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Lease of Real Property for Residential Purposes in Thailand

Posted Date : 2014-10-16 14:26:59

Credit By : Sunbelt Asia

Many foreigners go to Thailand for various reasons. Most of them are tourists, and some of the others want to settle for good after they retire from their employment abroad. With this comes the need for permanent accomodation. However, the laws of Thailand do not allow foreigners to own real properties in the country. Foreigners are only permitted to lease or rent these real properties in Thailand.

A "lease" which is also called "hire of property" is a contract whereby a person, called the letter, agrees to let another person, called the hirer, have the use or benefit of a property for a limited period of time and the hirer agrees to pay rent therefor.

The Civil and Commercial Code of Thailand permits foreigners to lease real or immovable properties such as land, houses and condominiums for residential purposes up to 30 years. Upon the expiration of this period, the lease contract may be renewed for another 30 years. If the lease contract between the letter (the person who owns the property) and hirer (the person who rents the property and pays for it) has duration of at least 3 years, the same must be registered with the local land office.

Here are some of the salient points on the Law of Hire of Property in Thailand:

  • The Lease Contract creates rights and obligations to both contracting parties (the letter and the hirer). This means that as a lessee/hirer, you have contractual rights over the leased property as well as duties and liabilities to the lessor/letter. 
  • The expenses in the preparation of the lease contract are equally borne by both parties. This is what the law in Thailand provides. However, some lease contracts stipulate that the lessee/hirer shoulders all the expenses for its preparation. So, as a lessee/hirer, you really need to scrutinize the provisions of the lease contract. 
  • A verbal lease agreement is not enforceable by action. To enforce an action in court, the lease contract must be in writing and signed by the liable party. There must be some written evidence to it. 
  • To be enforceable by action, the lease agreement which has a period of more than 3 years must be in writing, signed by both parties and registered with the local land office.To protect your rights as a lessee/hirer, the law requires that the signed lease contract must be registered with the local land office.
  • If the lease contract is for more than 30 years, it is automatically reduced to 30 years by operation of Thai law. So, if the contract has been made for the duration of the life of the letter or of the hirer, it is understood that it has a maximum duration of 30 years only. However, it is renewable for another 30 years. 
  • The hirer/lessee cannot sub-lease the leased property or transfer his rights to another person unless it is agreed upon in the lease contract. Sub-leasing of properties must be agreed upon by the parties. Without such agreement, the lessee/hirer cannot sub-lease the property. 
  • If the hirer rightfully subleases the leased property, the sub-lessee is directly liable to the letter. Hence, advance payment of rent made by the sub-lessee to the lessee cannot be used against the lessor/letter. However, the sub-lessee can enforce an action against the hirer. 
  • A contract of lease is extinguished at the end of the agreed period without notice. Since the duration of the lease has already been agreed upon by the parties, notice is no longer required upon its expiration. In drafting a contract of lease, the rights and interests of the contracting parties should be both protected. This is true especially on the part of the hirers/lessees because most of them are foreigners. Since they are not familiar with Thai laws, the terms and conditions of lease contracts are often times not favourable to them considering that they are usually prepared by their Thai letters. Hence, foreigners need the assistance of experienced and competent lawyers in Thailand for the protection of their rights as lessees. This article was provided by Siam Legal, an international law firm with offices in Bangkok, Chiang Mai, Hua Hin, Pattaya, Phuket, and Samui. Siam Legal publishes guides to leasing land in Thailand on its website.

Types of land title in Thailand

Posted Date : 2014-10-16 14:43:01

Credit By : Elite Property

 There are basically four types of land title in Thailand:

1. Chanote (Title Deeds)

This is freehold title with the owner able to leave the land unattended indefinitely. The ownership is registered at the land department in the province where the land is located and there is no delay in transferring ownership on sale. Chanote titles are accurately surveyed by the land department and the land is marked by uniquely numbered posts sunk into the ground. This is the best form of title you can have.

2. Nor Sor Saam Kor (Confirmed Certificate of Use)
This certificate implies that issuance of the Chanote is pending, and that the person named on the certificate has a confirmed right to use the land. This land can be bought and sold, leased or pledged as collateral. This and the Chanote (above) are the only types of title that can be registered.

3. Nor Sor Sam (Certificate of Use)
Not all the requirements to achieve a confirmed certificate of use have been completed. It is transferrable but a public notice must be posted and then 30 days notice is necessary before any change of status can be registered.

4. Sor Kor Nung (Certificate of Possession)
This certifies that a person is in possession of the land but does not imply that he has any rights over it. It is not transferrable.

From a foreigner's point of view the Chanote is the only really safe legal title with the others involving an increasing amount of risk. We would only ever recommend, therefore, that land is purchased which has a Chanote title.

Buying Property in Thailand

Posted Date : 2014-10-16 14:47:51

Credit By : Elite Property

 This is not meant to be a definitive statement of the legal position covering the purchase of Thai property by foreigners, rather a guide to give an overview of some of the complexities involved. The government often talks about changing the law, and sometimes does, and local officials can interpret the law differently, so it is vital to take proper legal advice if contemplating a real estate transaction in Thailand.

The law is basically designed to ensure that, with a few exceptions, foreigners cannot own land in Thailand outright. So, how does a foreigner buy property? There are basically three ways:

1. Set up a limited company which is majority owned by Thai nationals. In theory this should mean only a simple majority of 51% needs to be owned by Thais but there have been cases where the local land registry has refused to register land purchases where Thais own less than 60% of the company. The Thai shareholders can be people you know and trust or they can be nominees provided by your lawyer, who will safeguard your interests with pre-signed share transfer forms, and shareholder agreements, which can be legally binding under Thai law.

2. Use a Thai person to buy the property and register it in their name and to give you a renewable thirty-year lease. This can be for the land and building or just the land. Foreigners are allowed to own buildings outright. This would normally be done with a loan agreement, assuming the foreigner provided the funds to buy the property. Again, if this is done properly, these agreements can be made completely legally binding under Thai law.

3. Certain condominiums can be owned outright by foreigners. This applies as long as Thai nationals own at least 51% of the properties in the condominium complex. This is quite a common way for foreigners to buy investment properties in Thailand, and as such the foreign allocation of units in new build condominiums tends to sell out quite quickly, often before construction is complete. It is so far rare to see selling “off plan”, as was common in the UK in the boom years but it is heading more in that direction.

Land Title

Taxation

Posted Date : 2014-10-16 14:50:07

Credit By : Elite Property

On all purchases and sales of property in Thailand there is a stamp Duty of 0.5%, a transfer fee of 0.01%, a business tax of 0.11% levied against an owner who has been in registered possession of the property less than 5 years, and Income Tax. There is no Capital Gains Tax in Thailand and Income Tax (usually between 1.0 - 3.0%) on property is the comparable replacement. There are no set rules on who pays the income tax, and it is just another part of the bargaining process, as with all the other costs of the transfer of ownership.

Ongoing property taxes are extremely small, although they are slightly higher if the land remains undeveloped. This is designed to stop land speculation.

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