Sections 537 to 571 of the civil and commercial code control the lease or rent of land, house, or condominium apartment units for residential purposes by foreigners. Irrespective of the property types, Lease or Rental Agreements in Thailand governs the terms. Foreigners can lease real estate property for up to 30 years under Thai law, and the law applies equally whether the lessee is a foreigner or a Thai national.
Rental (Lease) Terms and Agreement in Thailand
To be enforceable (by legal action) over 3 years, a lease (tenancy rental) arrangement must be registered with the local land office. The lease contract must the Thailand Land Department registration. This must be within three years after signing and the start of the tenancy. Moreover, without this, the lessee’s right to bring a lease dispute to court will be lost.
The maximum lease period in the agreement must not exceed 30 years, according to the civil and commercial code. Any leasing deal with a longer period automatically lowers to 30 years (section 540).
Furthermore, under Thai law, pre-signed or pre-agreed lease renewals are not acceptable. Moreover, any agreed-upon consecutive lease durations are assumed to be part of one lease agreement and are reduced to 30 years (section 546). Only after the expiry of the first lease agreement period may a lease be renewed. But, it must not exceed thirty years from the time of renewal.
Lease or Rental Agreements in Thailand: Legal Aspects
Long-term rentals of land and/or house or apartment have the following characteristics:
- Legal action is applicable only to enforce a written rental or lease agreement, not a verbal one.
- A three-year rental or lease can be in another language and without any record with the land department.
- A Thai script form of a rental or lease (leasehold) agreement with a period of more than three years must have the land department registration.
- Properties with title deeds can register a lease agreement.
- The length of a leasehold cannot exceed 30 years. However, the period may have renewal but the options are not certain. Moreover, the contract is not binding or enforceable by any third parties. This is because it is personal to the parties to the contract.
- In essence, a lease agreement establishes a conventional tenancy for the lessee. Additionally, it is the lessee’s personal right of use and possession of the property.
- A property lease in Thailand immediately terminates upon the death of the lessee. However, it is not the same on the death of the owner, according to Thai lease (rental/ tenancy) rules (section 569).
- A lease registration charge of 1% of the total rental during the lease duration. It is for lease registrations exceeding 3 years. Additionally, it needs stamp duty of 0.1 percent of the entire rental throughout the lease term.
- Personal income tax applies to sublease, rental, and lease income.
Property Lease Terms for Foreigners
The most difficult component of a foreigner’s ‘leasehold’ acquisition in Thailand is creating the terms and conditions. Moreover, challenges are there in drafting the agreement providing the best protection for the foreign leaseholder. Therefore, for this purpose, a foreigner must have an expert property law practitioner in touch. Moreover, without the protection of a lease agreement, the lease may not be enforceable throughout the duration. (e.g. termination upon death of the lessee).
In Thailand, there are several ways to construct a lease or leasehold or Rental Agreements in Thailand. However, the lease must be in Thai and follow the civil code and land office requirements. The lease with a foreigner must have evaluation report from a Land Office official before registration. However, it cannot include the right to transfer to freehold or prepaid additional lease periods in a renewal option, for example.
Land Lease Agreement
A lease can be in ownership over the structures on the land in a long-term leasehold interest in a real property by foreigners in Thailand. There are restrictions in foreign ownership solely in the land portion of the Property Code Act, not in the buildings on lease land. A land lease with all options in combination with a right of superficies or a separate sale of the building procedure is the ideal legal structure in Thailand.
Housing and Land Tax
Over property that is not the owner’s principal residence, Thailand imposes Building and Land Tax at a rate of 12.5 percent of the annual rental pursuant. It is aplicable to the property lease agreement or the annual value assessed by the Land Department, whichever is higher. For example, a second home or a property that is rented out by the owner. Building and land taxes is payable by the company owning a property (land AND dwelling). However, it is regardless of whether the company receives rent or income from it.
Lease Purchase in Residential Housing Development
The freehold sale agreement of a property in an official (holding license) property development must comply with severe land restrictions, housing development, and consumer protection legislation. Selling land and houses in the same development under a leasehold contract to foreigners is exempt from the same laws. Moreover, the developer can include various for him beneficial and misleading clauses in the lease agreement to generate sales. These can be additional lease renewal terms implying a 90-year lease term, but which is not permissible under Thai tenancy law.
Specific Rent and Lease of Commercial Property
The Thai Civil and Commercial Codes governs the Commercial rents, just like residential rentals. The Thai government’s enactment of the ‘The Hire of Immovable Property for Commerce and Industry by Aliens Act B.E. 2542′ is only to encourage international investment. This act only applies if the act’s prerequisites are met (a significant investment and remittance into Thailand). Elsewise, foreigners’ hiring of immovable property for trade and industry must abide by the civil and commercial Code’s section ‘Hire of Property.’
But in this context, we would suggest that you must consult with some prominent Land or Property Law Firm before taking any decision. If you are a foreigner, there are great probabilities of committing unwanted yet insane mistakes. For all types of guidance and assistance on Property matters and Rental Agreements in Thailand, mail us at [email protected]
