Leasehold for a land used for house & business

[GreenHut]

Hi,

I plan to set up a business (guest-house with adobe/earthbag bungalows) between Chiang-Mai and Chiang-Rai. I will also build by adobe house on that land. My capital (ie my savings) to start the business is quite limited, and I’d like to have the land in my own name, then I will certainly go for a 30 years leasing contract (ie instead of buying the land – freehold).

I went through legal websites and Thaivisa (of course!) and still wondering a few things…maybe someone could advice me?

1 - I still don’t understand in what cases a leasing could be interesting for a Thai owner, as many seem to be focused on a up-front payment by selling a land. Am I right to imagine that a thai owner could be likely to lease if, for example the land is in the hill (slope, rock etc)

2 – As the market in not really in favor of the Foreigner buyer/lessee, I can’t imagine being easily able to negotiate if the Thai owner really want to write some clauses saying in what cases he could end the contract. Any experience of such risks and how to limit them?

3 – What about is I make a leasing contract and 5 years later, the owner decides to sell the land to another Thai person. Will my leasing contract continue with the new owner?

4 – Having read several Thaivisa post regarding land purchase by foreigner, it seems recommended – when buying – to get assistance of a competent lawyer to check the real ownership and that the land is clear from any encumbrances (mortgages, debt etc), going with the lawyer to the land dept office: Are all these steps also needed/recommended for a leasing?

Thanks J

[NCC1701A]

make sure you get a good attorney. without a good attorney you really can't do this properly.

attorneys can only be a Thai national. Make sure the land owner does not know the attorney or have any connection with him. don't sign anything without it being translated.

don't listen to anyone who tells you that you can own land. you can't.

you will be making a one time payment up front on the lease, good for 30 years.

you can only own 49% of your business. who is your Thai business partner who owns the other 51%?

make sure you set your company up so you retain control even if you only own 49%.

again, you can't buy or own land in Thailand, you can only lease the land.

you must get a good attorney so you clearly understand what you are doing.

good luck.

[JackJD]

EXCELLENT answer in post 2. I'm a retired U.S. lawyer and that is exactly what I would do! And do not skip one step of his recommendations!

[simon43]

I've leased land on 4 separate occasions on which to build a guesthouse.

- Although the maximum lease period allowed by law is 30 years, I have only found land-owners willing to agree to lease for no more than 20 years, (with no renewal of lease guaranteed).

- Once I put the word about that I was looking to lease land, I had no shortage of offers, based on me paying the lease on a monthly or quarterly basis, (ie no money paid upfront, apart from the Land Office tax on the lease payments).

- I always used a 10 baht rental contract that I bought from a shop, then wrote extra clauses on the lease and then made sure that this private lease contract was included in the lease contract that we both signed at the Land Office.

The extra clauses were:

- I can sublease the land

- The landowner has no claim to any business that I do on the land, eg guesthouse

- The landowner has no claim to any infrastructure/buildings that I place on the land - I can demolish all of these at the end of the lease term and hand back the bare land to the landowner

- I never used a lawyer - the lease agreement was simple and supported by the standard Land Office lease agreement. We all went to the office to check the correct ownership of the land. After signing the lease contracts, my name was written on the Chanote as leasee and I hold the original Chanote.

- If the landowner sells the land, the new owner must honour the land lease, (if it is registered at the Land Office, which it should be, if leasing for more than 3 years).

[GreenHut]

Hello Simon43 !!

Thanks for your detailed response. I already read in other posts that you were in a similar situation (in Phuket) than my plan.

I also would like to know if the leasing contract can be signed even if my business is not created/officially registered yet (I might want to delay a bit to build my house first, then see how the business is going without officially launching it to test the demand). In other words can a leasing contract can be made without mentioning on the contract that it is either for housing, or business or both?

What would be your recommendation regarding the legal structure of such business on a land acquired with a leasing contract? (I plan to marry with my Thai girlfriend early next year)

Thank you very much !

[Suradit69]

make sure you get a good attorney. without a good attorney you really can't do this properly.

attorneys can only be a Thai national. Make sure the land owner does not know the attorney or have any connection with him. don't sign anything without it being translated.

don't listen to anyone who tells you that you can own land. you can't.

you will be making a one time payment up front on the lease, good for 30 years.

you can only own 49% of your business. who is your Thai business partner who owns the other 51%?

make sure you set your company up so you retain control even if you only own 49%.

again, you can't buy or own land in Thailand, you can only lease the land.

you must get a good attorney so you clearly understand what you are doing.

good luck.

"don't sign anything without it being translated. "

Since only the Thai language version would be binding before a court, make sure the translation is done by someone who will cope with getting all the "whereas" and "wherefores" into accurate English equivalents.

[simon43]

...leasing contract can be made without mentioning on the contract that it is either for housing, or business or both?

Yes, you are leasing a piece of bare land. What you do on that land is not the landowner's business, (although it is good to have his support - no building a pig farm on land owned by Muslims etc!).

You simply lease the land in your own name, and it is your responsibility to check that you are allowed by the OrBorTor/planning/building rules to operate the intended business from that land.

So in my base, I checked first that the land was Chanote or NS3G, with no building restrictions. I leased the land in my name only and then applied to the OrBorTor to build a guesthouse.

The actual business structure is very much dependant on your own circumstances. In my case, the businesses are always owned 100% by a Thai person (one of my ex-wives), registered as a Thai sole trader (50 baht to register at the Tessebahn). I have no legal ownership or 'control' over the business at all, and no involvement of a foreigner makes paperwork much easier.

[GreenHut]

Thanks again, Simon, for the information. I now have a better understanding

By the way, when you asked for the permit-to-build for the guest-house, did you have to show that you were following some "regulations" such as : plans approved by an architect, list naming all the professionals that will be involved in the work (see below) etc

Reminding you that I plan to build the bungalows from adobe or earthbag (myself with the help of local manual workers not specialist in such natural building) I am wondering if the land is likely to be visited during or after the work to check if I hired some professionals for the whole building (or at least the structure/frame and roof - I don't know yet the regulations about that but in some countries that's the kind of things you are not allowed to do such things by yourself)

[GreenHut]

Thank you NCC1701; JackJD and Suradit69 for your recommendations

I keep reading posts where people talk only about Thai lawyers in Thailand...

From my experience to plan to launch a business 5 years ago in Thailand (I've been living here since 6 years ), I would recommend to meet Western lawyers (mostly based in BKK). In my case, it helped me to avoid many language issues and they were able to advice me according to my situation, and not only to list the regulations and propose me some "illegal practise", as did by a few Thai lawyers met at that time in Chiang-Mai...nothing to compare !!

[simon43]

did you have to show that you were following some "regulations" such as : plans approved by an architect, list naming all the professionals that will be involved in the work (see below) etc

The 'trick' that I learnt many years ago was to draw the plans on a cigarette packet and then ask the architect in the OrBorTor office (ie, the office which will approve/refuse the planning permission), if he/she could draw up professional plans based on my cigarette packet sketch.

Once I started to employ and pay the OrBorTor architect to draw up my plans, they always seemed to get approved without issue (Note that these were modest, single-storey buildings, not a skyscraper on the beach...)

The only professional involved in the project was the architect who drew up the plans. My Thai brother-in-law, (who builds the main structures) has a degree in stupidity. My ex #2, (who liaises with the OrBorTor on all paperwork), has post-grad qualifications in deception and mental illness. For my pains, (and naturally as a foreigner, I have never lifted one finger to do any work), my MSc in rocket science was not especially relevant to installing septic tanks