Life After Lease?

[Mungo]

Having read some very informative and interesting articles on here, I would like to ask the following questions regarding leashold in Thailand. Please excuse me if this has previously been addressed. I am asking it as I have just paid a deposit on a plot in Hua Hin where a property will be built.

I decided to go for leashold as this seemed less complicated and "risky" that freehold as it is recognised in Thai Law - and you never know, the law may change in the future just as it did regarding now being able to take money out of Thailand or inddeed being able to own Condos outright. So, my questions are as follows:

1. Is it common place to be able to agree and have written into the contract a 30 year extension on initial signing, or does this have to be agreed upon expiry of the first 30 year period?

2. Assuming I only had a 30 year lease, what would happen to the property that I would own in the event that the land owner did not wish to extend the leashold of the land?

3. What are the disadvantages or possibe problems associated with leashold and generally, is this a preferred option amoungst expats?

4. Is it possible to change from leashold to freehold once a contract is signed?

Any comments will be greatly appreciated, many thanks

Mungo

[Thaipwriter]

1. yes it is.

2. if you have a 30 year lease,at the end of the 30 years you have nothing. you are leasing not buying? right? or are you saying that you rae "buying" the home....and then leasing from your partner?? please elaborate

3. the debate rages whether leasing or using a company to hold title is the best way to go. I suggest you read more on this subject on this forum.

4. that depends on both parties agreeing to the proposed changes.

[Dragonman]

Having read some very informative and interesting articles on here, I would like to ask the following questions regarding leashold in Thailand. Please excuse me if this has previously been addressed. I am asking it as I have just paid a deposit on a plot in Hua Hin where a property will be built.

I decided to go for leashold as this seemed less complicated and "risky" that freehold as it is recognised in Thai Law - and you never know, the law may change in the future just as it did regarding now being able to take money out of Thailand or inddeed being able to own Condos outright. So, my questions are as follows:

1. Is it common place to be able to agree and have written into the contract a 30 year extension on initial signing, or does this have to be agreed upon expiry of the first 30 year period?

2. Assuming I only had a 30 year lease, what would happen to the property that I would own in the event that the land owner did not wish to extend the leashold of the land?

3. What are the disadvantages or possibe problems associated with leashold and generally, is this a preferred option amoungst expats?

4. Is it possible to change from leashold to freehold once a contract is signed?

Any comments will be greatly appreciated, many thanks

Mungo

<{POST_SNAPBACK}>

A couple of additional points to Thaip's answers.

1. You cannot have written in an extension to the lease as such, but you can have an "option agreement" where you, but in practice the freeholder, has the decision to grant a new 30 year lease. In my opinion the only good "option" will be where you are still on good terms with the freeholder after the 30 years.

4. Your lawyer can include in the lease a provision that you will have first right of purchase should property laws change. Make sure he specifies what value the land will have at that time, current or future market value, or indeed nominal.

[trajan]

Having read some very informative and interesting articles on here, I would like to ask the following questions regarding leashold in Thailand. Please excuse me if this has previously been addressed. I am asking it as I have just paid a deposit on a plot in Hua Hin where a property will be built.

I decided to go for leashold as this seemed less complicated and "risky" that freehold as it is recognised in Thai Law - and you never know, the law may change in the future just as it did regarding now being able to take money out of Thailand or inddeed being able to own Condos outright. So, my questions are as follows:

1. Is it common place to be able to agree and have written into the contract a 30 year extension on initial signing, or does this have to be agreed upon expiry of the first 30 year period?

2. Assuming I only had a 30 year lease, what would happen to the property that I would own in the event that the land owner did not wish to extend the leashold of the land?

3. What are the disadvantages or possibe problems associated with leashold and generally, is this a preferred option amoungst expats?

4. Is it possible to change from leashold to freehold once a contract is signed?

Any comments will be greatly appreciated, many thanks

Mungo

<{POST_SNAPBACK}>

A couple of additional points to Thaip's answers.

1. You cannot have written in an extension to the lease as such, but you can have an "option agreement" where you, but in practice the freeholder, has the decision to grant a new 30 year lease. In my opinion the only good "option" will be where you are still on good terms with the freeholder after the 30 years.

4. Your lawyer can include in the lease a provision that you will have first right of purchase should property laws change. Make sure he specifies what value the land will have at that time, current or future market value, or indeed nominal.

<{POST_SNAPBACK}>

I personally think that contractual "lease renewal options" and "rights of first refusal" are quite risky because it is VERY uncertain whether such contractual rights are enforceable against the land owner in 30 yrs time (especially if the land owner is new, that is, the old land owner sold the land to a new land owner entity/person, which is very possible in a 30 yr timeframe)....

I would only rely on the initial 30 year REGISTERED lease right if I were you....

[Mungo]

Having read some very informative and interesting articles on here, I would like to ask the following questions regarding leashold in Thailand. Please excuse me if this has previously been addressed. I am asking it as I have just paid a deposit on a plot in Hua Hin where a property will be built.

I decided to go for leashold as this seemed less complicated and "risky" that freehold as it is recognised in Thai Law - and you never know, the law may change in the future just as it did regarding now being able to take money out of Thailand or inddeed being able to own Condos outright. So, my questions are as follows:

1. Is it common place to be able to agree and have written into the contract a 30 year extension on initial signing, or does this have to be agreed upon expiry of the first 30 year period?

2. Assuming I only had a 30 year lease, what would happen to the property that I would own in the event that the land owner did not wish to extend the leashold of the land?

3. What are the disadvantages or possibe problems associated with leashold and generally, is this a preferred option amoungst expats?

4. Is it possible to change from leashold to freehold once a contract is signed?

Any comments will be greatly appreciated, many thanks

Mungo

<{POST_SNAPBACK}>

A couple of additional points to Thaip's answers.

1. You cannot have written in an extension to the lease as such, but you can have an "option agreement" where you, but in practice the freeholder, has the decision to grant a new 30 year lease. In my opinion the only good "option" will be where you are still on good terms with the freeholder after the 30 years.

4. Your lawyer can include in the lease a provision that you will have first right of purchase should property laws change. Make sure he specifies what value the land will have at that time, current or future market value, or indeed nominal.

<{POST_SNAPBACK}>

Thanks all - very interesting information. But how about Freehold, what are the benefits/problems associated with this?

[johnnyk]

Neither one is perfect to say the least.

With LH there is a huge gray area at the end of 30 years as the option to renew isn't registered at the Land Office but is rather a private arrangement as far as I know. Also, with land appreciation there could be motive to get you off the land 30 years down the road.

With FH, you don't really own it your company does. Even though you mey control all the decision-making apparatus in the company it is still, IMO, a bit of a legeal loophole which could be closed.

What to do?

I guess everyone has to figure out what they are comfortable with and accept the risks with it.

Comes down to how much you want to spend time in Siam.

[Dragonman]

johnnyk's spot on. People can only advise on the pitfalls of each method of property ownership. It has not been long enough since all these methods were grasped upon by lawyers to see what invariably stands up in the eyes of a Thai judge. Especially in 25-30 years when all the leases, loan agreements, option agreements, usufructs, etc come to Court.

[johnnyk]

johnnyk's spot on. People can only advise on the pitfalls of each method of property ownership. It has not been long enough since all these methods were grasped upon by lawyers to see what invariably stands up in the eyes of a Thai judge. Especially in 25-30 years when all the leases, loan agreements, option agreements, usufructs, etc come to Court.

<{POST_SNAPBACK}>

Another interesting thing came from a friend who did an MBA at Sasin and had courses in Thai law. He said Thai law is not, as in the west, precedent-based. Each case is looked at individually and its whatever the judge decides. Up for grabs, I'd say and thickest wallet wins.

[Dragonman]

johnnyk's spot on. People can only advise on the pitfalls of each method of property ownership. It has not been long enough since all these methods were grasped upon by lawyers to see what invariably stands up in the eyes of a Thai judge. Especially in 25-30 years when all the leases, loan agreements, option agreements, usufructs, etc come to Court.

<{POST_SNAPBACK}>

Another interesting thing came from a friend who did an MBA at Sasin and had courses in Thai law. He said Thai law is not, as in the west, precedent-based. Each case is looked at individually and its whatever the judge decides. Up for grabs, I'd say and thickest wallet wins.

<{POST_SNAPBACK}>

Yes, he's right. Although things are gradually changing with case law being more readily accepted and exchange of information being easier through internet technology. However this does not stop the odd remarkable decision, especially where big bucks are concerned.

[Sumitr Man]

2 things in this thread interest me:

1-

Section 540 of the CCC is where the 30 year limitation rule comes in. Para. 2 of such section states clearly that the period may be renewed. The Supreme Court has upheld that provided that this is against the granter, it is enforceable. For this reason, a company granting a 30 year lease with an option to renew is seen as more attractive than an individual - as the former is more likely (though not always the case) to still be here.

This is different to the 30+30+30 lease. In this case the Revenue Court held that rents paid could only be amortized over the 60 years, not the 90. To the best of my knowldge, there is no Supreme Court ruling that the 90 year lease is either lawful or unlawful; hence the reliance on the Revenue Court obiter dictum.

2 -

Thailand is a civil law system. As such, no court ruling can bind another court. This is so, regardless of what court you are in - court of first instance, appeal court or supreme court (or IT court of Bankruptcy Court, etc.). Each court ruling stands by its own merits, but a case may be appealed if grounds (in that case) exist.

[johnnyk]

2 things in this thread interest me:

1-

Section 540 of the CCC is where the 30 year limitation rule comes in.  Para. 2 of such section states clearly that the period may be renewed.  The Supreme Court has upheld that provided that this is against the granter, it is enforceable.  For this reason, a company granting a 30 year lease with an option to renew is seen as more attractive than an individual - as the former is more likely (though not always the case) to still be here.

This is different to the 30+30+30 lease.  In this case the Revenue Court held that rents paid could only be amortized over the 60 years, not the 90.  To the best of my knowldge, there is no Supreme Court ruling that the 90 year lease is either lawful or unlawful; hence the reliance on the Revenue Court obiter dictum.

2 -

Thailand is a civil law system.  As such, no court ruling can bind another court.  This is so, regardless of what court you are in - court of first instance, appeal court or supreme court  (or IT court of Bankruptcy Court, etc.).  Each court ruling stands by its own merits, but a case may be appealed if grounds (in that case) exist.

<{POST_SNAPBACK}>

sumitr,

One thing of concern to me though, on renewal of the 30-yr lease there could be a new property owner either company or individual. I know the new owner is bound to the original lease but a renewal may not be binding on the heirs or successors.

On the 30-30-30 I've had this opinion from a prominent BKK lawyer:

We keep seeing these two 30 year renewal clauses but the law allows only

one such renewal and even these may be difficult to enforce as they are

valid only between the identical parties.

BTW, is Section 540 accessible via the web?

Cheers.

[Dragonman]

2 things in this thread interest me:

1-

Section 540 of the CCC is where the 30 year limitation rule comes in.  Para. 2 of such section states clearly that the period may be renewed.  The Supreme Court has upheld that provided that this is against the granter, it is enforceable.  For this reason, a company granting a 30 year lease with an option to renew is seen as more attractive than an individual - as the former is more likely (though not always the case) to still be here.

This is different to the 30+30+30 lease.  In this case the Revenue Court held that rents paid could only be amortized over the 60 years, not the 90.  To the best of my knowldge, there is no Supreme Court ruling that the 90 year lease is either lawful or unlawful; hence the reliance on the Revenue Court obiter dictum.

2 -

Thailand is a civil law system.  As such, no court ruling can bind another court.  This is so, regardless of what court you are in - court of first instance, appeal court or supreme court  (or IT court of Bankruptcy Court, etc.).  Each court ruling stands by its own merits, but a case may be appealed if grounds (in that case) exist.

<{POST_SNAPBACK}>

SM.

1. Agreed. As is normal in most western countries. The problem is, it is always easy for an individual to "sell" the land a year before the option is about to be renewed. The worst case scenario I've come across in British law is the freeholder having to pay back the original payment for establishing the option.

2. Yes, this is the reason, together with defamation laws, why Thailand is frequently attacked by Human Rights groups. It allows far too much freedom for corruption to thrive. I have been advised by a couple of firms of lawyers that things have improved with regard to assessing what case law there is, but as you say, they are not considered binding in any way.

[trajan]

2 things in this thread interest me:

1-

Section 540 of the CCC is where the 30 year limitation rule comes in.  Para. 2 of such section states clearly that the period may be renewed.  The Supreme Court has upheld that provided that this is against the granter, it is enforceable.  For this reason, a company granting a 30 year lease with an option to renew is seen as more attractive than an individual - as the former is more likely (though not always the case) to still be here.

this confirms my belief that if the individual or the company lease renewal option right grantor transfers ownership of the underlying land during the 30 year initial lease period (which is very possible) the lease renewal option right would be worthless...

also I would not feel comfortable just because a company granted the lease renewal option (versus an individual granting the option), unless such company/entity was a major public limited company or the Royal Crown Property Bureau/Privy Purse (but even in those circumstances, the land could possibly be transferred to a new owner during the initial 30 yr lease period rendering the renewal option rights worthless)....

in short, I personally would not place any heavy reliance on having any rights beyond the initial 30 year lease....if you want more rights you should buy on a freehold basis....

Edited November 24, 2005 by trajan

[johnnyk]

2 things in this thread interest me:

1-

Section 540 of the CCC is where the 30 year limitation rule comes in.  Para. 2 of such section states clearly that the period may be renewed.  The Supreme Court has upheld that provided that this is against the granter, it is enforceable.  For this reason, a company granting a 30 year lease with an option to renew is seen as more attractive than an individual - as the former is more likely (though not always the case) to still be here.

this confirms my belief that if the individual or the company lease renewal option right grantor transfers ownership of the underlying land during the 30 year initial lease period (which is very possible) the lease renewal option right would be worthless...

also I would not feel comfortable just because a company granted the lease renewal option (versus an individual granting the option), unless such company/entity was a major public limited company or the Royal Crown Property Bureau/Privy Purse (but even in those circumstances, the land could possibly be transferred to a new owner during the initial 30 yr lease period rendering the renewal option rights worthless)....

in short, I personally would not place any heavy reliance on having any rights beyond the initial 30 year lease....if you want more rights you should buy on a freehold basis....

<{POST_SNAPBACK}>

My thoughts exactly once I had really thought about it. There's nothing to say the lease option renewal is binding on an heir or successor to the property. This can significantly influence the resale value of the property as well. Huge gray area and 30 years is a long time.

[Krub]

2 things in this thread interest me:

1-

Section 540 of the CCC is where the 30 year limitation rule comes in.  Para. 2 of such section states clearly that the period may be renewed.  The Supreme Court has upheld that provided that this is against the granter, it is enforceable.  For this reason, a company granting a 30 year lease with an option to renew is seen as more attractive than an individual - as the former is more likely (though not always the case) to still be here.

this confirms my belief that if the individual or the company lease renewal option right grantor transfers ownership of the underlying land during the 30 year initial lease period (which is very possible) the lease renewal option right would be worthless...

also I would not feel comfortable just because a company granted the lease renewal option (versus an individual granting the option), unless such company/entity was a major public limited company or the Royal Crown Property Bureau/Privy Purse (but even in those circumstances, the land could possibly be transferred to a new owner during the initial 30 yr lease period rendering the renewal option rights worthless)....

in short, I personally would not place any heavy reliance on having any rights beyond the initial 30 year lease....if you want more rights you should buy on a freehold basis....

<{POST_SNAPBACK}>

If I am not mistaken, the idea of the 30 years lease and a further renewal for 30 years is because farangs are not allowed to own (buy freehold) propoerty in Thailand.

[Dragonman]

2 things in this thread interest me:

1-

Section 540 of the CCC is where the 30 year limitation rule comes in.  Para. 2 of such section states clearly that the period may be renewed.  The Supreme Court has upheld that provided that this is against the granter, it is enforceable.  For this reason, a company granting a 30 year lease with an option to renew is seen as more attractive than an individual - as the former is more likely (though not always the case) to still be here.

this confirms my belief that if the individual or the company lease renewal option right grantor transfers ownership of the underlying land during the 30 year initial lease period (which is very possible) the lease renewal option right would be worthless...

also I would not feel comfortable just because a company granted the lease renewal option (versus an individual granting the option), unless such company/entity was a major public limited company or the Royal Crown Property Bureau/Privy Purse (but even in those circumstances, the land could possibly be transferred to a new owner during the initial 30 yr lease period rendering the renewal option rights worthless)....

in short, I personally would not place any heavy reliance on having any rights beyond the initial 30 year lease....if you want more rights you should buy on a freehold basis....

<{POST_SNAPBACK}>

If I am not mistaken, the idea of the 30 years lease and a further renewal for 30 years is because farangs are not allowed to own (buy freehold) propoerty in Thailand.

<{POST_SNAPBACK}>

Yes, can buy house, but not land. Can also buy condo freehold.

Me, I own nothing, and that's why I'm sitting here drinking my chang whilst my wife is weeding the garden

[Sumitr Man]

Section 540 Civil and Commercial Code

The duration of a hire of immovable property* cannot exceed 30 years.  If it is made for a longer period, such period is to be reduced to 30 years.

The aforesaid period may be renewed, but it must not exceed 30 years from the time of renewal.

*Section 139 of the Civil and Commercial Code

Immovable property denotes land and things fixed permanently to land forming a body therewith.  It includes rights connected with land or things fixed to or forming a body with land.

[Krub]

2 things in this thread interest me:

1-

Section 540 of the CCC is where the 30 year limitation rule comes in.  Para. 2 of such section states clearly that the period may be renewed.  The Supreme Court has upheld that provided that this is against the granter, it is enforceable.  For this reason, a company granting a 30 year lease with an option to renew is seen as more attractive than an individual - as the former is more likely (though not always the case) to still be here.

this confirms my belief that if the individual or the company lease renewal option right grantor transfers ownership of the underlying land during the 30 year initial lease period (which is very possible) the lease renewal option right would be worthless...

also I would not feel comfortable just because a company granted the lease renewal option (versus an individual granting the option), unless such company/entity was a major public limited company or the Royal Crown Property Bureau/Privy Purse (but even in those circumstances, the land could possibly be transferred to a new owner during the initial 30 yr lease period rendering the renewal option rights worthless)....

in short, I personally would not place any heavy reliance on having any rights beyond the initial 30 year lease....if you want more rights you should buy on a freehold basis....

<{POST_SNAPBACK}>

If I am not mistaken, the idea of the 30 years lease and a further renewal for 30 years is because farangs are not allowed to own (buy freehold) propoerty in Thailand.

<{POST_SNAPBACK}>

Yes, can buy house, but not land. Can also buy condo freehold.

Me, I own nothing, and that's why I'm sitting here drinking my chang whilst my wife is weeding the garden

<{POST_SNAPBACK}>

Well if you buy a house on land that you do not lease, you (I think) can be thrown out of the house anytime as the land owner also 'owns' the property on his land. That is my understanding.

[Dragonman]

2 things in this thread interest me:

1-

Section 540 of the CCC is where the 30 year limitation rule comes in.  Para. 2 of such section states clearly that the period may be renewed.  The Supreme Court has upheld that provided that this is against the granter, it is enforceable.  For this reason, a company granting a 30 year lease with an option to renew is seen as more attractive than an individual - as the former is more likely (though not always the case) to still be here.

this confirms my belief that if the individual or the company lease renewal option right grantor transfers ownership of the underlying land during the 30 year initial lease period (which is very possible) the lease renewal option right would be worthless...

also I would not feel comfortable just because a company granted the lease renewal option (versus an individual granting the option), unless such company/entity was a major public limited company or the Royal Crown Property Bureau/Privy Purse (but even in those circumstances, the land could possibly be transferred to a new owner during the initial 30 yr lease period rendering the renewal option rights worthless)....

in short, I personally would not place any heavy reliance on having any rights beyond the initial 30 year lease....if you want more rights you should buy on a freehold basis....

<{POST_SNAPBACK}>

If I am not mistaken, the idea of the 30 years lease and a further renewal for 30 years is because farangs are not allowed to own (buy freehold) propoerty in Thailand.

<{POST_SNAPBACK}>

Yes, can buy house, but not land. Can also buy condo freehold.

Me, I own nothing, and that's why I'm sitting here drinking my chang whilst my wife is weeding the garden

<{POST_SNAPBACK}>

Well if you buy a house on land that you do not lease, you (I think) can be thrown out of the house anytime as the land owner also 'owns' the property on his land. That is my understanding.

<{POST_SNAPBACK}>

My understanding of thai law is that an access agreement or easement is contained implicitly where access is required to a property within an area not owned by the property owner. In other words the freeholder cannot deny access. Seems pretty pointless having a house with no land however, so a land lease would be a huge advantage. Unlike the law in most western countries land ownership does not include everything from down in the ground to up in the sky.