course whatever the law does or does not say, almost anything is or isn't possible, dependant on the players, the amount of influence and backhanders involved. TIT still applies, I'm afraid....

[cardholder]

I might be wrong, but I sure wouldn't pay for a three year or less unregistered lease without knowing I was wrong. Thai courts have consistently ruled that there must be privity of contract between the parties or the contract is unenforceable. That's why the whole 30 year renewal option fell apart. There is no privity between the chanote holder and the lessee after the death of the usufruct holder. There might an arguement that the chanote holder has granted management rights to the usufruct holder, but this sure isn't a normal interpertation of usufruct law anywhere else, that I'm aware of. Is this settled law in Thailand?

I might be wrong but I wouldn't do a usufruct with the idea that I can get back some of my investment at any time by selling a thirty year lease without knowing that its actually possible and been done. The Supreme Court case as I've read it doesn't address that at all. Therefore it would be useful to know if Sunbelt has actually ever registered a lease for a usufruct holder or if they know of it having been done, except for the case that needed to go all the way to the Supreme Court to be resolved......

The reason I’m doubtful about the land office allowing the registration of a lease by a usufruct holder is because the idea violates the basic rights of the property owner by extending the definition of a usufruct into uncharted areas.

It does not 'violate' rights at all.

As long as the usufruct wording does not work against the granting of a lease then Sunbelt's advice is spot on. This also accords with independent advice I received from Isaan Lawyers (who have also contributed numerous articles on this subject on ThaiVisa.com)

[thaiwanderer]

The usufructuary is the manager of the property and is allowed to rent out the property without the consent of the real owner (unless restricted in the usufruct contract.) The usufructuary is a real property right where the owner of a real estate property (condominium, land and/or house) grants by agreement to another person the right of possession, management and benefits the property may produce for a limited period of time. Unless restricted by the usufruct contract, the right of usufruct grants all the rights of use and management of the property to the usufructuary as per the Thai Civil and Commercial Code sections 1417 to 1428.

Even if the usufruct will end at the death of the usufructuary the usufructuary can lease out the land to a third party and this second agreement will NOT end when the usufructuary is deceased as per the Supreme Court ruling 2297/2541

Supreme Court Judgment No. 2297/2541:

The plaintiff who is the owner of the land and the townhouse has been registered the right of usufruct on the land to Tor. After registration of the lease Tor as the usufructuary has made a 30 years lease to the defendant, the lease agreement was made in writing and registered with the competent official, thus the lease agreement is enforceable and binding upon the plaintiff who is the owner of the land. Although during the lease term Tor. was dead and the usufruct is extinguished according to section 1418 paragraph 4 of the Civil and Commercial Code, however, the death of Tor does not to affect the right of the defendant who is the third party and the registered lease agreement is not to be terminated.

Do not forget that all leases over 3 years must be registered at the land department.

You also need to be aware that on some occasions, officers at land departments may not accept registration of a lease against the land by foreigners. They feel this is not a right given to a foreign usufructuary and the land office officer will deal differently with a foreign usufructuary and a Thai national as the usufructuary.

However, in the Civil code and Supreme court rulings, no difference is established between a Thai usufructuary or foreign usufructuary and both have the same rights.

1. this does not constitute a precedent.

2. it involves a poorly drafted usufruct (although an element many would not have thought of)

3. in this case the lease was upheld, does the landowner have a right of action against the decesaed's estate for the value of the land for the remaining time?

4. sunbelt rightly cautions foreigners likely to face difficulties in similarly registering such leases when only holding a usufruct

[ricklev]

Well, it will be kind of interesting to see if Sunbelt or Isaan Lawyers (or anyone) posts that they have ACTUALLY registered at the land office a lease granted by a usufruct holder.

Edited March 4, 2011 by ricklev

[oracle]

Well, it will be kind of interesting to see if Sunbelt or Isaan Lawyers (or anyone) posts that they have ACTUALLY registered at the land office a lease granted by a usufruct holder.

We checked this lease option with the Phuket land office and they do not allow this, registration of a lease by a foreign usufructuary that is. Nothing wrong with Sunbelt but their info on lease and usufruct could be misinterpreted by foreigners as an argument to enter into a usufruct.

The info from the other one, the Quebec Killer that is, should because of his horrible crime be disregarded at all.

[cheeryble]

Sorry I meant to edit the last post here's the edit: (I've removed it, Crossy)

I follow this thread with alacrity....

It seems to me that a lifetime usufruct.....especially if it includes the right to lease out....has a great advantage over a 30 year lease.

The fact is with a lease if one wants one's nominee to sell or divide the land or apply for an easement, or whatever things happen in real life, they can simply say no and the land will still revert to their control for the comfort of their later years.

If however one has the ability to say "Look we need to get this sale done one way or another or you will very probably never in your lifetime get any benefit from the land." it is a pretty powerful tool.

BTW if I think running this informally past a land office official is not the way to go.....it needs for one's lawyer to go down there primed and ready for action.

In any case, one hopes this usufructee-issued-lease will never be needed.....it's the knowledge that it exists based on solid law which can affect the actions of one's nominee.

So....let's investigate if it's solid law.

Edited March 5, 2011 by Crossy

[InterestedObserver]

So....let's investigate if it's solid law.

It's solid law (usufruct + third party lease), the Thai Supreme Court says so.

[thaiwanderer]

So....let's investigate if it's solid law.

It's solid law (usufruct + third party lease), the Thai Supreme Court says so.

What's solid though?

It doesn't create a precedent and for many farangs who are interested here they won't be able to take advantage of it.

Also I suspect the Court's decision is being misinterpreted.

The Court did not say this was an entirely legal and expected consequence of a usufruct.

Rather than landowner brought the case seeking to overcome the lease.

The Court's decision in upholding the lease was likely based on it otherwise being detrimental to the third party to the usufruct (the lessee)(an entirely familiar principle).

I suspectthe landowner then had a fairly stong case in seeking the value of the remaining lease beyond the death of teh usufructuary (against their estate).

In any case no decent usufruct agreement would fail to precisely deal with this issue (and likely preclude it unless sufficient consideration were paid up front).

[InterestedObserver]

So....let's investigate if it's solid law.

It's solid law (usufruct + third party lease), the Thai Supreme Court says so.

From the Civil and Commercial Code:

Section 1422. Unless otherwise provided in the act creating the usufruct, the usufructuary may transfer the exercise of his right to the third person. In such case the owner of the property may sue the transferee direct.

[ricklev]

I think what happened, probably, is that a few years a ago a farang lawyer saw the Supreme Court decision and devised a legal theory that it meant the usufruct holder had the right to register a lease without the consent of the chanote holder. This was then read, cut and pasted etc. by the various Farang oriented law firms and gradually the idea that it was a theory and not actual fact and experience was lost.

If you google it or look at information provided by the law firms you see that they are just cut and pasting the same couple of articles/information/opinion excerpts and each other.

I'm sure the well intentioned Sunbelt lawyer who responded above is in a difficult position with something like this.

As I wrote above, I could be wrong but I would bet that it has never been done by any of the law offices who say with such assurance that the usufruct holder has the right to register a lease without the consent of the chanote holder. I doubt that it's done for foreigners or for Thai's although I understand the land office transactions are rife with "complexities".

I'm sure they have gone into a land office with the chanote holder, the usufruct holder, and the new lessee and dissolved the usufruct and registered a lease on the chanote, but that is a far different thing.

Edited March 6, 2011 by ricklev

[cheeryble]

I could be wrong but I would bet that it has never been done by any of the law offices who say with such assurance that the usufruct holder has the right to register a lease without the consent of the chanote holder. I doubt that it's done for foreigners or for Thai's although I understand the land office transactions are rife with "complexities".

I hope we soon learn if lease registration regardless of chanote holder has or hasn't been done before....

I must say I don't see theoretically why we need the "consent of the chanote holder".

He presumably doesn't own the grom tee din's copy of the chanote which is where it gets registered any more than anyone else mentioned on the document (ie the usufructee) owns it. Nor do I theoretically see any reason why he should have some exclusive veto power over the lawful consequences of his giving the usufruct....which can it seems be registration of a lease. It may be that when he gives the usufruct he automatically gives the acquiescence to consequent registrations......that he has already given his agreement.

So does the Grom Tee Din need his "permission" to register a lien like this?

Edited March 6, 2011 by cheeryble

[sbk]

Having the right to do something and actually getting some done are often two very different things in Thailand. I don't think Sunbelt is incorrect in saying you have the right, but I do also see them saying:

You also need to be aware that on some occasions, officers at land departments may not accept registration of a lease against the land by foreigners. They feel this is not a right given to a foreign usufructuary and the land office officer will deal differently with a foreign usufructuary and a Thai national as the usufructuary.

However, in the Civil code and Supreme court rulings, no difference is established between a Thai usufructuary or foreign usufructuary and both have the same rights.

I don't see Sunbelt saying that its going to happen, just that it is your right. We all know from our experiences with various immigration officials, land officers etc etc that it is almost always at an individual level and just because something may be law doesn't mean its gonna happen.

[ricklev]

"You also need to be aware that on some occasions, officers at land departments may not accept registration of a lease against the land by foreigners."

Good, I must be wrong. I hope Sunbelt comes back and tells me that on "some occasions" land departments HAVE accepted registrations of a "lease against the land by foreigners"......... and perhaps shares specifically which land office they know has done it.

That's what the Sunbelt lawyer is implying right?

[thaiwanderer]

You also need to be aware that on some occasions, officers at land departments may not accept registration of a lease against the land by foreigners. They feel this is not a right given to a foreign usufructuary and the land office officer will deal differently with a foreign usufructuary and a Thai national as the usufructuary.

However, in the Civil code and Supreme court rulings, no difference is established between a Thai usufructuary or foreign usufructuary and both have the same rights.

How many leases granted by a foreign usufructuary have Sunbelt successfully registered?

[cheeryble]

It may not be possible to cast things in stone here.

However even a moderately strong body of legal opinion that the code does indeed allow for a 30 year lease to be issued would go a long way to giving one the persuasive power one needs. Even the strong possibility that one could do the lease should be enough to bring any difficult nominee to their senses, so that if one for example wanted to sell one could offer an appropriate compensation for their "help" and it would most likely happen. A bird in the hand.

Which brings me to thinking about how sucj a sale actually happens logistic-wise.

How is the payment made and how does one ensure one gets one's agreed price after allowing for the "help" money. A back to back deal where the usufruct is torn up as the price is paid.....to oneself?

(Still hoping to hear of examples of registration of course)

Edited March 7, 2011 by cheeryble

[Khun Jean]

Personal experience:

Leases that don't require registering with the land office, easy.

Anything that does require registration (even short leases can be requested to be registered), impossible. (This was in Bangkok Sai Mai district and another time in Prachuap Khirikhan district)

One case is me and my wife (officially my wifes mother) trying to lease out a piece of land, to a Thai if it makes a difference in your world.

Why, because mother in law already has a usufruct and can not also lease out at the same time. And when i try to do it, because i am just a usufruct holder and don't have the right, in their view of course, even with consent and physical presence of my mother in law. Confronting them with sections of the law are waved away with a smile.

My 'solution' was to just cancel the usufruct and transfer the land to my wifes name and then she leases it out. I am comfortable with that after 10 year marriage and 2 children but i would not have done that in the early stages of marriage.

For land that we want to develop and lease out we now use a company, but this is only possible when it is a real company with real shareholders and all the official things like bookkeeping, meetings, etc, etc... Not an option for an individual as a vehicle to own the land.

So for me the conclusion is (and i have a mother in law as a friendly cooperative landowner!), registering a lease while you have a usufruct is impossible.

[Mobi]

Personal experience:

Leases that don't require registering with the land office, easy.

Anything that does require registration (even short leases can be requested to be registered), impossible. (This was in Bangkok Sai Mai district and another time in Prachuap Khirikhan district)

One case is me and my wife (officially my wifes mother) trying to lease out a piece of land, to a Thai if it makes a difference in your world.

Why, because mother in law already has a usufruct and can not also lease out at the same time. And when i try to do it, because i am just a usufruct holder and don't have the right, in their view of course, even with consent and physical presence of my mother in law. Confronting them with sections of the law are waved away with a smile.

My 'solution' was to just cancel the usufruct and transfer the land to my wifes name and then she leases it out. I am comfortable with that after 10 year marriage and 2 children but i would not have done that in the early stages of marriage.

For land that we want to develop and lease out we now use a company, but this is only possible when it is a real company with real shareholders and all the official things like bookkeeping, meetings, etc, etc... Not an option for an individual as a vehicle to own the land.

So for me the conclusion is (and i have a mother in law as a friendly cooperative landowner!), registering a lease while you have a usufruct is impossible.

Thanks for the personal experience.

It's about what I would have guessed, having had land officials even trying to tell me that a usufruct is illegal a few years back!

We are being deafened by the silence from Sunbelt on this subject - clearly they have never succeed in registering such a lease and neither can they cite one ever having been registered.

I wonder what would happen if a non-registered lease, say for three years, was ignored after the chanod holder died and the new chanod holder kicked the lessee off the property? I bet the courts would take no action to redress the situation....

[ricklev]

I know from personal experience that the Chiang Mai land office has said that they will not allow registration of a lease AND a usufruct on a Chanote under any circumstances.

Edited March 10, 2011 by ricklev

[Sunbelt Asia]

Apologies for the delay in responding, a bit busy of late.

Sunbelt Asia has registered leases on usufructs in the past but it took quite a bit of work and persuasion from our lawyers in order to convince the Land Department officials of the laws and Court decisions.

As other posters' experiences indicate, it can change from official to official, office to office and who is in a good mood on the right day. As with many of these things in Thailand, just because we have registered leases on usufructs doesn't mean we always can or that those experiences will sway a Land Department official who has already made up his mind.

Many regulations in Thailand seem to fall under the "YMMV" category (your mileage may vary)

[ricklev]

"it took quite a bit of work and persuasion from our lawyers in order to convince the Land Department officials of the laws and Court decisions."

Quality lawyering you can be proud of!

Edited March 10, 2011 by ricklev

[thaiwanderer]

Apologies for the delay in responding, a bit busy of late.

Sunbelt Asia has registered leases on usufructs in the past but it took quite a bit of work and persuasion from our lawyers in order to convince the Land Department officials of the laws and Court decisions.

As other posters' experiences indicate, it can change from official to official, office to office and who is in a good mood on the right day. As with many of these things in Thailand, just because we have registered leases on usufructs doesn't mean we always can or that those experiences will sway a Land Department official who has already made up his mind.

Many regulations in Thailand seem to fall under the "YMMV" category (your mileage may vary)

Thanks for the reply - it is how suspected.

Since no liability attaches to the acts of government officials I wouldn't hold out much hope in the lease being upheld in the face of a challenge.