Clearing up the 30 year lease issues in Phuket

[Alwyn]

This gives clarification I hope!

EXCLUSIVE: Confusion over Phuket court’s recent property lease ruling cleared up

By Richard Allan Aquino on March 3, 2015

A recent article published in two well-known Thai English-language newspapers reported that a Phuket court ruled that 90-year secured property leases usually offered to foreign buyers are void, causing confusion and distress amongst many of the country’s expatriate population.

According to report in The Phuket News last Friday, the Phuket Civil Court, backed by the Region 8 Appellate Court, ruled that the secured leases – that allow foreign owners to add two consecutive 30-year terms to an existing 30-year lease – had never, in fact, existed.

“Finding a lease that is void means that it never legally existed, and therefore, as far as the law is concerned, a void lease cannot be, nor ever could have been, registered,” The News’s legal correspondent Jerrold Kippen said in the report.

Related: Will military rule see Phuket return to its former glory?

The decision was made by a sole trial court judge, upheld by a three-judge Appellate Court and now awaits hearing at the Supreme Court, the story, which was also republished by The Bangkok Post, noted.

However, the more detailed subject matter of the case reveals more relevant information.

The ruling was not actually an original challenge to the leases, but was in fact a case relating to ‘right of redemption’ and breaches alleged by several parties, including alleged breaches of the unregistered lease agreements, Woraphong Leksakulchai, managing partner at Thailand-based law firm Hughes Krupica, toldProperty Report.

“In this case there was a right of redemption; alleged default by lessees; alleged default by lessors and leases were not registered on land title documents,” he said. “On that basis, due to the issues of this case, the leased were deemed void due to several clauses that had been drafted to allow termination of the leases and for other reasons in the judgment.

“Investors should not react to cases through panic or belief that somehow a blanket decision can be made due to a single case.”

In Thailand, it is possible as in other jurisdictions, for contracts to be deemed void in court proceedings.

Property developers on the island have traditionally produced contracts for foreign buyers of their projects that include 30-year lease agreements with the option to add two consecutive 30-year terms. Such extensions are achieved under Thai law through the use of different legal structures, including ‘collective leasehold’ – which means that the company that owns the land where a property stands can renew the lease on behalf of the owners who voted for it.

“There are many cases in Thailand every week although this case is of interest on the facts,” Woraphong added. “I advise that buyers look carefully at whether developers have rights of redemption; have borrowed monies; have drafted their leases correctly and take the normal precautions before entering into an agreement. They should also check for any nominee shareholder arrangements and contraventions of the Land Code in relation to direct or indirect control of land. ”

In Thailand, which has a codified system of law differentiating it from ‘common law’ or ‘judge made’ law systems, even Supreme Court decisions are not legally binding, but only ‘guiding’.

Related: Infrastructure changes to benefit Phuket’s property sector

With tremors in the property market as a result of the media report on this case, questions have naturally been raised as to whether this case somehow undermines such structures.

The report immediately made headlines and became viral online over the weekend, causing alarm to existing 30-year renewal or “90-year lease” owners or prospective foreign buyers, and expat netizens were quick to voice their opinions.

One member of the Thai Visa community, “BudRight”, commented: “This is not new. Some have been predicting this for years. Now this has happened, though I feel sad.”

Another forum member, “steelpulse”, said that all the property sellers and developers needed to do was to update the lease contracts to change the ownership to the legal 30-year leases, echoing the same recommendation by Kippen.

Dexter Norville, national director of JLL Thailand, noted that this was not a new thing for buyers who enter into lease agreements in Thailand, but the inaccurate reports made on this case could cause confusion among prospective buyers.

Asked if the controversial case might scare foreign investors away, he commented: “As we are speaking about a relatively small percentage of the overall market in terms of real estate investment across Thailand it will not have a dramatic affect to the industry.”

Norville wouldn’t hypothesize on how this recent case could turn out in the next hearing, but he hopes that the attention could educate buyers about leasehold ownerships. “As I’m not a lawyer or judge I can’t comment on what the Supreme Court ruling maybe but would hope some clarity and negotiation on how developers can sell more percentage to foreign buyers in certain locations such as the resorts which have been a hotspot for foreign investors can be achieved.

“For example could there be something along the lines of the BOI where certain developments can apply for full foreign ownership rights as some hotels have for instance.”

Still, he is concerned that the news could have a slight impact, especially on many uninformed lease buyers. “Where developers are targeting foreign buyers it is bound to felt and without a quick and clear decision will deter buyers from making possible investment decisions. Foreigners will have to look at buying where they can secure freehold title.”

[CharlieH]

MOVED to Phuket Forum

[stevenl]

The same article was already linked to in the original report.

I don't think it clears up anything.

[Anthony5]

Thanks for informing us of something I was aware for about 20 years already.

[LivinginKata]

Nothing new here ...

[KarenBravo]

This ain't exactly news.

Here is a Thaivisa thread from 2006.

http://www.thaivisa.com/forum/topic/72665-the-in-validity-of-a-90-year-lease-30-30-30/

[thaibeachlovers]

Just one more reason to never never never buy property in Thailand.

Still, the dreamers come looking to lose their money.

[KarenBravo]

Just one more reason to never never never buy property in Thailand.

Still, the dreamers come looking to lose their money.

Hmmmmmmm......guess that I would never have made nice profits if I had followed your advice.

All you have to do is educate yourself and have a trustworthy Thai on your side.

[Pinot]

Just one more reason to never never never buy property in Thailand.

Still, the dreamers come looking to lose their money.

Hmmmmmmm......guess that I would never have made nice profits if I had followed your advice.

All you have to do is educate yourself and have a trustworthy Thai on your side.

Trustworthy Thai - isn't that an oxymoron? Seriously, when buying property?

I always say, never buy property in Thailand. If you made money on some property here, good for you. You're one of the few. No reason to buy property. It's a renters market. I have a friend who is a well known realtor on Phuket. I asked him over beers one time if he would buy here. He laughed, "Of course not, you never own the property." They'll be happy to sell it to you, though.

Buying into a condo project? I can point to numerous ongoing horror stories. All of the condo projects, I find are poorly built and are falling apart in this climate. Thai management of these places is always iffy. It usually involves extracting as much money as the can by providing as little in return as possible. It's crazy. Anybody who has lived here and is knowledgeable will tell you the same thing...rent.

Invest your money in anything else than property in Thailand.

[hansgruber]

Just one more reason to never never never buy property in Thailand.

Still, the dreamers come looking to lose their money.

Hmmmmmmm......guess that I would never have made nice profits if I had followed your advice.

All you have to do is educate yourself and have a trustworthy Thai on your side.

Trustworthy Thai - isn't that an oxymoron? Seriously, when buying property?

I always say, never buy property in Thailand. If you made money on some property here, good for you. You're one of the few. No reason to buy property. It's a renters market. I have a friend who is a well known realtor on Phuket. I asked him over beers one time if he would buy here. He laughed, "Of course not, you never own the property." They'll be happy to sell it to you, though.

Buying into a condo project? I can point to numerous ongoing horror stories. All of the condo projects, I find are poorly built and are falling apart in this climate. Thai management of these places is always iffy. It usually involves extracting as much money as the can by providing as little in return as possible. It's crazy. Anybody who has lived here and is knowledgeable will tell you the same thing...rent.

Invest your money in anything else than property in Thailand.

Many people have made money through buying property here. Of all the ones I've bought I've always made a profit and never lost. I'm 3 for 3.

That's fine if you like renting, rent is cheap and I can see why it's attractive to some as their future and employment opportunities are limited here but please don't tell anyone here about buying property unless you have first hand experience, not hearsay from a so called agent friend over some beers.

Edited March 29, 2015 by hansgruber

[KarenBravo]

I didn't make money on a "property", I made money on a string of them. After selling one, I would then buy another. I did that a few times until I ended up with the house I live in now, which is now my home and always will be.

Knowing a trustworthy Thai is helpful, but, I still got 30 year leases. When it was time to sell, we would scrap the lease and sell free-hold.

My very first property was bought on spec. It was the first condominium in Patong. Bought at 265k and sold three years later at 480k. Not a lot of money, but, a respectable ROI of 81%. That was the lowest for the string.

I wouldn't invest in property now. The returns are just not big enough. I was in the right place (Phuket) at the right time.

Please don't assume that all people are too dumb to make money here.........they have and they still do.

If you have never found a trustworthy Thai, maybe you're the problem?

Edited March 29, 2015 by KarenBravo

[LivinginKata]

<snip>

If you have never found a trustworthy Thai, maybe you're the problem?

I suppose that's the trick - find a trustworthy Thai. I am very lucky to have found that 'trustworthy' Thai 19 years ago, and we are still happily married, AND turned a profit on all our properties here in Phuket. Don't regret any land buy, and well ahead of the money curve by a big factor.

[KarenBravo]

Glad we have at least three people who actually live here to prove that old potato "never invest in Thailand more than you can afford to lose" is nonsense..........well, at least to people that have a brain and common sense.

[Sharp]

Spot on LIK

[falkan]

Just one more reason to never never never buy property in Thailand.

Still, the dreamers come looking to lose their money.

Hmmmmmmm......guess that I would never have made nice profits if I had followed your advice.

All you have to do is educate yourself and have a trustworthy Thai on your side.

Trustworthy Thai - isn't that an oxymoron? Seriously, when buying property?

I always say, never buy property in Thailand. If you made money on some property here, good for you. You're one of the few. No reason to buy property. It's a renters market. I have a friend who is a well known realtor on Phuket. I asked him over beers one time if he would buy here. He laughed, "Of course not, you never own the property." They'll be happy to sell it to you, though.

Buying into a condo project? I can point to numerous ongoing horror stories. All of the condo projects, I find are poorly built and are falling apart in this climate. Thai management of these places is always iffy. It usually involves extracting as much money as the can by providing as little in return as possible. It's crazy. Anybody who has lived here and is knowledgeable will tell you the same thing...rent.

Invest your money in anything else than property in Thailand.

My condo at Patong tower still standing after more then a decade (got my money back x2) and my Supalai condo been occupied since it was built, &lt;deleted&gt; are you talking about?

Cheap charlies will always rent..

[keestha]

Back to the original topic, which is the 30+30+30 leases. Has always been clear they wouldn't hold up in court beyond the original 30 years, leases longer than 30 years contravene the law, and a binding 30+30+30 lease would be the same as a 90 years lease.

Same applies for the 3+3 or 3+3+3 leases you often see in ads selling guesthouses/bars/restaurants. A lease longer than 3 years has to be registered with the Land Department, and has to be written on the land paper. So similarly, these plus leases are not valid as far as the extensions are concerned, I saw these extension clauses die in court.

Also, unless agreed otherwise, the Thai text of the contract is binding, and often it will state : If the owner and the tenant can agree, the contract will be extended. It is irrelevant what the translation into another language (usually English) will say.

[hansgruber]

Just one more reason to never never never buy property in Thailand.

Still, the dreamers come looking to lose their money.

Hmmmmmmm......guess that I would never have made nice profits if I had followed your advice.

All you have to do is educate yourself and have a trustworthy Thai on your side.

Trustworthy Thai - isn't that an oxymoron? Seriously, when buying property?

I always say, never buy property in Thailand. If you made money on some property here, good for you. You're one of the few. No reason to buy property. It's a renters market. I have a friend who is a well known realtor on Phuket. I asked him over beers one time if he would buy here. He laughed, "Of course not, you never own the property." They'll be happy to sell it to you, though.

Buying into a condo project? I can point to numerous ongoing horror stories. All of the condo projects, I find are poorly built and are falling apart in this climate. Thai management of these places is always iffy. It usually involves extracting as much money as the can by providing as little in return as possible. It's crazy. Anybody who has lived here and is knowledgeable will tell you the same thing...rent.

Invest your money in anything else than property in Thailand.

My condo at Patong tower still standing after more then a decade (got my money back x2) and my Supalai condo been occupied since it was built, <deleted> are you talking about?

Cheap charlies will always rent..

But his well known real estate agent mate told him so over a few beers. Must be true.

Nothing but barstool babble. Probably an ex sas soldier as well.

[KarenBravo]

The important point to remember is that the ORIGINAL 30 year lease is invalid if the lease is a 30+30+30 year lease.

Many people are now living in homes that they paid for, but, it still belongs to the developer.

[thaibeachlovers]

Just one more reason to never never never buy property in Thailand.

Still, the dreamers come looking to lose their money.

Hmmmmmmm......guess that I would never have made nice profits if I had followed your advice.

All you have to do is educate yourself and have a trustworthy Thai on your side.

have a trustworthy Thai on your side.

There's the rub. Not being psychic, I wouldn't know anyone that's "trustworthy" when it comes to money. Been screwed over by westerners, so it's not just Thais.

[thaibeachlovers]

Glad we have at least three people who actually live here to prove that old potato "never invest in Thailand more than you can afford to lose" is nonsense..........well, at least to people that have a brain and common sense.

I'll bet there are more than 3 people on here got screwed financially in Thailand, so that's pretty meaningless.

[steelepulse]

Glad we have at least three people who actually live here to prove that old potato "never invest in Thailand more than you can afford to lose" is nonsense..........well, at least to people that have a brain and common sense.

I'll bet there are more than 3 people on here got screwed financially in Thailand, so that's pretty meaningless.

Hmm, I wonder if people here got screwed more in their home country, or in Thailand. I'd bet their home country so that's why they came here.

Back on topic, agents are still pitching the 30+30+30. Just a couple days ago a friend of mine asked me about a certain condo unit on another island, and I told him to look into whether it was freehold or not. The agent in question trying to flog the property told him "he could either buy the unit with a Thai limited company attached, or of course could go the 30+30+30 leasehold route".

[KarenBravo]

Glad we have at least three people who actually live here to prove that old potato "never invest in Thailand more than you can afford to lose" is nonsense..........well, at least to people that have a brain and common sense.

I'll bet there are more than 3 people on here got screwed financially in Thailand, so that's pretty meaningless.

Well.....I could say that there are more people that didn't get screwed.

Both are pretty much meaningless statements without proof.

As I only have to look after myself and couldn't give a small furry rodents butt about whether other people have found trustworthy Thais, or not, I guess it must be up to the individual, eh?

[NamKangMan]

It can hardly be called an "investment" when you MUST have a "trusted" Thai national as a partner, either romantically, or financially, in order to enter the property market in Thailand, with some success.

I have no doubt some made money in the Phuket boom time - mid 80's to early 2000's.

However, those days are well and truly gone, and even those who have made some money here in the past from property, would now struggle to sell whatever property they are residing in now.

Many older Expats say, "When I die, the Thai wife can have it. So I don't care."

These guys may not actually be leaving the wife anything she can liquidate, and in fact, may be leaving behind an asset that will cost her money, rather than make her money, upon their demise.

The property market on Phuket will not continue to be fueled by Russian or Chinese money, after the western market has gone, in the same way their money is not fueling the tourism industry here now.

Edited March 30, 2015 by NamKangMan

[Pinot]

We have a newbie friend who came here to Phuket and bought a condo in an unfinished project. When he got to know a few locals, they all said the same thing...get out. He couldn't. He's in. Buying something under construction, IMHO, is a very risky thing right now. The Russians left with their money that was holding up a teetering property market in Phuket.

There is probably a lot of investment opportunities here right now. Good luck.

[LivinginKata]

^

Oh dear, Mr Doom and Gloom chimes in yet again. The old rent is much better than buy/lease mantra.

One must consider the whole picture. For sure if a foreigner has no Thai connections/responsibilities then rent is a very good short term plan. It's a completely different picture for those of us who have life commitments here in Thailand.

For sure it's much more difficult to plan that 'property' and a home as an appreciating asset, but there is more to that equation than monetary value, how about considering life style, status to one's Thai partner.

[NamKangMan]

^

Oh dear, Mr Doom and Gloom chimes in yet again. The old rent is much better than buy/lease mantra.

One must consider the whole picture. For sure if a foreigner has no Thai connections/responsibities then rent is a very good short term plan. It's a completely different picture for those of us who have life commitments here in Thailand.

For sure it's much more difficult to plan that 'property' and a home as an appreciating asset, but there is more to that equation than monetary value, how about considering life style, status to one's Thai partner.

"Oh dear, Mr Doom and Gloom chimes in yet again." - which one am I, Mr. Doom, or Mr. Gloom?

"For sure if a foreigner has no Thai connections/responsibities then rent is a very good short term plan." - my question to you, LIK, is even if a foreigner has "Thai connections/responsibilities" why isn't "rent" a good long term plan????????

"there is more to that equation than monetary value, how about considering life style" - EXACTLY.

Why tie up cash in a depreciating asset, that is poorly constructed, when that cash, invested elsewhere, makes more money than the rent asked for buying the same property????????

Doesn't the residual money profit in the rent v buy analysis also offer "lifestyle" BUT with the added freedom of movement, if so desired, for any reason, at any time, away from a certain property / location?

Basically, if you rent, you can live in a new house, every few years, without maintenance costs etc, and still leave your capital invested in western countries, earning more than the cost of rent on Phuket.

If you buy on Phuket, you are on a depreciating asset, with who knows what will become of the location, or the demographic, where you chose to buy.

Tell me - why bother buying????

[eisfeld]

If I understood the OP right, then the 30 year lease was not registered with the Land department and documented on the chanote as required by law and that alone makes the whole thing moot, doesn't it? So many other things wrong in this story like lessees and lessors both defaulting... I think you can't extrapolate too much from this case.

Is there a proper translation of the verdict? Because all other reports seem like very vague hear-say.

[stevenl]

If I understood the OP right, then the 30 year lease was not registered with the Land department and documented on the chanote as required by law and that alone makes the whole thing moot, doesn't it? So many other things wrong in this story like lessees and lessors both defaulting... I think you can't extrapolate too much from this case.

Is there a proper translation of the verdict? Because all other reports seem like very vague hear-say.

You did not understand right.

[NamKangMan]

If I understood the OP right, then the 30 year lease was not registered with the Land department and documented on the chanote as required by law and that alone makes the whole thing moot, doesn't it? So many other things wrong in this story like lessees and lessors both defaulting... I think you can't extrapolate too much from this case.

Is there a proper translation of the verdict? Because all other reports seem like very vague hear-say.

"Is there a proper translation of the verdict?" - yes, there is. All 30 X 30 X 30 leases are "void" - including the original 30 years.

We may not be far away from the Thai version of a Robert Mugabe style reclamation of Thai land.

[eisfeld]

If I understood the OP right, then the 30 year lease was not registered with the Land department and documented on the chanote as required by law and that alone makes the whole thing moot, doesn't it? So many other things wrong in this story like lessees and lessors both defaulting... I think you can't extrapolate too much from this case.

Is there a proper translation of the verdict? Because all other reports seem like very vague hear-say.

You did not understand right.

I got confused by this quote then:

The ruling was not actually an original challenge to the leases, but was in fact a case relating to ‘right of redemption’ and breaches alleged by several parties, including alleged breaches of the unregistered lease agreements, Woraphong Leksakulchai, managing partner at Thailand-based law firm Hughes Krupica, toldProperty Report.

“In this case there was a right of redemption; alleged default by lessees; alleged default by lessors and leases were not registered on land title documents,”