5 Year Lease Contract.

[chiangrai]

I am about to sign a 5 year lease and am going to build a cheap house on the land.

I want to put a clause in the contract to say that the owner can not raise the rent by over a certain amount.

Is there a reckognised way to do this.Is there a certain percentage or amount that

people put in in these situations.

The lease is 10,000 baht per year.So the rent can't be put up untill then.

What I want to prevent is to prevent the landlord putting rent up through the roof just to make us leave.

[Delight]

If you agree that a 5% rise per annun is reasonable then simply pay his 11100 Baht per year..

This figure reflects an average 5% increase.

Then agree to no price rises

[chiangrai]

Thanks,

And is that figure of 5 percent a more or less accepted rate.

I'm just trying to work out a fair rate for both of us.

[Delight]

It is unlikely that the seller is concerned with fairness.

Try it at '5'

If he is unhappy -he will respond.

The most import feature ,however,is no rent increases.

If you says no then try it at '10'

If '10'is not acceptable then be careful

[chiangrai]

Right 5 to 10 percent.

Just to be clear. This is per year.

Is there a reason that I shouldn't put in the contract that after 5

years the rent can not be increased by more than 25 percent

and if not 50 percent.

That way I don't have to agree to agree to any increases if the landlady

doesn't mention them.

[Delight]

Apologise. I did not read your OP correctly

You are worried about year 6 and beyond

Landowners giving tenants a easy first contract followed by a more brutal second contract is quite common.

The hope of the landowner is that the tenant will leave and 'gift' the asset.

When the first contract is finished it is finished.

Maybe a lawyer can advise you of a way to protect yourself

The regular way is to threaten to destroy the asset if you have to leave as a consequence of an exorbitant planned rent increase or obtain a 30 year contract at the out set.

There are other legal devices such as the use of a usufruct.

[NeverSure]

I don't know Thai law. In my home country, leases where the lessee is going to do expensive improvements don't have "escalator clauses" except at the five year point. If the lessor wants increases they would be figured into the five year monthly up front.

Then there would be options to renew for the lessee. The escalator would kick in at each renewal.

Can't you get a level five year lease that suits the lessor, with options to renew with a pre-determined escalator?

These leases are common and must be in Thailand also. They are typically for businesses that lease the land and then build perhaps a shopping center or franchise store or whatever. Those leases usually have options to renew for about 30 years or the lessee wouldn't spend the money on the improvements.

Cheers

[chiangrai]

Thanks all.

The house is cheap and 50 percent of it can be dismanteled and taken away.

So I'm reasonably covered but it's good to be wise just the same.

[PattayaPhom]

I take it the lease is being registered at the land office, if it isnt then the lease is worthless anyway as its over 3 years.

[simon43]

The lease has to be registered at the Land Office. The lease MUST state the lease payment for the complete lease term, (paid every month, quarter, year etc), because when the lease is registered at the Land Office, the tax on the lease payments has to be paid in full.

Therefore, the lease must be totally clear as to how much lease money is paid, including any % increases. (So your landlord cannot change these amounts after the lease is signed).

If your landlord does not agree to register the lease at the Land Office, then walk away...

[Delight]

Just a further thought.

It may be possible to sign a 2nd 5 year contract to run concurrent with the 1st.

Both contracts signed at the same time

That way at least 10 years is certain.

Maybe a 3rd and 4th at the same time.

You cannot go more than 30 years total

[cheeryble]

I believe Simon 43 is correct you must register any lease over 3 years for it to be valid..

Sorry bout that.

[bangkoklawyer24]

... you must register any lease over 3 years for it to be valid...

This is not what the law says.

[simon43]

... you must register any lease over 3 years for it to be valid...

This is not what the law says.

I'm not a lawyer, but my understanding is that a lease more than 3 years must be registered at the land office because tax will be due on the lease payments. (Which is why many landlords only offer <3 year leases because they do not want to be liable for tax payments).

Also, I think if you register your lease at the Land Office, it provides you (the leasee) with more 'protection' of your leasing rights if the landlord tries to break the terms of the agreed lease.

Bear in mind that when you register the land lease at the L.O., they will draw up their own lease document which summarises the basic lease conditions, AND then will attach your signed lease document with the landlord to their lease document, (so your lease document might have some additional terms that you and the landlord have agreed between yourselves).

At least, that is how it has worked for me on 4 occasions here in Phuket.

But perhaps BangkokLawyer24 can provide some input here.

[bangkoklawyer24]

... you must register any lease over 3 years for it to be valid...

This is not what the law says.

I'm not a lawyer, but my understanding is that a lease more than 3 years must be registered at the land office because tax will be due on the lease payments. (Which is why many landlords only offer <3 year leases because they do not want to be liable for tax payments).

...

But perhaps BangkokLawyer24 can provide some input here.

The validity of a long term lease does not require a registration. A 30-year property lease agreement which has never been registered at the land office, remains valid for the whole duration of 30 years. http://linkd.in/1C2FUFc

Edited August 28, 2015 by bangkoklawyer24

[bangkoklawyer24]

Also, I think if you register your lease at the Land Office, it provides you (the leasee) with more 'protection' of your leasing rights if the landlord tries to break the terms of the agreed lease.

Bear in mind that when you register the land lease at the L.O., they will draw up their own lease document which summarises the basic lease conditions, AND then will attach your signed lease document with the landlord to their lease document, (so your lease document might have some additional terms that you and the landlord have agreed between yourselves).

In Thailand the registration of a real estate lease at the local land office is often marketed as a special lessee protection scheme to nicely compensate the foreign investor for the legal restriction to acquire land ownership. The inconvenient truth is that the land office registration does not at all benefit the tenant. It does not provide him with any additional protection against invalidity, insolvency, default, fraud, loss or other risks. All the details at http://linkd.in/1C2FUFc

Edited August 28, 2015 by bangkoklawyer24

[kimmy]

... you must register any lease over 3 years for it to be valid...

This is not what the law says.

I'm not a lawyer, but my understanding is that a lease more than 3 years must be registered at the land office because tax will be due on the lease payments. (Which is why many landlords only offer <3 year leases because they do not want to be liable for tax payments).

...

But perhaps BangkokLawyer24 can provide some input here.

The validity of a long term lease does not require a registration. A 30-year property lease agreement which has never been registered at the land office, remains valid for the whole duration of 30 years. http://linkd.in/1C2FUFc

your link to your inkedin post does not work, but as you say in your other post you are linking to in your other post, 'it is certainly a good advice to register your lease in paradise'. What is your point, unregistered leases are enforceable? against third parties? section 540 does (not) apply to immovable properties (despite the text of this section)?

[simon43]

Certainly on the 4 occasions that I have leased land, it was a given by both parties - leaser and leasee - that the lease would be registered at the Land Office.

BangkokLawyer24, if as you say, there is no obligation to register a land lease at the L.O., and such registration does not benefit the leasee in any way, why is it common-practice to register leased land at the L.O.?

BTW, I cannot agree with you that such registration does not provide added protection to the leasee. My name is noted on the land Chanote as leasee. Even if the landowner claims to have lost the Chanote docment, a duplicate Chanote will still show my name as leasee. If I didn't register my lease at the L.O., my name would not appear on the land Chanote.

[bangkoklawyer24]

Certainly on the 4 occasions that I have leased land, it was a given by both parties - leaser and leasee - that the lease would be registered at the Land Office.

BangkokLawyer24, if as you say, there is no obligation to register a land lease at the L.O., and such registration does not benefit the leasee in any way, why is it common-practice to register leased land at the L.O.?

BTW, I cannot agree with you that such registration does not provide added protection to the leasee. My name is noted on the land Chanote as leasee. Even if the landowner claims to have lost the Chanote docment, a duplicate Chanote will still show my name as leasee. If I didn't register my lease at the L.O., my name would not appear on the land Chanote.

I just said it is valid for 3, six or 30 years without registration. The registration makes it enforceable after three years. Nothing more, nothing less.

If the lease is validly agreed, it is valid from day one without registration. Just to see your name on a paper, doesn't make it MORE valid than valid. And if the lease is invalid, the registration is void and does not heal the invalidness.

There is no such thing as "added protection" for the validity of the lease.

The law clearly distinguishes between validity and enforceability and it is an insane approach to try to be smarter than the law. This all is explained in detail in the article.

Example: You enter into a lease today till August 31, 2018. It is important to have that lease registered? Answer: no. The first three years the registration makes no difference at all, and it is unlikely that you really want to sue the landlord for the last 48 hours of the rent period.

Edited August 29, 2015 by bangkoklawyer24

[cheeryble]

Back to the original suggestion of building in an annual increase.

I would not mention this at all.

Most landlords are very happy to get a regular rent and I personally have not had an increase in 11 years.

[simon43]

The registration makes it enforceable after three years.

Well surely that is a benefit of registering the lease at the Land Office?

[bangkoklawyer24]

The registration makes it enforceable after three years.

Well surely that is a benefit of registering the lease at the Land Office?

No, it is not a benefit but the tenant's burden.

Résumé: If the registration of a land lease would be voluntarily under the laws of Thailand, neither the landlord nor the (well informed) tenant would be interested to have the lease registered. However, it is not voluntarily, because the law intends to protect the potential property buyer and, as a result, facilitates land purchases in Thailand. Sorry, But the law does not care about tenants.

Edited August 30, 2015 by bangkoklawyer24

[Sophon]

Also, I think if you register your lease at the Land Office, it provides you (the leasee) with more 'protection' of your leasing rights if the landlord tries to break the terms of the agreed lease.

Bear in mind that when you register the land lease at the L.O., they will draw up their own lease document which summarises the basic lease conditions, AND then will attach your signed lease document with the landlord to their lease document, (so your lease document might have some additional terms that you and the landlord have agreed between yourselves).

In Thailand the registration of a real estate lease at the local land office is often marketed as a special lessee protection scheme to nicely compensate the foreign investor for the legal restriction to acquire land ownership. The inconvenient truth is that the land office registration does not at all benefit the tenant. It does not provide him with any additional protection against invalidity, insolvency, default, fraud, loss or other risks. All the details at http://linkd.in/1C2FUFc

OK, so please answer the following question:

Today I enter into a five year lease with the owner of a piece of land.

The lease is not registered at the land office, so also not noted on the chanote.

A month from now. the owner gets an offer from a third-party that wishes to buy the land. This third-party knows nothing about my lease and the owner of the land doesn't tell him about it.

The owner of the land accepts the offer, and together they go to the land office and the land is transferred to the new owner.

The new owner starts building a house on the land, and when I see that I contact him and tell him I have a lease on the land. The new owner is sympathetic but doesn't want to honour my lease since he intends to live in the house on the land.

Now to my question: Can my lease be enforced against the new owner of the land, who bought the land in good faith?

Sophon

[bangkoklawyer24]

OK, so please answer the following question:

Today I enter into a five year lease with the owner of a piece of land.

The lease is not registered at the land office, so also not noted on the chanote.

A month from now. the owner gets an offer from a third-party that wishes to buy the land. This third-party knows nothing about my lease and the owner of the land doesn't tell him about it.

The owner of the land accepts the offer, and together they go to the land office and the land is transferred to the new owner.

The new owner starts building a house on the land, and when I see that I contact him and tell him I have a lease on the land. The new owner is sympathetic but doesn't want to honour my lease since he intends to live in the house on the land.

Now to my question: Can my lease be enforced against the new owner of the land, who bought the land in good faith?

Sophon

Give us your legal analysis and I will tell you whether you are right or not

[Sophon]

OK, so please answer the following question:

Today I enter into a five year lease with the owner of a piece of land.

The lease is not registered at the land office, so also not noted on the chanote.

A month from now. the owner gets an offer from a third-party that wishes to buy the land. This third-party knows nothing about my lease and the owner of the land doesn't tell him about it.

The owner of the land accepts the offer, and together they go to the land office and the land is transferred to the new owner.

The new owner starts building a house on the land, and when I see that I contact him and tell him I have a lease on the land. The new owner is sympathetic but doesn't want to honour my lease since he intends to live in the house on the land.

Now to my question: Can my lease be enforced against the new owner of the land, who bought the land in good faith?

Sophon

Give us your legal analysis and I will tell you whether you are right or not

I am not the one who claims to be a lawyer, so I don't have a legal analysis. But generally the point of having land registration offices in any country is to make ownership and encumbrances public in order to enhance trust and protect parties who acts in good faith. If a non-public lease can be enforced against a third-party who is acting in good faith, then no-one would be able to safely buy land.

Do I take it that you don't know the answer to my question?

[bangkoklawyer24]

I am not the one who claims to be a lawyer, so I don't have a legal analysis. But generally the point of having land registration offices in any country is to make ownership and encumbrances public in order to enhance trust and protect parties who acts in good faith. If a non-public lease can be enforced against a third-party who is acting in good faith, then no-one would be able to safely buy land.

Do I take it that you don't know the answer to my question?

I give you a hint:

Section 569 CCC: A contract of hire of immovable property is not extinguished by the transfer of ownership of the property hired. The transferee is entitled to the rights and is subjected to the duties of the transferor towards the hirer.

[Sophon]

I am not the one who claims to be a lawyer, so I don't have a legal analysis. But generally the point of having land registration offices in any country is to make ownership and encumbrances public in order to enhance trust and protect parties who acts in good faith. If a non-public lease can be enforced against a third-party who is acting in good faith, then no-one would be able to safely buy land.

Do I take it that you don't know the answer to my question?

I give you a hint:

Section 569 CCC: A contract of hire of immovable property is not extinguished by the transfer of ownership of the property hired. The transferee is entitled to the rights and is subjected to the duties of the transferor towards the hirer.

Is that the way you advice your clients, by quoting legal paragraphs and letting them make the interpretation themselves? Why did you bother to comment in the first place if you don't want to give clear answers to simple questions?

Sophon

[cheeryble]

May I put my concern?

Ok take a normal land sale, from person A to person B.

If the land is unencumbered by lease or usufruct or anything else it is worth say full value.

If it IS encumbered by a lease etc, it is likely worth a whole lot less, possibly a small percentage of its original value in the case of a 30 year lease

So how's the buyer to know the land is encumbered or not unless of course the impeccably honest seller informs him that he has entered into a private lease or other agreement with a third party Khun C?

Not to mention Khs DEF and G who might also be sold leases.

The same goes for rights of way etc., how's a buyer supposed to know about them unless they're registered?

This is without the problems of forgery and fabrication of documents when they're private or at best "witnessed." by a (naturally incorruptible) local.

Edited August 31, 2015 by cheeryble

[simon43]

Give us your legal analysis and I will tell you whether you are right or not

Sophon, this guy is giving you the 'runaround'. Take my advice, not because I'm a lawyer trying to make money from a naive client, but because I have experience 4 times in this matter. Get your lease registered at the Land Office, with your name as Leasee written on the back of the Chanote/NorSor3Gor.

Lawyers eh?

[cheeryble]

Looking forward to a reply to my post 28 as I'd love to see how the encumbrance system can work without registration.