Usufruct Laws play a significant role in the real estate industry of Thailand. Especially, when it comes to temporary possession of the property. A usufruct, or “Sidhi-kep-kin” in Thai, offers temporary ownership rights for the use and pleasure of a property. Additionally, it provides the benefit of being able to profit from the profits of another’s property. The owner of the immovable property gives possession, use, and enjoyment to the usufructuary through the right of usufruct.
Usufruct Laws in Thailand
The owner of an immovable property gives possession, use, and enjoyment to the usufructuary through the right of usufruct. Usufruct can only be registered over legally titled immovable property. Moreover, its drafting is through a written agreement with the owner and registration with the local land office. The document confirming the official agreement between the owner and the usufructuary in the contract or memorandum for usufruct.
A few facts about usufruct in Thailand
- The usufructuary does not obtain the title to the property, nor can he sell or consume the property.
- Usufructuary must take care of the property as a person of ordinary prudence would take of his own property.
- The usufructuary cannot transfer the right of usufruct. However, he can transfer his right under the usufruct to another person contrary to the right of habitation.
- The usufruct does not prevent the sale of the property by the owner. However, the sale of the property does not terminate the usufruct nor the rights of the usufructuary. Usufruct is not a contract right but a real (property) right. However, a real right usufruct is a burden on the property itself. It is so because any new owner automatically takes the property subject to/ including the right of usufruct.
- The usufruct is not transferable by inheritance. Moreover, the usufruct is automatically terminated upon the usufructuary’s death (but not the owner’s death).
- The usufruct is governed by the sections 1417 to 1428 Civil and Commercial Code.
Term of the Usufruct
One can establish the right of usufruct for up to 30 years or for the lifetime of a person. If a juristic person holds the right of usufruct, the time cannot exceed 30 years.
In case a usufruct is for a specific period of time, the usufruct will last as long as the person (or individuals) who holds the right of usufruct lives. If a property owner provides B the right of usufruct for a period of 30 years and B dies after 20 years, the usufruct terminates by default.
In this regard, the right of usufruct differs from the right of superficies. For example, an inheritable right if registered for a period of time.
Renting of Property under Usufruct
Unless the contract of usufruct specifies otherwise, the usufructuary is free to rent out the property. This is possible without the permission of the real owner and keeping the rent. In essence, a usufruct is the right to register a rental agreement with the Land Department. It is for a period of more than three years. However, lease registration is essential for the enforceability of a lease agreement by the tenant. In the event of a foreign national, the usufructuary Land Offices will not enable the lease to be registered. This is because foreigners cannot govern or manage land in Thailand under Thai land laws. Therefore, they cannot get this privilege under the usufructuary Land Offices.
Because the Land Registry will not accept a foreigner as a ‘landlord’ under a lease, local Land Offices will once again distinguish between foreigners and Thais. In practice, a foreign usufructuary can only let out the usufruct property for a maximum of three years at a time.
However, on the creation of a legal rental or lease, the lease/rent does not stop with the end of the usufruct (Scj 2297/2541), i.e. by a decision of Thailand’s highest court.
Payment or Consideration of the Usufruct
One can receive usufruct right with or without payment or consideration. A usufruct contract does not need the exchange of value for the right of usufruct. Registrations of usufructs must be with the local land office. The registration fees are 1% of the total consideration plus 0.1 percent stamp duty, or less than 100 THB per plot if the issuance of the usufruct is without the exchange of value (money).
How to Buy or Sell under Usufruct Agreement?
The Civil and Commercial Code’s chapter ‘Property’ governs the right of usufruct, which provides specific rights and obligations as a property right. Under Thai law, there is no inclusion of the option to buy or a restriction on the sale of the property in the right of usufruct. Such choices are not possible under usufruct in Thailand. For this, separate negotiations are essential between the owner and the usufructuary.
Even if it exists in the usufruct contract, it would still be a separate contract right under Thai law and not part of the usufruct right. For example, it does not follow the property as a real right during a transfer of ownership. In the case of foreigners, the enforceability of such (contract) options is likely to be void in court.
Generally, many people frequently use the right of usufruct to protect a foreign spouse’s interest in Thai property. Normally registration of such properties is as personal property in the name of a Thai spouse. The right of usufruct is based on an agreement, and because it is an agreement between husband and wife entered into during marriage, it may not provide complete protection in the event of a divorce (section 1469 Civil and Commercial Code), but it is the only suitable right under Thai law that provides protection in the event of a marriage.
In any case, starting from drafting a usufruct agreement till its execution, you will need experienced and trustworthy legal support. You must talk with a renowned Property Law Firm in Thailand. For more information on usufructuary or usufruct property in Thailand, email us at [email protected].
