Property Lease/Usufruct/Other

[Lobo4819]

I have gone through every imaginable (I think) thread on property issues, and can't seem to find what I think is a relatively simple question answered. Please help (only if you have some good knowledge on the subject).

I understand that the difference between true love and herpes is that herpes lasts forever. SO here is the question.

If my (Thai) wife and I build a house and the house is in my name and the land is in her name, what form of lease/usufruct/ownership is in my best interests should something go awry in the relationship? (I know I would be the first)

Are there third party businesses - holding companies - (I understand the risks) that could handle this issue?

There are no children involved, except her prior ones that I hope never get involved with any of my affairs.

I plan on leaving it all to the wife if I go to the Happy Hunting Ground and we are still in bliss. If not, ... then...

If we divorce/split before I die, I want to retain ownership AND CONTROL of the house and the land, as well as possession of both, as I have paid for and have receipts for all.

Is there an easy answer, or at least one that is better than another? Personal opinions and experiences welcomed if qualified as such.

[Thaifan2]

Just get a usufruct .( good for 30 years and no annual charges ) .In case things go bad and she starts moving in Family members ,keep yourself fit at the Gym every day ;-) .

[Langsuan Man]

Sorry, but no matter what the usufruct says Thai laws regarding community property via a divorce is going to trump any unufruct or long term lease

See a lawyer and get a real legal opinion

[sfokevin]

Just get a usufruct .( good for 30 years and no annual charges ) .In case things go bad and she starts moving in Family members ,keep yourself fit at the Gym every day ;-) .

I thounght a usufruct term was for the life of the Leasee?

But as already mention if you are married any future agreement can be voided by her within one year after divorce...

Edited October 19, 2011 by sfokevin

[Dante99]

In the past, wise advice was that you should be prepared to walk away from anything you have or think you have in Thailand meaning if you can not afford to loose it, you should not have it here. Sure things have changed in the past 25 years but one of the biggest changes has been the expectations of the foreigners who have come to live here, those expectations too often not in accordance with reality. I think this still is mostly a country of relationships, not a country of laws.

[hml367]

Search the internet for Isaan Lawyers. I hope putting that name is ok to find what the OP is looking for. Look at the Property link. There is some information under that heading.

And, as posted and in my opinion, you must be prepared to walk away from anything here.

MSPain

[uptheos]

Article 7 is particularly interesting

Everything you wanted to know about

usufructs in Thailand.

By Sebastian H. Brousseau, LLB, B.Sc.

Attorney-at-Law (Quebec, Canada)

Managing director of Isaan Lawyers.

==========================

Isaan Lawyers has recently registered usufruct agreements in more than 15provinces of Thailand.The following text is aimed to give you objective and accurate informationabout this right included in the Civil and Commercial Code of Thailand(hereafter CCCT). Don't hesitate to communicate with us by email should youhave any questions or inquiries.

==========================

As you probably know, foreigners are forbidden to own land in Thailand by theLand Code. There are few rare exceptions to this rule (investment of 40 millionbaht, BOI approval, etc.). This is why many foreigners are looking into ways tosecure a real estate investment or at least, give them the right to enjoy aproperty even if they are not the "full" owner. A usufruct agreementcan give you this right: to possess and enjoy a property without being the fullowner. And it is perfectly legal.

HISTORY

A usufruct is a real right (real means in civil law = attached to a thing) thatoriginates from Roman law. In Roman law, the wife wasn't entering legally inthe family of her husband. At the death of her husband, the wife had no rightsof inheritance in the estate. To bypass this injustice, Roman law created theright of "usufruct". This usufruct was giving the widow thepossibility to enjoy the asset of her husband after his death even if she wasn'tan heir. The asset was normally devolved to the children at that time.

By essence, the right of usufruct is temporary and has roots in familyrelationships.

WHAT IS A USUFRUCTAGREEMENT

Usufruct contracts are governed by sections 1417 to 1428 of the CCCT. Ausufruct is a right granted by the owner(s) of the land/house in favor of ausufructuary whereby this person has the right to possess, use and enjoy thebenefits of an immovable property (section 1417 CCCT). The usufructuary has theright to manage the property (sect 1414 CCCT). It can be on a piece of land, ona house or on both of them.

The holder of a usufruct, known as "usufructury", has the right touse, possess and enjoy the property, as well as the right to receive profitsfrom the fruits of the property. The usufructuary could be a person or anentity (ex: a company).

In civil law, property is divided in three parts. They are called in latin"usus" (use), "fructus" (fruits) and "abusus"(abuse). The word usufruct is normally unknown in Commonwealth countries. Itcombines the two first parts of the property in civil law, the usus (use, orpossession) and fructus (fruits, or as we will see, more or less the"profits"). In French, it is called "usufruit" and in Thai "See-tee-kep-kin".It is interesting and useful to know that Thai Civil Law was largely inspiredby French Civil law. (see "the work of codification in Siam" by Rene Guyon, 1919.)

The owner who gives the usufruct is called in French"nu-propriétaire" or by literal translation in English"naked-owner". It means that the owner has nothing else than theownership: He can't use his possession, even if he is the owner. Besidepossession and enjoyment of the property, the usufructurary has also the legalright to use and derive benefits from the property that belongs to anotherperson, as long as the property is not damaged. "Fruits" should beunderstood as its natural (fruits, livestock, etc) and/or its legal definition(rent, etc.).

If you would like to use this right for industrial purposes, be aware that sometaxes might be required.

Let's see some examples of usufruct agreements.

EXAMPLES

Imagine that you have a usufruct on a piece of land, an orchard. The apples(natural fruits) will be your asset and do not belong to the 'real" ownerof the land. But in our days, fruits are more or less the legal fruits, like arent from a lease. Section 148 of CCCT defines what can be the legal fruits in Thailand:"legal fruits denote a thing or interest obtained periodically by theowner from another person for the use of the thing; It is calculated and may beacquired day by day or according to a period of time fixed."

Now imagine that you have a Thai girlfriend. She buys the land and gives you ausufruct on this land for free. It means that you can enjoy this property, evenask her to leave the property, can sublease and get the money from the rents,and this, until the end of your life. It is NOT restricted to 30 years maximum.On top of that, if you decide to build on this land, it is possible for you bethe full owner of the buildings and constructions. It is really a strong right.

THE END OF A USUFRUCTCONTRACT

In Thailand, a usufruct can be created for a limited time (5 years, 10 years,etc.) or the LIFE of the usufructuary. (sect. 1418 CCCT). If no time has beenfixed, it is presumed that the usufruct is for the life of the usufructuary. Inany case, the usufruct ends at the death of the usufructuary.

THE USUFRUCTUARY CANLEASE THE LAND/HOUSE

A usufructuary has the right to enjoy, use and possess the land. He is actinglike the real owner but can not sell or destroy the property as he is NOTthe full owner. However, he can transfer his rights on the land/house to athird party. Even if the usufruct will end at the death of the usufructuary theusufructuary can lease out the land to a third party and this second agreementwill NOT end when the usufructuary will die as per the Supreme Court ruling2297/1998: "the lessor does not have to be the owner of theproperty".

So the usufructuary can grant a thirty years lease to a third party. By thisway, you could pass on your rights to your children or other relatives evenafter death if the lease was done before the demise. Do not forget that allleases over 3 years must be registered at the land department and taxes have tobe paid.

REGISTRATION

By a decision of the Supreme Court of Thailand, all usufruct agreements must beregistered to be valid (Supreme Court decision 6872/2539). Once you register ausufruct at the land department where the title deed is located, your name willbe registered (written in Thai) on the title deed. After this registration, theland/house can only be sold provided the buyer respects this usufruct. This iswhy it will be difficult for the owner to sell the land/house after a usufructis register: nobody wants to buy a property where they can't live. Be awareland departments in Thailandhave different rules and requirements. Some will ask to see your visa, somewill ask for the father and mother's name of the usufructuary, etc.

You can also get a yellow book which is a House Registration Certificate (Thor.Ror 13) with a usufruct but many other documents will be required.

MYTHS AND FACTS ABOUTUSUFRUCT AGREEMENTS

1) Usufruct can be done for maximum 1 rai

False. We registered usufruct agreements for more than 100 rai with onecontract and multiple title deeds. Hovewer, the usufruct must be registered onEACH title deed separately.

2) Usufruct have never been tested by the Court

False, there are Court decisions IN THAILAND about usufructs (examples:Supreme Court of Thailand 2783/2516, 6872/2539, 2297/2541, 2380/2542, etc.).The land department has also published a small guideline about usufructagreements.

Usufructs originate from Roman Law and they have been known in civil lawcountries for centuries. It has nothing to do with some old agricultural lawsor customs. Remember that leases where mostly used in the 18^th and19^th centuries by farmers as they were not rich enough to fully buyland.

3) Usufructs are NOT as safe as lease agreements:

False. There is no legal, historical or factual grounds for this affirmation.If a lease is safe in Thailand(section 537 and following), a usufruct is safe. Both of them are in the CCCT,just as a gift agreement (section 453 and following) or a loan contract(section 640 and following).

Unless the Thai law changes, foreigners are fully allowed to make usufructagreements, just as they are allowed to purchase condominiums or to make alease agreement. Some law firms prefer to register lease agreements as leasesagreements are normally more expensive. If you can understand civil law, thereis even some legal basis to say that a usufruct is stronger than a leaseagreement.

4) You must pay taxes to register a usufruct agreement

True. If the usufruct agreement is done for an amount of money, taxes of about1.5 % on the value of the contract will have to be paid. Some land departmentsdon't like to register usufruct agreements for free as they see that theirgovernment is not making as much money as a lease agreement. On a leaseagreement, you will also have to pay taxes on the value of the rents for thetotal agreement. Rents must be based on the assessed value of the property.Most of the time, it is cheaper to register a usufruct agreement than a leaseagreement. If you register a usufruct agreement involving a company, the landdepartment might ask for some value on the contract. They won't like to see itdone for free. It is the discretion of the land officers to accept an agreementeven if by law, it is clear and usufruct agreements for free CAN be done.

5) The owner can't borrow money or sell its property if a usufruct isregistered

False. Even if you register a usufruct agreement on a title deed, the owner cansell his property to anyone. But in reality, nobody is interested to buy aproperty where they will have to maintain your right and won't be able to usethis property until you die. This is why a usufruct is a good protection foryou as it allows you to live there for the rest of your life, whatever happens.If you want this right to be passed to your heirs, it can also be done by alease agreement might be a better option depending on your case.

6) It is possible to cancel or void a usufruct agreement

If you are NOT married to the owner granting you the usufruct, we believe it isnot possible to cancel a usufruct and you are legally protected.

If you are legally married to the owner, Thai lawyers disagree on theapplication of article 1469 CCCT. This article mentions that all agreementsmade between spouses can be cancelled by the Court at the request of one party,unless agreements affect third parties. According to one interpretation,"publicity" or registration affect third parties and a usufruct can'tbe cancelled. According to the other interpretation, we have to search for thespirit of the law and it looks like Thai law wanted to end all relationsbetween spouses in case of divorce, even usufruct agreements. A way to avoidthe application of 1469 CCCT would be to have a second agreement (like a lease)affecting a third party before the Court could cancel your usufruct agreement.

7) I will be fully protected with a usufruct

False. Imagine that you bought a big house in a small village near the familyof your girlfriend. Now, imagine that things go wrong with her and you decideto expulse her from this house. You have the legal right to do it. But do youreally think your life will be nice and quiet near her family, in a big house,in the middle of nowhere? Usufruct will legally protect you but there aresituations where even a legal protection won't have any authority in face ofthe reality.

8) Usufruct agreements can be done anywhere in Thailand

False. Usufruct agreements must be registered and you can register a lease or ausufruct only on title deeds equals or superior to Nor Sor Sam. It means thatusufruct can be registered for Chanotte or Nor Sor Sam, but can NOT beregistered in some rural areas without proper title deeds.

9) A usufruct agreement is a simple form.

False. It is a contract, like a loan or a lease. All contracts can be adaptedor constructed around the situations of the parties. For example, some clientsprefer limitations to their usufruct right for their own and personal use. However,others want to be able to transfer their rights without any prior notice ornotifications (see section 1422 CCCT). Some usufructs are done for free, somefor an amount of money. All clauses are possible if they are not against publicorder.

===========================

Usufruct agreements are a strong protection as they let you possess, use andmanage a property in Thailand.We believe they will give you some piece of mind while you enjoy all the otheraspects of Thailand.They can be a very good alternative to lease agreements, as they can be foryour lifetime, with lesser taxes.

===========================

[cardholder]

Article 7 is good, practical advice from Sebastian.

You may be in 'the right' from a legal standpoint - but that counts for nothing if a hot-headed cousin living next door comes at you with a machete.

[Semper]

If we divorce/split before I die, I want to retain ownership AND CONTROL of the house and the land, as well as possession of both, as I have paid for and have receipts for all.

Your wife would be entitled to 50% if you bought the house after you got married.

[uptheos]

Oops DP

Edited October 19, 2011 by uptheos

[uptheos]

If we divorce/split before I die, I want to retain ownership AND CONTROL of the house and the land, as well as possession of both, as I have paid for and have receipts for all.

Your wife would be entitled to 50% if you bought the house after you got married.

Correct - except half of the land will not be given to a foreigner. Any other assets that either party acquired after the marriage should be divided equally by agreement or by a court.

However, if the person has usufruct on the property, the wife can be asked to vacate (I will try to find the appropriate court decision).

As stated previously, whether the person with usufruct will live happily ever after is debatable and although usufruct is for life, that life could come to an end quite quickly in this country.

Edited October 19, 2011 by uptheos

[sfokevin]

Article 7 is good, practical advice from Sebastian.

You may be in 'the right' from a legal standpoint - but that counts for nothing if a hot-headed cousin living next door comes at you with a machete.

Also refer back to THE END OF A USUFRUCTCONTRACT...

"a usufruct can be created for... the LIFE of the usufructuary"

[sfokevin]

Can an Usufruct be in two names jointly?...

Say there is a husband and wife both farrang can it be both names jointly so if one spouse dies can the survivor continue on with the Usufruct till his/her death?

I know a lease could extend the term for an additional 30 years - but you don't know which spouse will die first...

Edited October 19, 2011 by sfokevin

[ludditeman]

You are already married, you cannot enter into any valid legal agreement with your wife.

In other words, if you get divorced she may cancel any and all agreements with you, lease, usafuct, etc.

You could enter into a legal agreement with her sister, mother, friend, etc.

BUT NOT WITH HER!

[hml367]

It seems to me that getting a lawyer would be the best advice. Seems to be a lot of different views from posts. I doubt a post on Thai Visa would hold up as evidence or proof of anything in a court of law.

There have also been instances of lawyers not being in the best interest of their own client. Probably true anywhere in the world. Still, I think it is the best way to go in these instances. I once had a lease drawn up by a lawyer for 4,000 baht. I ended up not using it, so there were no other fees like the lawyer going to the land office or anything. I do currently have a long term lease recorded on the land chanote and, obviously then, at the land office. (EDIT) Actually I have two leases recorded this way. I believe once you do this, the lessee has to report the income and pay taxes on it. The amount used on the recorded lease is what the tax is based on - at least in my case.

MSPain

Edited October 20, 2011 by hml367

[Lobo4819]

Thanks to all for some good feedback, particularly uptheos and his excerpt from Isaan Law. As many of you have noted, each situation is different, but a variety of feedback is always appreciated. A good legal consult it will be, but now with more info and questions. Thanks again.

[Thaifan2]

>>I thounght a usufruct term was for the life of the Leasee?<<

A usufruct is good for 30 years or the life of the Leasee,which ever comes first . :jap:

[Mapguy]

The post from Isaan Lawyers is very good. (They must have quite a practice with Americans!) Please note, however, that just reading the law does NOT (as the author notes in many ways) answer all the questions involved. For example, the situation, per the article, is at issue depending on where you are, as written in the article, comparing leases to usufructs.

It really needs to be mentioned that the non-citizen must have a complete valid paper trial regarding the transfer of monies from abroad into Thailand for purchasing property (including condominiums) in case such (quite legally) comes into question at a property office. Ask your Thai bank and counselor about this. The bank manager may know better, but don't make a wager on that!

There are other helpful documents, such as pre- and post-nuptial (yes post-nuptial!) agreements that, for example, record the understanding of the parties of their agreements. Such information is very important in court.

Do NOT assume that non-citizens have no rights under property law in Thailand, and that decisions have not been made in favor of foreigners. The courts have made decisions in favor of non-citizens regarding property rights. That does not mean that a foreigner (outside the special exceptions noted in the article) can own any property "free and clear" after winning a court decision. The foreigner will have to sell the property, if it is awarded to him, within the time (probably a year) dictated by the court. That does satisfy the law. But understand that, if a foreigner is properly represented and with good cause, the courts are sensible to the realities of personal situations so long as the result is not "contrary to the public order."

Inheritance law provides other various "complications." A lot depends upon individual circumstances. No more to say here, but read the code for starters.

Precedence in Thai case law is important as well as what is in the code, so don't buy into the latter without understanding the former. And don't expect to be able to research this yourself. That's what qualified legal counsel is for.

The practical advice in the article is as important (if not more important) as the history and details about the Civil and Commercial Code. In addition, one or more posters above have noted that all these agreements could chill a relationship. I ask, would that be different in any country ?! (Clearly a rhetorical question!) So, if you are in love but still nervous (or your families, usually children, abroad are fraught with their father's new life in Thailand), then don't buy property in your new-found love's name! If your loved one insists, then you might re-examine your relationship! Or offer an alternative: You can (given satisfactory compliance with other aspects of Thai property law) buy a condo if you are in an urban environment and can do so. Or (please forgive me!) you might suggest buying a herd of breeding water buffalo for your love or for her family and see where that gets you!)

Regarding solicitors, there is the woefully naïve belief that because a solicitor either speaks English or also appears on a consular list of "professionals" that you have discovered a good solicitor. That is totally preposterous. Foreign governments do not recommend professionals, they list them. Foreign governments are not nannies, and they do try to find relief from the onslaught of overly dependent citizens who bombard them with such questions. Read the consular disclaimers! To find a good solicitor, you should start chatting up people who should know. That means talking to more than the blokes at the local or who post here. (In defense of TV Chiang Mai, it appears that the general drift of comments and advice posted have taken an admirable turn to the more sensible in the past year or so!) Also, you do need to read and understand the relevant sections of the code. A url for an English translation has been posted on TV Chiang Mai before. Understand, of course, as noted above, that precedence in case law might be important. There is also one general reference to Thai law called Thai Law for Foreigners. Google it. Buy it. That preparation will not turn you into a solicitor, but it will guide you in asking the right questions.

Lastly, Heavens above!, do not be trapped by the notion that you need a solicitor who speaks English (Don't anticipate any other spoken language ability generally other than Thai.) Hire a good interpreter. Japanese and Chinese citizens should be able to do this as well. There are certainly several decent translation and interpretation shops in Chiang Mai, and that preparation is very inexpensive considering what is at stake.

If you can not take the path suggested above (or something similar to it and follow the advice of other sensible posters), then you either do not have much at risk or simply are risking what you may have. Up to you! :jap:

And good luck!

[Thighlander]

I did my lease thing with a thai lawyer from ICO in 2006. The trick is to get them to accept a very low rent amount at the land office. We tried 300K for 30 years, and it was "CANNOT" so we made it 500K (less than 1500 per month) so there was a 1% tax on that, and apparently there are annual rental taxes that never get collected--but they are still out there. My name was on the Chinot, and I also had a will from her in case of her death, as well as a "loan" agreement making me a creditor on the house. I also said what happens if you get a catastrophic medical bill (like we get in the US) and she said they would have to get in line after the lease was up, and that should not be a worry. I just don't like the grey area nature of the whole thing and will be buying a condo next. This is clearly an example of the Thais shooting themselves in the feet when it comes to foreign investors. There are many extortion stories out there from people that thought they were owners of land. Must be at least 5 million townhouses in LOS that need an infusion of cash for renovation.....