30 yr lease has run 5 years and is being sold

[Harrykrabi]

5 years ago a small Villa was purchased via a 30 year lease. The freeholder(lessor) is the developer. The lessee is a farang.

The property was never used or occupied and fell into disrepair. The lessee decided to sell the property. The Lessee does not live in Thailand.

The freeholder (lessor) stated at once that a new lease would NOT be granted to any buyer of the property. The lessee on advice then decided to sell on the remaining term of the lease (25 years approx) and with it, of course the rights of occupation of the land and house. The original Lease does contain a clause permitting the creation of a sub lease. Most leases prohibit this but curiously this one did not.

A buyer emerged and initially wanted a new 30 year lease but was told by the freeholder (lessor) that that would not be an option. The local lawyer then decided to prepare a sub lease for the buyer to execute along with the seller. The freeholder (lessor) served the proposed buyer with the Rules and Regs of the development but stated that because the original Lease stands the buyer (who would effectively be a sub lessee) was not bound by them as the buyer had no dealings with the developer who is of course the freeholder and lessor. The buyer had of course also not signed any acknowledgement of the Rules and Regs of the development. Similarly the freeholder (lessor) told the buyer that he was also not duty bound to pay the communal fees as the original contract between the freeholder(lessor) and lessee would stand because the original Lease had not been cancelled. I think the developer (freeholder and lessor) was trying to put the lessee off selling by informing the buyer that if the buyer broke the Rules or did not pay communal fees then he would go against the lessee and not the buyer.

Furthermore the sub lease prepared by the lawyer was a "bastardised" standard property sales contract and NOT a sub lease. It had words in it such as "buyer and seller to pay the transfer costs and taxes equally" etc etc. The lawyer stated that the two parties had only to execute this sub lease with two witnesses, buyer pay over the agreed sum for the property and the deal was done. The Freeholder (lessor) was not involved nor was the Land office.

I can see the logic of the process and presumably if the original or main Lease allows for a sub lease to be created (a Lease within a Lease) then I follow. But to me it all sounds unfair to the original Lessee since it would appear that ALL the terms of the Lease remain in force against him because the Lease is still in force. Should the buyer decide not to adhere to the projects Rules and Regs, (say for example by painting his house purple when the rules say only white or by not paying the communal fees) the original Lessee is responsible. Getting him to pay up or take action would in reality be difficult if he lives in Western Europe.

Anyone have any experience of this sort of situation or have any useful observations ?

A question was posted in Ask the Lawyer and answered by the lawyer but this only gave general advice.

[manarak]

it's a complicated situation, my guess is that the sale should be nulled.

The lessee made several mistakes and as a consequence the property was sold on false premises, which warrants cancellation of the sale.

The correct procedure would have been to make all rules & regulations an integral part of the sublease contract.

[inzman]

The new leasee is bound to the contractual obligations as the original leasee. He is in essence buying out the original leasees obligation. ie...25 years.

[Harrykrabi]

The new leasee is bound to the contractual obligations as the original leasee. He is in essence buying out the original leasees obligation. ie...25 years.

If he is not a party to the original Lease then I do not see how he can be bound by its T & C's. He hasn't signed it, is not named in it and hasn't signed anything ancillary relating to the development. So could you pls expand on your thoughts as I am really interested to read peoples input into this dilemma, thx

[BritManToo]

Any lease longer than 3 years if not registered at the land office is not legally binding.

[manarak]

Any lease longer than 3 years if not registered at the land office is not legally binding.

Wrong.

They are legally binding under contract Law.

But registered leases are very strong while contract Law is weak in the sense that many things can happen to the parties of the contract (death, disappearance, sale of property, etc.)

[yankee99]

im no lawyer but the sub lessee is gonna abide by the community rules and pay the dues or walk away. Not sure why he would think its different then owning the property.

Trying to fight the system is not gonna work.

[KittenKong]

Furthermore the sub lease prepared by the lawyer was a "bastardised" standard property sales contract and NOT a sub lease. It had words in it such as "buyer and seller to pay the transfer costs and taxes equally" etc etc. The lawyer stated that the two parties had only to execute this sub lease with two witnesses, buyer pay over the agreed sum for the property and the deal was done. The Freeholder (lessor) was not involved nor was the Land office.

You should probably think about employing a real lawyer rather than a crooked plastic imitation.

[stgrhe]

Good practice is to incorporate a clause that states that the new lessee will take over the former's all rights and obligations. Furthermore, it is not clear what OP means when he states the condition of the lease agreement. The document that matters is the one signed at the Land Office and if this document are missing some rights by the lessee despite such rights are written in a lease contract, such rights are void.

[monkeycountry]

I think the most interesting part is that it generally costs the same to rent for 30 years as it costs to buy something freehold. Yet owners/developers clearly seem to want their property back after 30 years. Granted, that is their right, but then the value of the asset drops significantly compared to freehold, and the initial rental price should be alot cheaper than the freehold price. Supply and demand I guess.

[kinmaew]

Another Thai property nightmare - Be warned. RENT and keep your life savings and assets in civilized countries with transparent laws and leaders.

[jpinx]

Buying a remaining lease is simple. The buyer contracts to agree the terms of the original lease. Basically it is just a name-change from the lessor/owners point of view. There is no way to wrangle this any other way in the face of the lessors stated position of not giving a new lease. He has the ultimate power, as the owner. Buying remaining leases is common practice and well-understood. Looks like the lawyer messed this one up badly.

[Toscano]

As I read the original leasee has not lived in this property and has allowed its condition to deteriorate . The owner leasor of the property should have sought to terminate the original lease by legal means , before trying to sell or release the property . The origilal leasee has not , it appears , occupied and taken care of the property and must be considered at fault in that respect ; though in fact he should receive some compesation for relinquishing the lease . I wouldn't consider buying a lease of any sought , or freehold while such complications exist ; one also wonders whether the developer owner is acting in good faith .

[jpinx]

As I read the original leasee has not lived in this property and has allowed its condition to deteriorate . The owner leasor of the property should have sought to terminate the original lease by legal means , before trying to sell or release the property . The origilal leasee has not , it appears , occupied and taken care of the property and must be considered at fault in that respect ; though in fact he should receive some compesation for relinquishing the lease . I wouldn't consider buying a lease of any sought , or freehold while such complications exist ; one also wonders whether the developer owner is acting in good faith .

The owner is not selling the remaining lease -- the defaulting farang is trying to sell it while he is in UK - possibly on health grounds. Anyone buying the remaining lease will have to factor in the costs of complying with the terms and conditions, including maintenance of the building.

Here's the source of the problem .- from the OP....

" ... The local lawyer then decided to prepare a sub lease for the buyer to execute along with the seller...."

The local lawyer obviously does not have any understanding of property leasing. Buying a remaining lease will automatically inherit the terms of the original lease. The seller saying otherwise is just sales-talk.

Edited December 10, 2014 by jpinx

[monkeycountry]

As I read the original leasee has not lived in this property and has allowed its condition to deteriorate . The owner leasor of the property should have sought to terminate the original lease by legal means , before trying to sell or release the property . The origilal leasee has not , it appears , occupied and taken care of the property and must be considered at fault in that respect ; though in fact he should receive some compesation for relinquishing the lease . I wouldn't consider buying a lease of any sought , or freehold while such complications exist ; one also wonders whether the developer owner is acting in good faith .

Usually when you rent a property most issues are maintained by the owner, while the tenant is mainly responsible for keeping the property clean and report if something is broken. The balance of power is maintained, as the tenant (if paying monthly) can just choose to leave if the roof is leaking or similar and the owner does not want to fix it. It seems however, that if you rent the property long enough (30 years), then that balance of power is gone, and suddenly the tenant becomes responsible for everything I am sure you are right about it, but it is ridiculous. You pay rent 30 years upfront, and then become responsible for fixing everything on behalf of the owner - great deal

Edited December 10, 2014 by monkeycountry

[manarak]

I think the most interesting part is that it generally costs the same to rent for 30 years as it costs to buy something freehold. Yet owners/developers clearly seem to want their property back after 30 years. Granted, that is their right, but then the value of the asset drops significantly compared to freehold, and the initial rental price should be alot cheaper than the freehold price. Supply and demand I guess.

Actually, the discounted cash flows for renting and buying most property in Thailand do break even after a period of 13 to 18 years.

[jpinx]

As I read the original leasee has not lived in this property and has allowed its condition to deteriorate . The owner leasor of the property should have sought to terminate the original lease by legal means , before trying to sell or release the property . The origilal leasee has not , it appears , occupied and taken care of the property and must be considered at fault in that respect ; though in fact he should receive some compesation for relinquishing the lease . I wouldn't consider buying a lease of any sought , or freehold while such complications exist ; one also wonders whether the developer owner is acting in good faith .

Usually when you rent a property most issues are maintained by the owner, while the tenant is mainly responsible for keeping the property clean and report if something is broken. The balance of power is maintained, as the tenant (if paying monthly) can just choose to leave if the roof is leaking or similar and the owner does not want to fix it. It seems however, that if you rent the property long enough (30 years), then that balance of power is gone, and suddenly the tenant becomes responsible for everything I am sure you are right about it, but it is ridiculous. You pay rent 30 years upfront, and then become responsible for fixing everything on behalf of the owner - great deal

Which explains why the owner wants to keep the 30 year deal he has. He can't break that lease until the property is back up to standard and all dues paid. If the property was in good condition and everything paid up, the owner might well terminate that lease and grant a new 30-year deal. The effect is the same -- someone has to pay for getting the property fixed before anything can happen.

[monkeycountry]

I think the most interesting part is that it generally costs the same to rent for 30 years as it costs to buy something freehold. Yet owners/developers clearly seem to want their property back after 30 years. Granted, that is their right, but then the value of the asset drops significantly compared to freehold, and the initial rental price should be alot cheaper than the freehold price. Supply and demand I guess.

Actually, the discounted cash flows for renting and buying most property in Thailand do break even after a period of 13 to 18 years.

I am not sure what you mean? Are you not comparing to a tenant that pays monthly? With most, if not all, 30 year leases, the tenant pays 30 years upfront, which means the tenant is losing money from day one compared to buying freehold (assuming the 30 year lease and freehold cost the same, which it usually does).

[Benmart]

im no lawyer but the sub lessee is gonna abide by the community rules and pay the dues or walk away. Not sure why he would think its different then owning the property.

Trying to fight the system is not gonna work.

I've "found" the system on several occassions and have prevailed. I try not to forecast a future event that I am not involved in.

Gonna? Interesting colloquialism. Gunna, gonna, going to, etc.

[Strangebrew]

To OP since you or I are not a legal lawyer in Thailand asking this forum for an answer is like explaining why you can't travel faster than the speed of light to a 2 year old. So my advice is pose you question to Ask a lawyer forum here at this site. And good luck.

[monkeycountry]

To OP since you or I are not a legal lawyer in Thailand asking this forum for an answer is like explaining why you can't travel faster than the speed of light to a 2 year old. So my advice is pose you question to Ask a lawyer forum here at this site. And good luck.

Or anyone for that matter. I bet very few people understand the theory behind why you can or cannot travel faster than light

However, the OP has apparently tried the ask the lawyer section, so perhaps actually getting a lawyer is the way forward.

Edited December 10, 2014 by monkeycountry

[NeilSA1]

To OP since you or I are not a legal lawyer in Thailand asking this forum for an answer is like explaining why you can't travel faster than the speed of light to a 2 year old. So my advice is pose you question to Ask a lawyer forum here at this site. And good luck.

Seems this was tried already - " A question was posted in Ask the Lawyer and answered by the lawyer but this only gave general advice."

[yankee99]

im no lawyer but the sub lessee is gonna abide by the community rules and pay the dues or walk away. Not sure why he would think its different then owning the property.

Trying to fight the system is not gonna work.

I've "found" the system on several occassions and have prevailed. I try not to forecast a future event that I am not involved in.

Gonna? Interesting colloquialism. Gunna, gonna, going to, etc.

I guess its easier to take the words out of my mouth;/)

[Galangal]

On the subject of leases and lawyers, has anybody had a good experience with a lawyer in Chiang Mai area that they can recommend? I need someone with solid experience in structuring land acquisitions such that ones interests are protected to the maximum possible permitted by Thai laws, and then also experience with building approvals, which I understand are not straight-forward for a foreigner with a land-lease. Would greatly appreciate references/recommendations in this regard as I am new to Thai property regs and also new to Thai Visa forum. Tx

[dunque]

As I read the original leasee has not lived in this property and has allowed its condition to deteriorate . The owner leasor of the property should have sought to terminate the original lease by legal means , before trying to sell or release the property . The origilal leasee has not , it appears , occupied and taken care of the property and must be considered at fault in that respect ; though in fact he should receive some compesation for relinquishing the lease . I wouldn't consider buying a lease of any sought , or freehold while such complications exist ; one also wonders whether the developer owner is acting in good faith .

Suggest you read the OP again - it seems clear that it is the lessee who has initiated the 'sale' on of the lease.

[Gringogazzer]

A sub lease was created rather than a sale & transfer of the original lease.

Within that sub lease it can state the new "tenant" is responsible for maintenance & said fees etc but ultimately the original leasee is responsible for taking action if this is broken.

The freeholder has no recourse against the new "tenant" but only against the original leasee.

The freeholder is right, but I think he is trying to scupper the deal by not allowing a new lease term, seeing the opportunity to recoup the property minus legal fees too late.

Get a proper lawyer & transfer the original lease with the land office.

Once done the freeholder may come round & offer a new lease term at a price.

Way I read it.

[alfieconn]

I think the most interesting part is that it generally costs the same to rent for 30 years as it costs to buy something freehold. Yet owners/developers clearly seem to want their property back after 30 years. Granted, that is their right, but then the value of the asset drops significantly compared to freehold, and the initial rental price should be alot cheaper than the freehold price. Supply and demand I guess.

Actually, the discounted cash flows for renting and buying most property in Thailand do break even after a period of 13 to 18 years.

I am not sure what you mean? Are you not comparing to a tenant that pays monthly? With most, if not all, 30 year leases, the tenant pays 30 years upfront, which means the tenant is losing money from day one compared to buying freehold (assuming the 30 year lease and freehold cost the same, which it usually does).

I could never understand that mc, there should be a price for freehold and a price for a 30 year lease, I would imagine that there's a calculation somewhere perhaps using estimated average interest rates over the term that could work out the discount off the freehold price.

[2fishin2]

Why any person would "lease" property in thailand for 30 years is beyond my comprehension. You will lose.

[manarak]

I think the most interesting part is that it generally costs the same to rent for 30 years as it costs to buy something freehold. Yet owners/developers clearly seem to want their property back after 30 years. Granted, that is their right, but then the value of the asset drops significantly compared to freehold, and the initial rental price should be alot cheaper than the freehold price. Supply and demand I guess.

Actually, the discounted cash flows for renting and buying most property in Thailand do break even after a period of 13 to 18 years.

I am not sure what you mean? Are you not comparing to a tenant that pays monthly? With most, if not all, 30 year leases, the tenant pays 30 years upfront, which means the tenant is losing money from day one compared to buying freehold (assuming the 30 year lease and freehold cost the same, which it usually does).

Yes, compared to monthly rental payments.

[manarak]

Why any person would "lease" property in thailand for 30 years is beyond my comprehension. You will lose.

It is a prepaid 30 year rental, and can be interesting in some cases.

Again: the discounted cash flows of monthly rental payments will break even with the freehold price of a property in Thailand on a duration of 13 to 18 years depending on the interest rate used as well as on the property and rental prices, obviously.