Usufruct: Title VII Thailand Civil and Commercial Code
What Is a usufruct or usfruct agreement
In Thailand the right of usufruct is an real property right whereby the owner of a real estate property (condominium, land and/or house) grants by agreement to another person the right of possession, management and benefits the property may produce for a limited period of time. Unless restricted by the usufruct contract the right of usufruct grants all the rights of use and management of the property to the usufructuary, however, he can't sell or consume the property and he must take normal care of the property and keep the property in good condition. The usufructuary will be liable for loss of value or destruction of the property unless he can proof that damages are not caused by his fault ( sections 1417 to 1428).
Registration of the usufruct agreement
The agreement granting the right of usufruct in Thailand must be in writing, in Thai script and registered by the local Land Office. The usufruct contract will be noted on the backside of the land title deed copy of the owner and in the registers of the Land Office. The right of usufruct may be registered in the foreigner's name. Registration fees are 1% and 0,1% stamp duty over the total price, or if the usufruct is registered without consideration the registration will cost less than 100 THB per plot.
Usufruct is a personal right
Usufruct is granted to a personal or persons and is not transferable to a third party, nor is a usufruct transferable by inheritance. The usufruct will end with the life of the person or persons granted the right of usufruct and the property will return to the real owner. Unless restricted in the agreement granting the right of usufruct the usufructuary is allowed to transfer the exercise of his rights to a third person, however, not the actual right of usufruct.
Term
The maximum term ( section 1418) of a usufruct agreement in Thailand is 30 years or for the life of the usufructuary, meaning for the life of the (registered) person who holds the property under a usufruct. If the usufruct is for the life of a juristic person the maximum term will be 30 years. After this period the right of usufruct may be renewed. Again, in any case and by law and the usufruct comes to an end with the death of the usufructuary ( section 1418). The right of usufruct is not terminated with the death of the real owner of the property and follows the freehold title of the property.
Rights of management and renting out the property under usufruct
The usufructuary as the manager of the property is allowed to rent out the property without the consent of the real owner (unless restricted in the usufruct contract). As a benefit of usufruct is sometimes referred to Supreme Court judgment 2297/2541( translation summary) which says that a usufructuary may rent out the property and in this case the lease/ rental term will not automatically be terminated together with the death of the usufructuary/ the end of the usufruct. As a sales argument is sometimes suggested that the foreign usufructuary can have the property for his life + pass on the property under a 30-year lease to his heirs. In practice such a construction will not be possible. Management of the immovable property under usufruct and registering legal acts against the land at the land department, is not an allowed right given to a foreign usufructuary (the land office will deal differently with a foreign usufructuary opposite a Thai national as the usufructuary). Secondly, the lease may not be automatically terminated upon the death of the usufructuary but the real owner can claim misuse or unlawful use of the usufruct if he is damaged hereby. The right to benefit from the property and enjoy the 'fruits' (rent) of the property will by law end with the death of the usufructuary and property and its benefits will return by law to the real owner. The real owner must in the first place be the recipient of a reasonable rent from the date of termination of the usufruct.
Can a usufruct be for free, without consideration?
Opposite to for example a lease agreement a usufruct agreement does not need to contain a consideration, however, the Land Department could refuse to register the usufruct and the Revenue Department could investigate this structure to see if it is not actually set up to circumvent taxes.
Can usufruct protect a property investment?
Compared to a well crafted lease agreement, and if possible combined with a right of superficies, a usufruct may not the best choice to protect a property investment because usufruct is not transferable and will end with the death of the person or persons granted the right of usufruct. The right of usufruct can last for a specified period of time up to 30 years or for the life of the usufructuary, however in both cases end at death of the usufructuary. In this case the property will absolutely and by law return to the owner ( section 1420), any contractual clause stating different will be void.
Because a right of usufruct can be granted without consideration a right of usufruct is often used to protect the foreign spouse's interest in a property should the Thai spouse (registered owner) predecease the foreign spouse, and in some cases to protect in a divorce. Read more: buying property during marriage on a Thai spouse's name.
More: usufruct contract, sample contract
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