The 30 year lease

[Senechal]

I haven't seen much discussion of the legal (under Thai law) 30 year lease. And I have yet to meet anyone who has one in all my years here.

So, a few questions for any board-members who may have experience with 30 year leases:

1) My understanding is that the back-to-back lease-extension (ie: double 30 year lease, or 60 years) is not legally defensible and is technically illegal. Is this correct?

2) Are all 30-year leases paid in advance as a "leasehold" purchase? Or are they / can they be structured as a standard monthly payment, due every month for 30 years? (And would any property owner ever even go for that?)

2b) If a very-long term monthly-payment lease is possible, how is the issue of annual rent increases typically handled (if at all)?

3) What special lease / contract provisions should be included in a very-long term lease that aren't included in a standard rental agreement (if any)?

Thanks in advance! I think the 30 year lease option is an interesting one for foreigners to pursue in Thailand and I'd love to see more discussion about it.

Edited March 1, 2014 by Senechal

[simon43]

I can only answer in respect of leasing land for 30 years upon which I have built my(cheap-to-build) property:

1) My understanding is that the back-to-back lease-extension (ie: double 30 year lease, or 60 years) is not legally defensible and is technically illegal. Is this correct?

Correct - it is a pie-in-the-sky fantasy dreamed up by real estate agents. It would be laughed out of Court.

2) Are all 30-year leases paid in advance as a "leasehold" purchase? Or are they / can they be structured as a standard monthly payment, due every month for 30 years? (And would any property owner ever even go for that?)

I pay monthly, with no 'key-money' or initial deposit.

2b) If a very-long term monthly-payment lease is possible, how is the issue of annual rent increases typically handled (if at all)?

Any rent increases are stipulated in the lease contract. so this may be specifically stated for each year of the lease. One lease that I have for a property states the lease amount for each year of the contract. Another contract for a different plot of land has no rental increase at all over the lease term

3) What special lease / contract provisions should be included in a very-long term lease that aren't included in a standard rental agreement (if any)?

The right to sub-lease, the right to sell the lease, the right to demolish any structure on the land at the end of the lease term

Buit as for 'buying' an existing house on a 30-year lease, I have no expoerience. I am sure other posters will advise.

Simon

[Langsuan Man]

The reason that you have not met anyone who has one is because the Thais are loathe to do them. It has to do with the mind set that land owners have here in Thailand

Despite their legality Thais just have a hard time wrapping their heads around the idea of structured payments. If they are finally going to sell their land they want all their money up front

Large developers don't want to deal with them because once they finish a project they want to get out and start a new one and don't want to be bothered with dealing with the lessee. If they still have a interest in a development then they can't turn the property over to a home owners association and clear if off of their books

Whenever the subject of land ownership is brought up here at TV the rent-don't-own brigade always jumps in with the gloom and doom scenarios of buying in a company name and declare that the 30 year lease or usefruct is the only "legal" solution. Unfortunately they never take into consideration that most land owners and developers will not go that route when selling to a foreigner

[Farma]

The reason that you have not met anyone who has one is because the Thais are loathe to do them.

I've encountered 30 year leases for commercial buildings on crown land. It's common to find main business areas of cities are built on crown land.

The buildings are bought and sold with the remaining land lease time transferring to the new building owner. In these transactions the buyer is expected to pay the building purchase price in full which includes whatever time is remaining on the crown land lease.

Once that land lease expires it is up to the building owner to renew the crown lease. Some buildings on crown land have been leased for generations.

Personally I wouldn't expect a 30 year private land lease to be renewed.

3) What special lease / contract provisions should be included in a very-long term lease that aren't included in a standard rental agreement (if any)?

Last year a bank and a supermarket chain made separate offers to lease land from my family. The term was for 30 years.

The bank offer was for the family to build a building to the banks specification. The bank would then lease the building for 30 years paying upfront yearly with rent increases each year.

The supermarket offer would see the supermarket building their own building. Yearly rent would be paid upfront with yearly rental increases. At the end of the lease we could keep the building or the supermarket would restore the land back to original condition.

[johnnyk]

Residential or commercial property lease?

Most 30-yr leases are residential offered by developers who want it all up front. Not great because you must factor in opportunity cost. By paying a large sum upfront rather than monthly you forfeit any earnings the capital might earn.

Example: you pay 3 million for 30 years upfront. A reasonable assumption would be 4% return on that 3 million or 120,000/year x 30 = 3,600,000 baht opportunity cost.

Most commercial leases are 3 years at a time, or 2 years 364 days so the landowner doesn't register the lease to avoid tax.

Clearly, if you could pay 100,000 a year over 30 years you could pay it from income earned by the capital.

The 30 year up front payment is a bit of a loser for the buyer but many developers (most falang ones) want the money up front because they build their developments without bank financing.

At the end of the 30 years you have nothing if it was all paid up front.

[Senechal]

The 30 year up front payment is a bit of a loser for the buyer but many developers (most falang ones) want the money up front because they build their developments without bank financing.

At the end of the 30 years you have nothing if it was all paid up front.

Yes, and I'm sure 99% of people would agree with you. The up-front "leasehold" purchase is a terrible deal. Particularly when you can buy freehold elsewhere.

A pay-as-you-go 30 year lease however is very interesting as it requires no up-front capital -- and it allows you to live securely in an actual house with little capital risk. As someone who wants to live in a house and not a condo, this is appealing. I'd also like to find a house and invest in some renovation/furniture, etc -- so the long term lease is the only way I can imagine doing this.

Does anyone know what the standard percentage of annual rent increases should look like (or typically looks like) on a 30-year lease?

Edited March 2, 2014 by Senechal

[steve73]

I know of two farangs that have used their girlfriends to buy land/property, and then taken a 30 year (+30 extension - FWIW) lease from them, obviously paying the full cash up-front to enable the gf's to buy in the first place.

In one case, they are still together, and all's well... In the other, they have since split up; he then "sold" the land on by terminating the lease and paying a percentage of the profits made to her for "allowing the sale". Obviously she could have refused to sell and caused problems for him.

I also know of a Farang couple who have "bought" a house on a leased plot in a small resort (of 12 houses). They have a 30 year lease of a 12th of the single chanote and pay monthly, with no increments. If they sell (as they are trying to do), a new 30 year lease will be offerred by the land owner (the original developer and currently management co), but at a higher monthly fee than previously. They are having real problems selling - local Estate agents aren't interested due to the complexity, Thai's aren't interested as they can't own the Chanote, so it's only speculative buyers that are offering around 50% of it's notional "value" as a vacation 2nd home.

[Langsuan Man]

Think about it for a minute and give me one good reason why a Thai landowner should " finance" the purchase for you by allowing you to effectively finance you purchase via lease payments. If they have land and want to sell, they want their money up front. The concept of "lease to buy" doesn't exist here and if you think they care about selling to you they don't

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[Senechal]

Think about it for a minute and give me one good reason why a Thai landowner should " finance" the purchase for you by allowing you to effectively finance you purchase via lease payments. If they have land and want to sell, they want their money up front. The concept of "lease to buy" doesn't exist here and if you think they care about selling to you they don't

I think you are misunderstanding the topic here. No one is discussing "lease to buy". We are discussing basic leasing.

[SDM0712]

1) As far as I am aware the Law does not prohibit the granting of another 30 year lease after the previous one has expired. However it is clear that the Law is specifically designed to prevent a foreigner from having more than a 30 year lease, so the intentional setting up a of structure whereby a new 30 year lead/extension would automatically start at the expiration of the previous 30 year period would seem to be in breach of the spirit of the Law even if it is not specifically prohibited in Law. Until a case comes to Court no one can give a definite indication as to how safe this 30,30,30 year structure is. Anything you see written here or anywhere else is speculation.

2) I have never heard of such a lease structured in this way and it is not in the Landlords (would-be seller) interest to deal with it in this way, ie they want all their money upfront !

2b) Since the idea of these leases is really to circumnavigate Thai land ownership Laws rather than as a landlords leasing investment this situation would not occur. Normally once you have paid for the first lease that is it and some admin fees from the Land Department for the issue of lease extensions.

3) The right to approve/veto the sale of the Lease/Land to any third party and if you sell on the Lease that a new 30 year period ( + + ) will be given to the person you sell on to.

An unpopular view amongst my "brother " agents I am sure, but if you take a lease on a 30 year basis with the promise of two extensions in 30 & 60 years time, only assume that the first 30 year period is completely safe. In the real world of course I must speculate that if a case ever did come to court and a ruling went against the lessee that this would undermine the value of all properties bought in this way in Thailand and stop the flow of lots of inbound foreign currency.

SDM

[Senechal]

I can only answer in respect of leasing land for 30 years upon which I have built my(cheap-to-build) property:

2) Are all 30-year leases paid in advance as a "leasehold" purchase? Or are they / can they be structured as a standard monthly payment, due every month for 30 years? (And would any property owner ever even go for that?)

I pay monthly, with no 'key-money' or initial deposit.

So at the end of 30 years you lose your house? Or is there some way you can see a return of its value?

[simon43]

Does anyone know what the standard percentage of annual rent increases should look like (or typically looks like) on a 30-year lease?

As previously mentioned, my experience relates to leasing 'bare' land for 30 years and then building a commercial guesthouse/hotel, (which is also my home).

The % increase is whatever you and the leaser agree to. Be careful of compoiund interest when agreeing on a rent increase! An apparently small % increase can increase the rent significantly over 20+ years.

In my case, one piece of land had no rent increase at all in the lease contract. The other has a small (<5%) increase every 5 years.

For both these leases, the land owner had no interest to sell the land, but was interested in receiving a regular, monthly rental income.

The landowner also no doubt, has his/her eyes on acquiring the hotel buildings at the end of the lease term, in which case I say good luck to them. My leases allow me to demolish the buildings at the end of ther lease term, or to salvage whatever materials I want. I doubt that 30-year old hotel rooms will have much value.....

For those wishing to build a modest house, and who are perhaps at an age of retirement, the bare land-lease route/monthly payments is attractive. You only need to factor in the house build cost as an initial lump sum payment. You could even build a small teak house and then take that house with you to another land plot after 30 years if the lease is not renewed.

Edited March 3, 2014 by simon43

[johnnyk]

I can only answer in respect of leasing land for 30 years upon which I have built my(cheap-to-build) property:

2) Are all 30-year leases paid in advance as a "leasehold" purchase? Or are they / can they be structured as a standard monthly payment, due every month for 30 years? (And would any property owner ever even go for that?)

I pay monthly, with no 'key-money' or initial deposit.

So at the end of 30 years you lose your house? Or is there some way you can see a return of its value?

Pretty much yes. The landowner can buy it from you though I suspect he would offer peanuts, take or leave it. Or, he could tell you to move your pile of bricks off his land, pronto.

[simon43]

Pretty much yes. The landowner can buy it from you though I suspect he would offer peanuts, take or leave it. Or, he could tell you to move your pile of bricks off his land, pronto.

Correct. The only reason why this works ok for me is because my 'house' (hotel) has earned me a good income over that 30-year period, such that I can ignore the initial (approximately) 4 million baht capital investment/build cost.

[sean in udon]

Not sure if I should hijack this topic or start something new, but I'm interested in simon43's 30 year land lease. It sounds exactly what I'm looking for.

Would be grateful if you (simon43) could give some idea of the cost for setting up the 30 year lease.

And where are you located? If you're anywhere need Udon Thani, I'm interested in which legal firm you used.

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[Arkady]

The problem with the options to renew 30 year leases for further 30 year terms is that the Land Code doesn't permit leases of more than 30 years with the exception of property for commercial use in certain designated zones which can be 50 years. If a case of non-renewal went to court there would likely be two problems: 1) in property disputes courts place the highest weighting on the records in the Land Office which would only show the first 30 year lease; 2) you would have to sue the land owner for civil damages due to breach of contract (i.e. the difference between the rental stated in the lease renewal option and the cost of comparable property at the time) but could not get the lease renewal enforced. Furthermore, if the land owner is no longer the same party that signed the original lease, they would argue they were not bound by it. In short the renewal options are an estate agents con that are not worth the paper they are printed on.

Rentals can be paid on whatever terms the lessor and leasee agree on but the Land Dept might ask for tax on the entire rental consideration upfront.

30 leases are quite common for commercial property but not for residential. Businesses often have no choice as prime spots may be only available on 30 year leases and renting for a business that has many branches is not a problem. But a house purchase usually represents a major portion of an individual's assets. So they normally like to look at it as capital formation that can be passed on to their heirs, rather than end up being worthless with the family evicted. So 30 year residential leases are only concocted for foreigners or for condos on very desirable pieces of land, e.g. some of the condos overlooking the Royal Bangkok Sports Club built on Crown Property Bureau land.

[simon43]

Would be grateful if you (simon43) could give some idea of the cost for setting up the 30 year lease.

The main cost is the tax that has to be paid on the entire rental fee over the lease period. This is paid at the land office and is about 1% of the lease amount.

So you draw up a lease contract which stipulates the monthly lease amout for each month/year of the lease term, including any annual increases etc. That contract also stipulates the other terms of the lease, such as the right to sublet, right to return the land 'virgin' at the end of the lease period etc.

You and the landower sign the lease and take it to the land office where the land officer will draw up another summary lease contract that cites your lease document. Your lease document is attached to the land office lease document and the latter is referenced on the land Chanote, together with your name. You pay the land tax fee and that's it.

I have done this in Phuket for 4 different land plots, on each which I have built a modest hotel/guesthouse which gives me/my ex-wives a viable income.

Simon

[Delight]

The lawyer working on the 'Ask a Lawyer' forum has something to say about leases as follows:

‘The rules for leasehold in different provinces is the same, the only difference is that some provinces are more strict or lax than others.

A leasehold is limited to 30 years but you can make an agreement in advance for another 30 years, this is not an extension of the original lease.’

http://www.thaivisa.com/forum/topic/716654-leasehold/?p=7662364&hl=%2Blease

[Senechal]

The lawyer working on the 'Ask a Lawyer' forum has something to say about leases as follows:

‘The rules for leasehold in different provinces is the same, the only difference is that some provinces are more strict or lax than others.

A leasehold is limited to 30 years but you can make an agreement in advance for another 30 years, this is not an extension of the original lease.’

http://www.thaivisa.com/forum/topic/716654-leasehold/?p=7662364&hl=%2Blease

Nonsense.

I'm sure the "experts" at "Siam Firm Inter Laws" will be happy to take your money. Give 'em a call in 30 years if you run into any problems. Haha!

Show me the case history of a successfully defended 30x30 contract.

And if anyone's comeback sounds anything like, "Well... he's a lawyer, and he's Thai so he should know", then all I can say is "Welcome to Thailand".

Here's a better thread:

http://www.thaivisa.com/forum/topic/166345-the-303030-year-lease-final-discussion/

Edited May 6, 2014 by Senechal

[Delight]

The lawyer working on the 'Ask a Lawyer' forum has something to say about leases as follows:

‘The rules for leasehold in different provinces is the same, the only difference is that some provinces are more strict or lax than others.

A leasehold is limited to 30 years but you can make an agreement in advance for another 30 years, this is not an extension of the original lease.’

http://www.thaivisa.com/forum/topic/716654-leasehold/?p=7662364&hl=%2Blease

Nonsense.

I'm sure the "experts" at "Siam Firm Inter Laws" will be happy to take your money. Give 'em a call in 30 years if you run into any problems. Haha!

Show me the case history of a successfully defended 30x30 contract.

And if anyone's comeback sounds anything like, "Well... he's a lawyer, and he's Thai so he should know", then all I can say is "Welcome to Thailand".

Here's a better thread:

http://www.thaivisa.com/forum/topic/166345-the-303030-year-lease-final-discussion/

It seeems to me that all leases start in the future. The law does not distinguish between one month into the future (as a commencement date) or 30 years plus one month into the future.

The Khun Jean link refers to a lease extension not a new lease. I presume that both leases will be detailed on the Chanote

I can envisage many practical problems with 2 parties committing themselves to 30 years into the future-just not legal problems

[colinp]

It seeems to me that all leases start in the future. The law does not distinguish between one month into the future (as a commencement date) or 30 years plus one month into the future.

The Khun Jean link refers to a lease extension not a new lease. I presume that both leases will be detailed on the Chanote

I can envisage many practical problems with 2 parties committing themselves to 30 years into the future-just not legal problems

The lease starts on the date of registration at the land office of your province. It is set at a maximum of 30 years. There is no 'extension' offered at the land office, it would be considered a new lease even if the same parties are involved, and the circle begins again.

Any extension past the originally registered 30 year lease would be a civil agreement.

[Senechal]

it would be considered a new lease even if the same parties are involved, and the circle begins again.

Any extension past the originally registered 30 year lease would be a civil agreement.

At least that's how the fairy tale goes.

[Mick60]

I know of two farangs that have used their girlfriends to buy land/property, and then taken a 30 year (+30 extension - FWIW) lease from them, obviously paying the full cash up-front to enable the gf's to buy in the first place.

In one case, they are still together, and all's well... In the other, they have since split up; he then "sold" the land on by terminating the lease and paying a percentage of the profits made to her for "allowing the sale". Obviously she could have refused to sell and caused problems for him.

I also know of a Farang couple who have "bought" a house on a leased plot in a small resort (of 12 houses). They have a 30 year lease of a 12th of the single chanote and pay monthly, with no increments. If they sell (as they are trying to do), a new 30 year lease will be offerred by the land owner (the original developer and currently management co), but at a higher monthly fee than previously. They are having real problems selling - local Estate agents aren't interested due to the complexity, Thai's aren't interested as they can't own the Chanote, so it's only speculative buyers that are offering around 50% of it's notional "value" as a vacation 2nd home.

I'm in a similar situation to your "buying for their girlfriends" I'm in the process of house hunting in Lop Buri. I fully understand I will not own the home but will pay for it in full up front so will need the 30 year lease. We will be living together in the home so it's really just a home purchase and 30 year lease for my security and peace of mind.

Do you or anyone here think it's ok for her to use a real estate lawyer in Lop Buri for the actual sale and I would then use a lawyer in BKK for the 30 year lease since I don't read any Thai and still picking up the language. And where are the hidden problems? Thanks to all in advance.