Foreigner leasing land and building house in Chiang Mai - questions

[nakhe]

Hello all, first post.

 

I am a foreigner looking to find a home for my parents who want to live in Chiang Mai long term.

 

They have scouted the place and want to lease a plot of land in Kool Punt Ville Project 9 (?) and build a house on it. They say that it will cost approx THB 3,750,000 total. I am more than happy to cover any cost, but I don't understand what they're trying to explain to me in terms of the land. They say that the land will be leased for 90 years (30yrs x 3) from 2017 and can be extended indefinitely. They say that the lawyer will draw up a contract which will state that "the land-owner is borrowing money from [my parents] with land as the collateral" (???). The house however will be owned by my parents. 

 

My understanding is that foreigners can not own land in Thailand, but can own condos and (by a recent change in Thai law in the last 1-2yrs) houses. I feel that owning a house on land that is not yours is a huge risk. The land-owner can at any time do whatever he wants with the land, along with the house on it, right?! 

 

If building a house on leased land is not a safe option, what other options may be viable for my parents who want to spend their geriatric lives in Chiang Mai?

[happyme]

I have just rented land and went to the tessa Ban not sure spelling is right they told me you can rent the land for life so i had a contract drawn up this was agreed by the land owner and the tessa Ban did a house plan for me total cost for plan 3,000 bt once the house is built 80% I can go and register the house in my name and put the utilities in my name the staff were great giving me advise and so helpful

[jobin]

'Rent the land for life'.  Whose life, your's or the owner's?  If the land owner's life then what happens if he dies next year?  Is your contract cancelled, or his kids take over or must renegotiate the contract with his kids?

If rent the land for your life, what happens to all your investment once you die, which of course may be only a year after you fork out 10m baht for house construction? 

By the way, what kind of price are you paying to rent the land per unit, per year and in what locale?  

[laochef]

Check out "usurfruct" in Thailand. By law, you, a foreigner, can "own" land, for life...

Edited October 8, 2016 by laochef

[dotpoom]

I have owned two houses (still have one) and a condo (still have it),,,,in a company name.....no problems.

[stephenterry]

Another option is to buy a condo, which can be put in your name or your parents. If the condo is relatively new, and the condo maintenance management is  robust,  the apartment could retain its value for many years. 

 

There could be some quite swish apartments available for the 3.75 million, possibly with housekeeping services - if you scout around. Of course, there are cons, e.g. no pets, limited cooking facilities, and the nearby occupiers could be noisy, rude or argumentative, but even buying a house on a moo-bahn  could be beset with bad neighbours, e.g screaming children, constantly barking dogs, raising cockerels, building roof extensions right up to your house boundary, etc.

 

I live in a house on a moo-bahn, and we have been lucky that our neighbours are professional and quiet people - and it could be that you'd find similar people at that price. But first, (if you want to cover all bases) I advise you short-term rent in your preferred location to see if it is one that suits your parents. A holding deposit could be put on the chosen plot in the meantime - and it might be money well utilised.

 

Finally,  you can PM me about what pitfalls to avoid/enhancements to make when the house is being built. It's easy to leave it all to the development builders, but once it's finished it costs to change things around. 

 

[NancyL]

You should have a lawyer involved and be sure to answer all the questions raised in this thread and then some, like how will your parents' heir, presumably you, be able to sell the house.

 

Why do they even want to buy a house if they are of advanced age.  There are many rental options and it's possible to sign a long-term rental lease and pay to make modifications so the house is more to their liking.  That's what Hubby and I did to our condo, we made an agreement with our condo owner to do some remodeling in exchange for a long lease and low (fixed) monthly payments.  

 

That way, our estate doesn't have the hassle of trying to sell property since we have no Thai heirs and if the situation changes for us, we can always walk away from the condo and just lose a couple months' rent that is the deposit (plus the cost of the remodeling which has given us much utility, incidentally)  

[jonwilly]

There was a UK lawyer on the board some years ago and he was saying that multiple leases had never been 'Tested' in a Thai court.

In his opinion for one lease following another the land would have to revert to the original owner for at lease 24 hrs between leases.

I was going for 2 by 30 year leases and my Thai lawyer was against it on legal grounds.

Condos for Frangs was her word, legal and The Government says you own it.

Usurfruct is the legal way to go for yes a company may own but their has been a crack down on Legality of Frang Controled companies.

 

john

[stgrhe]

4 hours ago, happyme said:

I have just rented land and went to the tessa Ban not sure spelling is right they told me you can rent the land for life so i had a contract drawn up this was agreed by the land owner and the tessa Ban did a house plan for me total cost for plan 3,000 bt once the house is built 80% I can go and register the house in my name and put the utilities in my name the staff were great giving me advise and so helpful

Tessaban has nothing to do with ownership of land, lease of land etc., it is the responsibilitly of the land office, which is a complete differernt government entity. Tessaban would handle the building permit.

[stgrhe]

As usual there are many misunderstandings when it comes to questions of land ownership, lease etc. First, forenigers can actually own land in their own name, but only on two very unique circumstances, non of which normally is doable for the normal foreigner.

 

Land can never be leased, actually hired, for life. The maximum term is 30 years. There is a possibility for a one time extension, but only after the first term has expired.

 

Foreigners may have possesory right of land for life. The best option for someone who want to built a house on someone elses land, is to get a superficery right. The second best is a usufruct right and one could also get a habitation right. The most common is leasing, but that is actually the lease benefitial one, and also most expensive.

 

Anything else are in a grey zone, a zone which in fact is illegal and could be costly in the long run, except for the creative solicitor of course.

[LukKrueng]

Few issues...

1. No such thing as a "rent for life". Most property rental agreements are yearly, and as far as I know the longest possible term is 5 years, however most owners wouldn't go for more than 2 years (taxation reasons)

2. The longest term of a legal lease is 30 years. LEGALLY signing 2 or 3 consecutive leases possible. There was a case about a year ago (I think in Phuket) that such a lease came to court and the court decided that consecutive leases are not legal, therefore even the initial 30 years lease which was included on the same contract was an illegal contract therefore voided. A 30 years lease is mentioned as a warning remark on the property's deed, and that's how your parents are going to be protected against sales of the land and losing their home.

3. Buying property under a company's name which was formed only for the purpose of owning a land by foreigner is not legal as it is considered as a proxy. Moreover, the company itself has to be owned by a majority of Thai people (51%) so you don't actually own the company nor the land. If you use a proxy for the registration of the company - that's illegal as well. We all realize that the government is not checking each and every property nor company, but from time to time there is a crackdown o such companies / properties and you risk losing it all + fines.

[elgordo38]

As a long standing member (cough cough) Take Nancy L's advice. Its about as good as your going to get. Your parents age is a good point and plays against the intent your expressing as another member points out. Also there are lawyers here and then there are lawyers. I think Nancy knows a good one. You could go to all this expense and find out that soi dogs roam the street at night or a neighbor has fighting roosters there is always a fly in the ointment. Elderly people like a good nights sleep. Sometimes the plans of mice and men can go astray. There are so many unknowns here that come out after the fact. Be careful and as the song goes "Don't get yourself fenced in" well close enough. Good Luck.

[nakhe]

Thank you for all your responses so far everyone! If anyone is feeling keen, I have a number of questions arising from the responses:

 

1. It seems that the options for "hiring" land is (1) superficiery right (2) usufruct (3) leasing [in order of preference]. Could anyone elaborate on the application process for each of these options and the associated difficulty? In any of the three cases, it would be in my name as I am young (<30yo)

 

2. Anyone recommend a good trustworthy (haha) lawyer for these purposes in Chiang Mai?

 

3. Is 2.95million Baht a reasonable number for a 3x bed, 3x bath, two storey house in Chiang Mai (Kool Punt Ville; unfurnished)?

 

My parents are ~65yo so they aren't crumbly old folks just yet haha

[bitcoinforever]

my advice is if you can not own the land outright it is not worth it, all it is is goodwill , it is not an appreciating  asset to you . if it is ever argued you will lose no matter how you structure it. RENT any problems walk away. 3,750,000 divide  by 15 years 20,000 a month to rent your budget. good luck

[khunPer]

Quote

They say that the land will be leased for 90 years (30yrs x 3) from 2017 and can be extended indefinitely. They say that the lawyer will draw up a contract which will state that "the land-owner is borrowing money from [my parents] with land as the collateral" (???). The house however will be owned by my parents. 

Legally land can only be leased for one 30-year period, and that shall be registered at the Land Department on the owner's title deed, to be legal – any lease lasting longer than 3-years shall be registered – a small tax for the whole lease period will be charged and shall be paid upon registration; it use to be 1 percent of the lease sum, paid in once for all 30-years.

 

Prolonged lease terms like a second or third 30-year period is not legal, but the lessor can offer these in a separate Agreement; it's important that optional lease terms are not mentioned in the original Lease Agreement, as that – to my best knowledge – become void, if more than one (only) 30-year lease term is mentioned. A separate optional lease-term is a normal agreement, and if that agreement is not fulfilled, it has to be settled by a Thai court at that time – i.e. lessee has no guaranties at all.

 

A lease Agreement shall be written in both Thai language and English language, so lessee has a chance to understand it; however, only the Thai language is legally binding. Get a third part to translate and explain the Thai text.

 

Using the land as collateral for a loan from foreigners, I will advice to check carefully with a lawyer (not lessor's) – it's very common procedure among Thais, but foreigners cannot own land in Thailand – in case something goes wrong the land need to be sold to a Thai within 6 or 12 month.

 

A foreigner can own a house, but not the land it's build on. It's important that the Lease Agreement gives permission to build a house – your parents may need other documents signed by lessor to obtain a building permission at Tessa Ban (Local District Office) – your Lease Agreement can/shall be combined with a Superficies Agreement. A foreigner do not receive any kind of "house deed" or registration from the Land Department when building a new house, therefore it's vital important, and the only proof of ownership, that architect drawings has the foreign owner's name as builder, that building permission is issued in the foreign owner's name, that contract between owner and building constructor is in foreign owner's name, that all money transfers to building constructor comes from the foreign owner's account and receipts are kept as documentation, that bills/receipts for all additional stuff bought for the construction carry the foreign owner's name. When a new house is 80 percent finished, the owner can apply for a so-called (Blue) House Book from Tessa Ban, that shall be done within a year from the issuing date of the building permission. The (Blue) House Book is not a proof of ownership and cannot include foreigner's names (however, if a foreigner has "Permanent Residence" I think the name can be in the Blue House Book), so that will be an empty House Book; however all houses shall have a House Book and that shall be used for permanent electric supply etc.

 

Foreigners can have their name in an alien's (Yellow) House Book, and the foreigner can have status of "Master of House"; which don't state ownership, but who to authorize names to be obtained in the House Book(s) – alien's (Yellow) House Book also work as proof of address and is useful in a number of situations.

 

Quote

If building a house on leased land is not a safe option, what other options may be viable for my parents who want to spend their geriatric lives in Chiang Mai?

Lease and/or Superficies is the best legal method for a foreigner to build and own a house in Thailand – for other eventualities you need to talk to an experienced lawyer specializing in property for foreigners; the lawyer may know some tricks, not know to us plain folks...

 

I kindly, but strongly advice you to check the "project", how it's owned and managed. Some projects allow only use of their building constructor, and all supply of electric and water shall be through the project, often at a higher rate. Also mutual maintenance costs of the project is important to know, what's included and how the costs can raise. We have unfortunately seen a number of cases where the lessee's have been overcharged (too much) or double charged (for electricity and water); and some projects has even gone bankrupt.

 

Under all circumstances, I will advice you to get in contact with a lawyer to handle the case for you; a first informative meeting is normally free, so you have option to check a number of lawyers and find one you fell is best for you and your parents.

 

I wish you good luck with your project...
(For your info: I have been through the process, I have build and "own" a house in Thailand.)

Edited October 8, 2016 by khunPer
My bad spelling – sorry for not being native English speaker... :(

[NancyL]

Yes, it's correct that you can't sign a rental agreement for longer than five years.  But since the OP's parents are 65 years old, that's about the right length of time.  Actually, I'd suggest starting out with a one-year agreement.  Many new arrivals find they've selected the "wrong side of town" when they first arrive.  Maybe they think they want to live in a house in a moo baan -- as the OP is suggesting his parents want to.  But after a few months, they discover the traffic is a killer and all the activities they want to join are in town.  They'd rather rent a condo along the Huey Kaew/Nimman area and cultivate a relationship with a tuk-tuk driver and/or walk to activities for their health.

 

A 20,000 baht/month rental budget is good and should definitely get the OPs parents something equivalent to the 3 million baht home they're considering.  But three bed, three bath and especially TWO levels -- at their age -- OK at age 65, not so good at age 75, perhaps.  Why lock them into this?  Why lock them into something where they have to drive everywhere or pay a fortune for a taxi?  Why lock them into having to employ a maid and gardener?  Is the OP going to be here to keep all these details operational for them?  Sure, they can figure all this out at age 65, but at age 70 or 75?  Then what?  Let the Thai maid take care of them (and their money)?

 

Let them rent a house for a year or two and see if they want the lifestyle.   I'm their age and I sure don't want that lifestyle anymore. 

[nakhe]

6 minutes ago, NancyL said:

A 20,000 baht/month rental budget is good and should definitely get the OPs parents something equivalent to the 3 million baht home they're considering.  But three bed, three bath and especially TWO levels -- at their age -- OK at age 65, not so good at age 75, perhaps.  Why lock them into this?  Why lock them into something where they have to drive everywhere or pay a fortune for a taxi?  Why lock them into having to employ a maid and gardener?  Is the OP going to be here to keep all these details operational for them?  Sure, they can figure all this out at age 65, but at age 70 or 75?  Then what?  Let the Thai maid take care of them (and their money)?

 

Let them rent a house for a year or two and see if they want the lifestyle.   I'm their age and I sure don't want that lifestyle anymore. 

 

Ah yes I definitely thought of this and suggested the same to my parents (e.g. all the bedrooms being upstairs!). To be honest, I think they are being very short-sighted about getting a two-storey home. I will try to convince them to get a one-storey place. 

 

We have lived in Chiang Mai back in 2004-2008, and they are thankfully well aware of the suburbs around the area and lifestyle. They enjoy the food, culture, and golf. The only real "guaranteed" duration of lease seems to be 30years... god knows what may or may not happen to the home at the end of the 30y lease! I will try to convince them by offering a plump sum of rent money for their entire life.

 

The main reason that my parents want to build a home is because they've never owned property their entire life. I think building a home has some special meaning to them. They've sacrificed a lot for me during my time in university and grad school, so I am doing this for them as a gift, I suppose. But is it really worth tens of thousands of dollars... that I can't say :S

[Grubster]

2 hours ago, nakhe said:

Thank you for all your responses so far everyone! If anyone is feeling keen, I have a number of questions arising from the responses:

 

1. It seems that the options for "hiring" land is (1) superficiery right (2) usufruct (3) leasing [in order of preference]. Could anyone elaborate on the application process for each of these options and the associated difficulty? In any of the three cases, it would be in my name as I am young (<30yo)

 

2. Anyone recommend a good trustworthy (haha) lawyer for these purposes in Chiang Mai?

 

3. Is 2.95million Baht a reasonable number for a 3x bed, 3x bath, two storey house in Chiang Mai (Kool Punt Ville; unfurnished)?

 

My parents are ~65yo so they aren't crumbly old folks just yet haha

I don't like the two story part, are they getting younger now.

[Mekong Thunder]

9 hours ago, happyme said:

I have just rented land and went to the tessa Ban not sure spelling is right they told me you can rent the land for life so i had a contract drawn up this was agreed by the land owner and the tessa Ban did a house plan for me total cost for plan 3,000 bt once the house is built 80% I can go and register the house in my name and put the utilities in my name the staff were great giving me advise and so helpful

One born every minute!

[Mekong Thunder]

"Foreigner leasing land and building house in Chiang Mai"...I don't see this one ending well!

[Mekong Thunder]

For the record houses for foreigners are NOT worth the hassle,you can lease land for 30 years only at a time and then there is no obligation for the landowner to renew,meaning you lose your house no matter what ANYONE will tell you.
Stick to a condo,a nice 2 or 3 bed freehold and maybe overlooking the Ping River and you CANNOT go wrong,that's my tuppence worth and you'd be wise to follow it!

[nakhe]

1 minute ago, Mekong Thunder said:

For the record houses for foreigners are NOT worth the hassle,you can lease land for 30 years only at a time and then there is no obligation for the landowner to renew,meaning you lose your house no matter what ANYONE will tell you.
Stick to a condo,a nice 2 or 3 bed freehold and maybe overlooking the Ping River and you CANNOT go wrong,that's my tuppence worth and you'd be wise to follow it!

 

But wouldn't I be able to sell the house separate from the land near the end of the lease? E.g. putting it out on the market ~28yrs into the lease? I wouldn't mind making $0 profit on the sale... 

Edited October 8, 2016 by nakhe

[Mekong Thunder]

2 hours ago, bitcoinforever said:

my advice is if you can not own the land outright it is not worth it, all it is is goodwill , it is not an appreciating  asset to you . if it is ever argued you will lose no matter how you structure it. RENT any problems walk away. 3,750,000 divide  by 15 years 20,000 a month to rent your budget. good luck

If you go for an unfurnished house in Chiang Mai you will get a very nice 3 or 4 bed 2 story house even within the city limits for 20,000 per  month easily!

[Mekong Thunder]

7 minutes ago, nakhe said:

 

But wouldn't I be able to sell the house separate from the land near the end of the lease? E.g. putting it out on the market ~28yrs into the lease? I wouldn't mind making $0 profit on the sale... 

Who would buy a house with a 2-year lease apart from the landowner?And why would he do that when he can wait 2 years and get if for free?

[Mekong Thunder]

Seriously OP you are entering a legal minefield here and in Thailand the foreigner ALWAYS loses,imagine your poor parents getting unceremoniously booted out of what they thought was their home in 10-15 years time on a legal technicality or a change of government?
Or even the landowner remortgaging the house to pay his gambling debts believe me these things DO happen in Thailand regularly!
Go with the nice FREEHOLD condo option for 2 bed 2 bath in a decent area for you budget and you can't go wrong,plus you can inherit when they are no longer around.

[Naam]

4 hours ago, LukKrueng said:

No such thing as a "rent for life".

both "superficies" and "usufruct" are for life! nobody mentioned "renting for life".

the problem is whether the individual land office grants easily one the two methods mentioned above.

[Naam]

3 hours ago, bitcoinforever said:

my advice is if you can not own the land outright it is not worth it, all it is is goodwill , it is not an appreciating  asset to you . if it is ever argued you will lose no matter how you structure it. RENT any problems walk away. 3,750,000 divide  by 15 years 20,000 a month to rent your budget. good luck

 

the OP wants to fulfill a wish of his parents. obviously he can afford it. he has not mentioned anything about an "appreciating asset".

[nakhe]

21 minutes ago, Mekong Thunder said:

Seriously OP you are entering a legal minefield here and in Thailand the foreigner ALWAYS loses,imagine your poor parents getting unceremoniously booted out of what they thought was their home in 10-15 years time on a legal technicality or a change of government?
Or even the landowner remortgaging the house to pay his gambling debts believe me these things DO happen in Thailand regularly!
Go with the nice FREEHOLD condo option for 2 bed 2 bath in a decent area for you budget and you can't go wrong,plus you can inherit when they are no longer around.

 

Wait... The landowner can boot my parents out of the home within the initial 30 year lease (e.g. 10-15 years into the lease like you said)? Even if I get a lease+superficiery for the land?

[Mekong Thunder]

27 minutes ago, nakhe said:

 

Wait... The landowner can boot my parents out of the home within the initial 30 year lease (e.g. 10-15 years into the lease like you said)? Even if I get a lease+superficiery for the land?

This is Thailand anything can happen and often does,it doesn't even have to be the landowner just a change in government which has happened I think 19 times in the last 100 years!
Heed the warnings here and RENT a house or BUY a condo.

[swissie]

6 hours ago, dotpoom said:

I have owned two houses (still have one) and a condo (still have it),,,,in a company name.....no problems.

Post # 11 should be of interest to you. Especially paragraph 3.

Cheers.