Lease Legality

[rayinkrabi]

Hi all, I've had conflicting advice on the legality of a 30/30/30 lease, in fact the lawyer I used some years ago simply smiled when I questioned the 2nd & 3 rd 30 yr periods (which are simply referred to as 'promised' in the lease). My new lawyer, who comes highly recomended, tells me the 'extensions' are legal & no problem to pass onto my new wife & daughter. As far as I know the lease law hasn't been around long enough yet to put the extensions to the test (?)

The 'freehold' is in the name of my ex gf, who has made it quite clear that she will say or do any thing to have me out of the way, in particular she's told a friend that she wants me thrown out of the country. For the record I have never and would never harm her (or any one else for that matter) and I make a point of keeping my nose clean..but in the event of a trumped up charge ever sticking (we all know anything is possible in the LOS) how would a lease stand ?

My ex is trying to make life very hard for my new wife and has told her that she is the rightful owner of everything, even demanding access to the land / house as she sees fit. All cobblers of course but how does Thai law view this?

All comments welcome especially from any who have had a similar experience.

[stgrhe]

First, you may like to know that there is no special lease law so whether it is new or old is up to the individual to judge.

Lease rights are determined in Book 3, Title IV and sections 537 - 571 of the Civil and Commercial Code.

You will it here on www.thailawonline.com/images/thaicivilcode/book%203%20title%204-10%20commercial%20code%20hire%20of%20property.pdf

[InterestedObserver]

If the ex does not want to honor the second or subsequent 30 year lease there is nothing you can do about it. The promised, unsigned future extensions are legal only so far as they can be enforced when signed. The first 30 year lease is the only legally enforceable lease you have at this point in time.

[thaiwanderer]

If the ex does not want to honor the second or subsequent 30 year lease there is nothing you can do about it. The promised, unsigned future extensions are legal only so far as they can be enforced when signed. The first 30 year lease is the only legally enforceable lease you have at this point in time.

I think its a little unclear from the OP whether the promises of future leases are 'signed' or not (i.e. contained within a binding contract and appropriately drafted).

However IMHO at the very most all this can give anyway is a key to litigation against the ex (which essentially may be of no consolation whatsoever - an expensive endeavour possibly against a future woman of straw who no longer owns the subject land).

For the OP there are many threads on renewals. They aren't a 'new' area of law, merely an attempt to circumvent the 30 year maximum residential lease (since foreigners can't own land freehold, usual exceptions aside).

IMHO they are very easily defeated by the land being transferred. Even if your ex is still the owner at the time (unlikely given her apparent attitude) and a binding contract exists that's appropriately worded its still a crapshoot.

[InterestedObserver]

I think its a little unclear from the OP whether the promises of future leases are 'signed' or not (i.e. contained within a binding contract and appropriately drafted).

It's perfectly clear from the Civil and Commercial Code that any lease contract of immovable property of greater than three and a maximum of thirty years must be registered at the land office and recorded on the back of the Chanote. Any term in excess of thirty years must be reduced to the thirty year maximum. Any future renewals (extensions) are subject to fair market value at the time of renewal and therefore cannot be presigned, predated and preregistered. The so-called 30+30+30 lease contract for immovable property has never been validated by a Thai court nor is there any basis for it in the Civil and Commercial Code..

[manarak]

If the ex does not want to honor the second or subsequent 30 year lease there is nothing you can do about it. The promised, unsigned future extensions are legal only so far as they can be enforced when signed. The first 30 year lease is the only legally enforceable lease you have at this point in time.

Maybe the term 'legal' needs to be defined.

In my understanding, 'legal' means anything that is not illegal.

In that sense, 30+30+30 leases are certainly legal... 'enforceable' is the relevant word here.

The law says a lease of maximum 30 years must be materialized on the land deed and recorded at the land office. The documentary status of the land can be enforced very easily with the help of police and courts.

What one gets when signing a 3x30 lease is a solid lease for 30 years, plus a "promise" that the lease will be renewed 2 times.

What happens after the expiry of the lease is stipulated in your contract, and the contract is only binding for the signatories. In theory, private contracts are enforceable in court.

In practice, private contracts have proven difficult to enforce, especially when the land has changed ownership.

[stgrhe]

I think its a little unclear from the OP whether the promises of future leases are 'signed' or not (i.e. contained within a binding contract and appropriately drafted).

It's perfectly clear from the Civil and Commercial Code that any lease contract of immovable property of greater than three and a maximum of thirty years must be registered at the land office and recorded on the back of the Chanote. Any term in excess of thirty years must be reduced to the thirty year maximum. Any future renewals (extensions) are subject to fair market value at the time of renewal and therefore cannot be presigned, predated and preregistered. The so-called 30+30+30 lease contract for immovable property has never been validated by a Thai court nor is there any basis for it in the Civil and Commercial Code..

I do fully agree with your statement IO. A golden rule in any contract is if a term is against the law than term is not valid. Hence, the law will always take precedence over a contract term. Hence the best the OP can legally ask for is 30+30 years since the law permits extension of the lease term by another 30 years.

Edited due to typing error.

Edited December 20, 2011 by stgrhe

[stgrhe]

Maybe the term 'legal' needs to be defined.

In my understanding, 'legal' means anything that is not illegal.

In that sense, 30+30+30 leases are certainly legal... 'enforceable' is the relevant word here.

The law says a lease of maximum 30 years must be materialized on the land deed and recorded at the land office. The documentary status of the land can be enforced very easily with the help of police and courts.

What one gets when signing a 3x30 lease is a solid lease for 30 years, plus a "promise" that the lease will be renewed 2 times.

What happens after the expiry of the lease is stipulated in your contract, and the contract is only binding for the signatories. In theory, private contracts are enforceable in court.

In practice, private contracts have proven difficult to enforce, especially when the land has changed ownership.

No, if it is against the law it is not enforceable in a court of law, and 30+30+30 year term is against the law.

[ludditeman]

If any Thai lawyer tells you the promised renewals are legal, he is either a fool or a crook.

Look for a new lawyer.

[manarak]

Maybe the term 'legal' needs to be defined.

In my understanding, 'legal' means anything that is not illegal.

In that sense, 30+30+30 leases are certainly legal... 'enforceable' is the relevant word here.

The law says a lease of maximum 30 years must be materialized on the land deed and recorded at the land office. The documentary status of the land can be enforced very easily with the help of police and courts.

What one gets when signing a 3x30 lease is a solid lease for 30 years, plus a "promise" that the lease will be renewed 2 times.

What happens after the expiry of the lease is stipulated in your contract, and the contract is only binding for the signatories. In theory, private contracts are enforceable in court.

In practice, private contracts have proven difficult to enforce, especially when the land has changed ownership.

No, if it is against the law it is not enforceable in a court of law, and 30+30+30 year term is against the law.

Yes, what you say is true, but the reverse is not true. If something is not enforceable it does not mean that it is illegal.

Please give a reference to the applicable Law (title, articles) banning a contractual obligation to grant a new lease in 30 years from now?

Edited December 20, 2011 by manarak

[thaiwanderer]

Whatever level of legality, enforceability or practical likelihood of contracting ahead of time for one renewal we agree or disagree on IMHO the same applies to two renewals (or any other number).

The first renewal is in no way stronger than the second (despite what interested parties combatting questions from clients may espouse).

CCC540 allows for renewal and IMHO its an incorrect interpretation to say that's only one renewal (and don't get me started on appeals to secondary sources citing supreme court decision 'precedents').

But when it can be agreed is another matter that is not specifically dealt with.

In general contracting ahead of time does not offend the CCC or any other Thai law.

But the maximum duration of a residential lease is 30 years and however well the contract splits the deal and distinguishes the leases we cannot ignore the core reason for all this is to circumvent the general prohibition on foreigners owning land. Where Thai law is silent on the specifics of renewal structures who is willing to bet interpretation will favour foreigners?

That's not to say renewals shouldn't be included, especially since foreigners typically pay more for leasehold than the freehold is really worth!

They are though very easily defeated by the land being transferred, so no protection of interest in the land beyond the registered 30 years.

If the original land owner remains the same (or if hoping to claim money from them if they've since sold) you can attempt to pursue it but will be hoping for a favourable interpretation as above.

There's no reason not to include provision for renewal (if not securing the freehold by other means ) but there's little reason to assume it will be of much use.

[rayinkrabi]

Wow, many good & interesting responses so far from clearly well informed folk, please keep 'em coming. TBH this all confirms what I already think (and I've been researching on & off for many years already), the intention this time is to identify any real or proven 'benchmarks' that may be out there from people that have already trod this path.

Even tho this topic has probably been covered many times in the past I feel this could help others to get their head around this whole business.

[Khun Jean]

What everybody forgets is that a renewal is just that. If you get the renewal, you have to pay again!. As an example: pay 4 million now for 30 years. Pay 50 million for the extension! Marketvalue, inflation etc makes this very hard to predict.

You have 30 years to save for it.

[thaiwanderer]

What everybody forgets is that a renewal is just that. If you get the renewal, you have to pay again!. As an example: pay 4 million now for 30 years. Pay 50 million for the extension! Marketvalue, inflation etc makes this very hard to predict.

You have 30 years to save for it.

While it doesn't overcome the obstacles to enforcement, prepayment does take care of that element (especially since foreigners often pay more for 30 years than a freehold is worth).

[thaiwanderer]

Wow, many good & interesting responses so far from clearly well informed folk, please keep 'em coming. TBH this all confirms what I already think (and I've been researching on & off for many years already), the intention this time is to identify any real or proven 'benchmarks' that may be out there from people that have already trod this path.

Even tho this topic has probably been covered many times in the past I feel this could help others to get their head around this whole business.

Unfortunately much of the discussion here is likely irrelevant to your situation since the landowner has no intention of honouring a renewal.

Therefore is she really going to remain the landowner when the time comes since a transfer will be very easily defeat any purported claim you have over the land itself?

[SuperGers]

When i drew up a 30 + 30 year land lease my Thai lawyer virtually told me to forget the second 30 year period as a lost cause !

Even for the first 30 year period to be valid YOUR name has to be registered on the lease with the Land Office AND appear on the Chanote that the land owner holds.

If the land owner dies or sells the land to someone else your "right" to a second 30 year term lapses.

If you use this method to ahem, "buy" land you might as well accept it's only for the initial 30 year period i'm afraid.

[manarak]

Is there a cap on the maximum term of a mortgage in Thai Law?

[thaiwanderer]

Is there a cap on the maximum term of a mortgage in Thai Law?

None, but if using a mortgage to attempt to enforce continued beneficial use its not entirely straight forward.

[manarak]

Is there a cap on the maximum term of a mortgage in Thai Law?

None, but if using a mortgage to attempt to enforce continued beneficial use its not entirely straight forward.

No, but since a lease is materialized on the deeds and recorded at the land office and since a mortgage carries over to the next owner in case of property transfer, the mortgage could be used to guarantee financially the 30+30+30 lease by making the lease payment a mortgage.

The renewals can be defined in the mortgage contract as mortgage repayments.

Of course, the owner could choose to repay the mortgage, but due to accrued interests, this option would be costly.

I agree that it is not entirely straight, but since the mortgager has the choice of renewing the lease or repaying part of the initial sum (which was paid for 30+30+30) plus interest, this can not be construed as unfair.

It is more a financial guarantee than a control on the land itself.

If not illegal for some reason, this method would ensure that the person leasing the land will get a big part of the money back if the lease is not renewed as stipulated in the 30+30+30 contract.

Of course this idea is a bit adventurous.

Edited December 21, 2011 by manarak

[thaiwanderer]

Is there a cap on the maximum term of a mortgage in Thai Law?

None, but if using a mortgage to attempt to enforce continued beneficial use its not entirely straight forward.

No, but since a lease is materialized on the deeds and recorded at the land office and since a mortgage carries over to the next owner in case of property transfer, the mortgage could be used to guarantee financially the 30+30+30 lease by making the lease payment a mortgage.

The renewals can be defined in the mortgage contract as mortgage repayments.

Of course, the owner could choose to repay the mortgage, but due to accrued interests, this option would be costly.

I agree that it is not entirely straight, but since the mortgager has the choice of renewing the lease or repaying part of the initial sum (which was paid for 30+30+30) plus interest, this can not be construed as unfair.

It is more a financial guarantee than a control on the land itself.

If not illegal for some reason, this method would ensure that the person leasing the land will get a big part of the money back if the lease is not renewed as stipulated in the 30+30+30 contract.

Of course this idea is a bit adventurous.

Not adventurous at all.

They can, have been and continue to be used in various ways (though some land offices refuse to register them when the structure is too transparent or unsophisticated).

If used they are best as just a part / add on.

[rayinkrabi]

Interesting ideas but surely unworkable assuming the property is used as surety for a loan.

As mentioned before, the law of the land always takes precedence, no matter what wording is in the contract agreement. In other words, if it could be proved at any time in the future the intention was to circumvent the law..all would be lost..as is the case with any who think they are being smart by buying in a bogus company name etc.

[thaiwanderer]

Interesting ideas but surely unworkable assuming the property is used as surety for a loan.

As mentioned before, the law of the land always takes precedence, no matter what wording is in the contract agreement. In other words, if it could be proved at any time in the future the intention was to circumvent the law..all would be lost..as is the case with any who think they are being smart by buying in a bogus company name etc.

While in general agreement, not all bogus companies are the same.

[katabeachbum]

Wow, many good & interesting responses so far from clearly well informed folk, please keep 'em coming. TBH this all confirms what I already think (and I've been researching on & off for many years already), the intention this time is to identify any real or proven 'benchmarks' that may be out there from people that have already trod this path.

Even tho this topic has probably been covered many times in the past I feel this could help others to get their head around this whole business.

Unfortunately much of the discussion here is likely irrelevant to your situation since the landowner has no intention of honouring a renewal.

Therefore is she really going to remain the landowner when the time comes since a transfer will be very easily defeat any purported claim you have over the land itself?

and as landowner has no intention of granting another 30 years, I would look at other clauses in lease.

Is there an option for lessee to transfer to freehold to another Thai national or Thai co ltd? if, not it seems you used a useless lawyer

[katabeachbum]

Is there a cap on the maximum term of a mortgage in Thai Law?

None, but if using a mortgage to attempt to enforce continued beneficial use its not entirely straight forward.

does any land office allow mortgage registered for more than 30 years?

[thaiwanderer]

Wow, many good & interesting responses so far from clearly well informed folk, please keep 'em coming. TBH this all confirms what I already think (and I've been researching on & off for many years already), the intention this time is to identify any real or proven 'benchmarks' that may be out there from people that have already trod this path.

Even tho this topic has probably been covered many times in the past I feel this could help others to get their head around this whole business.

Unfortunately much of the discussion here is likely irrelevant to your situation since the landowner has no intention of honouring a renewal.

Therefore is she really going to remain the landowner when the time comes since a transfer will be very easily defeat any purported claim you have over the land itself?

and as landowner has no intention of granting another 30 years, I would look at other clauses in lease.

Is there an option for lessee to transfer to freehold to another Thai national or Thai co ltd? if, not it seems you used a useless lawyer

This and many other 'clever' clauses are worthwhile including on the off chance - but have you ever managed to enforce such a clause?

[thaiwanderer]

Is there a cap on the maximum term of a mortgage in Thai Law?

None, but if using a mortgage to attempt to enforce continued beneficial use its not entirely straight forward.

does any land office allow mortgage registered for more than 30 years?

Yes, but at the other end some refuse to register any mortgage where the lender and lessee or whatever is a foreigner or otherwise the intent is clearly transparent.

[Nip]

Sadly or worryingly the honest opinion of most lawyers, prosecutors and judges is that the 'Lease' system is an attempt to circumvent Thai Law .... Period! Thus if challenged they will not stand up in court. I believe there are 6 or 7 test cases going through the courts at the moment in Samui and Phuket? It is also the opinion of at least one Honorary Consul! Really it can be best considered a rental agreement and nothing else.

[New007]

I've got an offer that looks promising and affordable. It's going to be a direct leasing between a temple and us. The contract is ratified by the land office and a lawyer's office. For the 30 - year lease they have the following rates:

Year 1 - 5 = 570 Baht / month

Year 6 - 10 = 760 Baht / month

Year 11 - 15 = 1,350 Baht / month

Year 16 - 20 = 1,850 Baht / month

Year 21 - 25 = 2,250 Baht / month

Year 26 - 30 = 2,650 Baht / month

After the 30 years the contract will be re-noegotiated.

Is that common practice that the leasing price increases with the time? So on top of the buying price for the house, which is around 1.8 million, there would be another 490,000 on top for the lease. Does that sound fair to you guys? The house is finished. All the fiitings and wiring is done, that includes water pump and tank on the rooftop. It's a 4-storey townhouse which can be used commercially.

Any suggstions or comments on that welcome

[Khun Jean]

That is not bad, not bad at all.

Can you pay per month also or is it a lump sum for the whole 30 years?

[Khun Jean]

Sadly or worryingly the honest opinion of most lawyers, prosecutors and judges is that the 'Lease' system is an attempt to circumvent Thai Law .... Period! Thus if challenged they will not stand up in court. I believe there are 6 or 7 test cases going through the courts at the moment in Samui and Phuket? It is also the opinion of at least one Honorary Consul! Really it can be best considered a rental agreement and nothing else.

In Samui and Phuket anything can be challenged.

Nothing wrong with a lease (other than with your spouse obviously).

I like how you end, "Really it can be best considered a rental agreement and nothing else".

So WHAT do you really want to say, the first part or the last part?

I guess you are talking about the legality of those 'renewals'. I got news for you, they are perfectly legal, only problem is enforcement.

I wrote a lengthy post about that few years ago with some samples how someone can get out of the contract, at that time 30+30+30 leases were used by every lawyer, agent, developer.

Edited January 19, 2012 by Khun Jean