Extending A 30 Year Lease

[stevehaigh]

if you have a 30 year land lease agreement with a 30 year lease extension option written into the contract, as is normal for land lease agreements, what do you think your chances are of getting the land owner to extend the lease if your relationship with the land owner goes belly up? (jeeze that's a long sentense!)

i understand that Thai courts are will up uphold that lease extensions are a contractual matter between the parties involved, but does this mean the court will favor the leasee (farang) over the leasor (thai)? even if the leasee wins in court. is the leasor compelled to sign up for another 30 years?

any experience or info? thanks.

[Gary A]

Call me a pessimist or whatever but I always look at the worst case scenario. From what I have read the first 30 year lease MUST be registered at the land office to be legal and the second 30 year lease is entirely up to the land owner. Lots of things can change in 30 years and it would appear prudent to NOT look for the lease to be renewed.

if you have a 30 year land lease agreement with a 30 year lease extension option written into the contract, as is normal for land lease agreements, what do you think your chances are of getting the land owner to extend the lease if your relationship with the land owner goes belly up? (jeeze that's a long sentense!)

i understand that Thai courts are will up uphold that lease extensions are a contractual matter between the parties involved, but does this mean the court will favor the leasee (farang) over the leasor (thai)? even if the leasee wins in court. is the leasor compelled to sign up for another 30 years?

any experience or info? thanks.

[SamuiRes]

if you have a 30 year land lease agreement with a 30 year lease extension option written into the contract, as is normal for land lease agreements, what do you think your chances are of getting the land owner to extend the lease if your relationship with the land owner goes belly up? (jeeze that's a long sentense!)

i understand that Thai courts are will up uphold that lease extensions are a contractual matter between the parties involved, but does this mean the court will favor the leasee (farang) over the leasor (thai)? even if the leasee wins in court. is the leasor compelled to sign up for another 30 years?

any experience or info? thanks.

The Option should also be registered and then in theory at least, should the landowner not be willing to attend at the Land Office, the courts should grant the new lease and direct the Land Office to register it. With options I believe the terms under which the option is being granted should be clear at the outset and not left to negotiation later. By that I mean the term of the lease and any further money to be paid and who pays the registration costs.

As far as I am aware none of this has passed through the courts so there is no precedent to work from - not that Thai judges appear to be bound by precedent anyway.

I have always had doubts about the Leasehold system for precisely this reason unless you are leasing from a management company in which you are a shareholder which is becoming quite common with new developments now.

[Thaipwriter]

what do you think your chances are of getting the land owner to extend the lease if your relationship with the land owner goes belly up?

Zero!

Good way to do this is to have the title of your land help by someone who does not need any more money.

Putting it with hard up in-laws is likely to bring trouble.

Why not consider putting your "assett" in the name of a local lawyer or police captain that you have befriended.

This way you can lease off them and have the same amount of peace of mind, if not more than if it's in the GF's familys name.

Discuss with your title holder about annulling your lease after 10 years and then creating a new 30 year lease. (with the option to renew after 30). This route will cost you more but has obvious benefits.

[Bobcat]

The Option should also be registered and then in theory at least, should the landowner not be willing to attend at the Land Office, the courts should grant the new lease and direct the Land Office to register it.

Such an option is not a registerable interest under Thai law. Accordingly, options to renew (for however long they may be) cannot be registered with the Land Department.

Regards,

Bob

Edited January 6, 2006 by Bobcat

[johnnyk]

I was going to go the lease route but after some research I decided to go freehold via company.

Here's why (just my opinions):

1) 30 yrs is a very long time, lots of things can happen

2) The land could be sold or passed/willed/devolved to another party who has NO agreement with you other than to honour your lease until the 30 yr term is up

3) The land could increase in value thus providing someone with motive to get you off the land

4) A leasehold is a diminishing asset.

[Dragonman]

The Option should also be registered and then in theory at least, should the landowner not be willing to attend at the Land Office, the courts should grant the new lease and direct the Land Office to register it.

Such an option is not a registerable interest under Thai law. Accordingly, options to renew (for however long they may be) cannot be registered with the Land Department.

Regards,

Bob

As the "option"is strictly a contract between the two parties mentioned, there is no need for anyone else to know about it. It has no effect on selling a property, as once sold the contract is pretty worthless.

[trajan]

I was going to go the lease route but after some research I decided to go freehold via company.

Here's why (just my opinions):

1) 30 yrs is a very long time, lots of things can happen

2) The land could be sold or passed/willed/devolved to another party who has NO agreement with you other than to honour your lease until the 30 yr term is up

3) The land could increase in value thus providing someone with motive to get you off the land

4) A leasehold is a diminishing asset.

I agree completely with your points.... I also decided to go freehold via a company (and freehold individually with a condo)...

[mickba]

I was going to go the lease route but after some research I decided to go freehold via company.

Here's why (just my opinions):

1) 30 yrs is a very long time, lots of things can happen

2) The land could be sold or passed/willed/devolved to another party who has NO agreement with you other than to honour your lease until the 30 yr term is up

3) The land could increase in value thus providing someone with motive to get you off the land

4) A leasehold is a diminishing asset.

You're right of course, albeit there are questions about the company route (if it's a non-trading one). If there was a perfect solution we'd all be going for it, but in the end we are trying to get round their rules, so there'll probably never be one.

I've gone the Lease route, accepting your points and the potential consequences. Each of us has to decide.

As a matter of interest, would you consider the 99 year Lease being talked about (if introduced) or would you dismiss it for the same reasons?

[BEENTHEREDONETHAT]

I was going to use the 30 year lease for the land and build a house. But thought that 30 years was much to short a time for as large an investment as a house is. Like johnnyk says every year the value of a lease goes down. Even if the additional 30 years is agreed on it dosen't mean anything until it is successfully re-registered with the land department.

So I finally gave up the house idea and bought a condo. Which we own legally and are quite happy with.

[johnnyk]

As far as I understand the original signers of the lease must turn up in person to register the 30yr extension.

Well, I'd be 90yrs old and so would my landowner, 555!

If things changed I'd happily go for 99 yrs to be watertight legal (if that's not an oxymoron in Thailand!).

I went the company route, I make sure the company shows trading activity and I file all proper tax returns and audited statements.

Edited November 22, 2007 by johnnyk

[ProThaiExpat]

Most options in lease contracts not drawn by knowledgeable lawyers are merely provisions to agree to agree. Hardly enforceable. In exerciseing the option, it must be supported by separate "consideration" or benefit to the landlord. Unless it is specified in the original lease, the option is probably not legally enforceable.

In determining the value of the renewal term, the market value of the new lease must be determined and that is fraught with problems, especially in Thailand. I am sure the tenant desiring to extend the lease for an additional 30 years is not is a position to fund such an extension at the then market rates unless the lease allows for periodic payments during the option period. Just a sample of the difficulties in effecting such a provision. Of course the costs of the court case and lawyers must be added to the new market price if the landlord is unwilling to effect the option willingly.

[quiksilva]

The decision to exercise an Option to Renew in Thailand is optional for both parties (depending on how it is worded) and there is no overriding legislation that provides security of tenure to a tenant, as you would have in England & Wales, or Australia.

Edited November 22, 2007 by quiksilva

[thaipete]

The best solution is to andd an extra clause to the 30 year rent that only you can sell the land fully acceptabe in Thai law

[mickba]

The best solution is to add an extra clause to the 30 year rent that only you can sell the land fully acceptabe in Thai law

Sounds interesting but I don't understand - could you elaborate please?

Thanks

[ProThaiExpat]

As you may know, you can agree with another to almost anything legal in a contract.

Thus, a provision can be included in a lease that would be termed a "restraint on alienation" which means that the landlord can be limited in his right to sell the property during the term of the lease.

I doubt any intelligent landlord would sign such a clause.

Sometimes one sees "rights of first refusal" clauses which are far less objectionable from a landlords point of view. Such a clause states that in the event the landlord desires to sell the land upon which the tenancy is a burden, the tenant has the right to buy the land at the price a 3rd party has offered to buy the land. There is a danger that a "phony offer" can be generated from a 3rd party collaborator.

[stevemiddie]

I note in todays Bangkok Post that some of the political parties have stated their policies regarding leases and the FBA.

One party wants to extend the legal 30 year lease to a one-off 90 year lease. Good news. Unfortunately they are a small party and not expected to win many ( any ) seats.

Others want the FBA ( nominee shares ) proposed amendment to be scrapped.

Fixed rate 30 year mortgages ( 3.25% ) i think is being mooted.

All speculation at the moment though but good news that they are even CONSIDERING these options

Edited November 22, 2007 by stevemiddie

[nobody65]

I was going to use the 30 year lease for the land and build a house. But thought that 30 years was much to short a time for as large an investment as a house is. Like johnnyk says every year the value of a lease goes down. Even if the additional 30 years is agreed on it dosen't mean anything until it is successfully re-registered with the land department.

So I finally gave up the house idea and bought a condo. Which we own legally and are quite happy with.

same me. i also would like to stay in a nic villa but 30 years is too short (you just sign 30 years and everything else is speculation) and even the very best construction of a thai company for freehold could be a bit risky i decided to purchase a condo on my own name.

[nobody65]

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