Posts tagged: property

Property Leasehold in Thailand. Thailand imposes strict restrictions on foreign ownership of immovable property, particularly land. As a result, leasehold structures have become a common legal mechanism for long-term use of property by foreigners and certain corporate entities. Leasehold in Thailand is governed by the Civil and Commercial Code (CCC) and, in the case of condominiums, by the Condominium Act B.E. 2522 (1979).

Although leasehold is not equivalent to freehold ownership, it can offer long-term stability and enforceable use rights when properly structured. However, Thai lease law is highly formalistic, and enforceability often hinges on registration and compliance with specific legal conditions.

1. Legal Framework

The governing law for leasehold property in Thailand is found in Sections 537 to 571 of the Civil and Commercial Code, which defines a lease as a contract by which one party (the lessor) allows another (the lessee) to use or occupy immovable property for a certain period in return for rent.

Key points include:

• Lease agreements for more than three years must be registered with the Land Office to be enforceable beyond that period.

• The maximum lease term for land and residential property is 30 years, with an optional renewal clause for another 30 years.

• Leases must be in writing and include precise terms (property description, rent, duration, etc.).

2. Who Can Lease Property in Thailand?

Leasehold rights are available to:

• Thai nationals

• Thai juristic persons

• Foreign individuals

• Foreign-owned companies, provided certain conditions are met

While foreigners cannot own land, they can lease land or condominiums and register leasehold interests with the Land Department, making it a key method for acquiring long-term rights.

3. Types of Property Commonly Leased

3.1 Land

• Foreigners may lease land for residential or commercial use up to 30 years.

• Land lease agreements must be registered at the Land Office, and the lease must be noted on the title deed (Chanote).

3.2 Condominium Units

• A leasehold condominium may be registered for up to 30 years.

• Unlike freehold ownership (limited to 49% of the total floor area for foreigners), leasehold units do not fall under this quota.

• All leases of individual units must be registered on the unit title.

3.3 Buildings

• Buildings constructed on leased land may be owned separately by the lessee (e.g., under superficies rights).

• Lease of a standalone building without land requires a clear legal basis and registration, especially if constructed by the lessee.

4. Lease Term and Renewal

4.1 Maximum Term

• By law, the maximum lease term for immovable property is 30 years.

• A renewal clause may be included in the contract but is considered a promise to lease, not an automatic extension.

• Renewal requires a new lease registration, and the lessor must be alive and legally competent to contract.

4.2 Multi-Term Lease Structures

In practice, some developers and lessors offer lease packages marketed as “90-year leases”, which are structured as:

• 30-year registered lease

• Two 30-year optional renewals

However, Thai courts have ruled that unregistered renewals are unenforceable against successors or third parties, making the enforceability of the full 90 years uncertain.

5. Registration Requirements

To be enforceable, leases exceeding three years must be registered with the Land Department. The process includes:

• Draft lease agreement (Thai or bilingual)

• Certified copies of ID or passport (and company documents if applicable)

• Title deed (Chanote or Nor Sor 3 Gor)

• Land Office fee: 1.1% of the total rental value

• Witnesses and lessor/lessee attendance

Registration is made on the back of the title deed, and only upon such registration does the lease become binding on third parties, including purchasers of the land.

6. Rights and Duties of the Lessee

The lessee obtains the exclusive right to occupy and use the property in accordance with the lease terms. Key rights and obligations include:

• Right to exclusive possession

• Right to renew the lease if agreed upon

• Obligation to pay rent and maintain the property

• Right to sublease or transfer the lease (if contractually permitted and registered)

• No right to alter or develop the property without lessor’s consent

Leasehold is considered a personal right, not a real right like ownership. It is not inheritable unless specifically structured through succession mechanisms (e.g., through corporate entities or assigning lease rights before death).

7. Subleasing and Assigning Leasehold Interests

The lease contract may allow the lessee to:

• Sublease: Subject to lessor’s written approval

• Assign the lease: Requires a registered assignment at the Land Office

• Pledge the lease: As collateral, though often difficult in practice

Restrictions on these rights should be clearly addressed in the lease contract to avoid disputes.

8. Leasehold in Mixed-Use and Development Projects

Large-scale developments (e.g., villa resorts, mixed-use projects) often use leasehold structures to allow foreign participation while maintaining Thai land ownership. Common features include:

• Long-term lease of land plots

• Sale of villas or units built on leased land

• Transferable lease agreements with developer or holding company

• Use of optional add-ons such as usufruct or superficies rights

While widely practiced, these structures should be carefully reviewed for compliance with land and foreign business laws to avoid issues of nominee ownership or circumvention.

9. Risks and Limitations

Despite widespread use, leasehold carries several legal and practical risks:

9.1 Death or Bankruptcy of Lessor

• Lease agreements may become unenforceable if the lessor dies or the land is transferred, unless the lease is registered and protected under the law.

9.2 Non-renewal

• Renewal clauses are not binding on successors unless a new lease is registered.

• Buyers of the leased land are not obligated to honor the renewal promise if the lease is not registered with succession safeguards.

9.3 Enforcement Issues

• Thai courts often treat leaseholds as non-transferable personal rights unless clearly structured.

• Foreigners have no direct path to upgrade leasehold into ownership, except via approved channels under the BOI or treaty exceptions.

10. Alternative Legal Structures

To increase security, some foreign investors use additional legal tools alongside leasehold:

• Usufruct (Section 1417 CCC): Lifetime use right over land

• Superficies (Section 1410 CCC): Right to own structures on another’s land

• Option agreements: For future land sale to a Thai spouse or company

• Shareholder control in a Thai company: With leasehold and land-use rights assigned to the company (with FBA compliance)

These mechanisms have limitations and must be tailored carefully by legal counsel.

Conclusion

Leasehold remains one of the most commonly used legal structures for foreign individuals and entities seeking long-term property use in Thailand. It provides a registered and enforceable right, but with limitations inherent to Thai law — particularly concerning duration, inheritance, and renewal.

Proper leasehold arrangements require precise drafting, registration at the Land Office, and ideally contractual safeguards that anticipate succession, transfer, and enforcement risks. Where greater control is required, supplemental rights such as usufruct or superficies, or structured corporate vehicles, may offer a more robust solution—subject always to compliance with land and business regulations.