Usufruct: Title VII Civil and Commercial Code

What Is

The right of usufruct refers to the rights granted under the Civil and Commercial Code whereby the owner of an immovable property (condominium, land and/or house) grants to another person for a limited period of time the right of possession, use and enjoyment, management and benefits the property may produce without destroying, damaging, or diminishing the property. The benefits ('fruits') of the property could be the enjoyment or rental income from the property or in case of farm land the crops etc which are collected from the land.

Rights of usufruct is a property right that origins from Roman Law and is currently still used in most Civil Law systems, including Thailand (though, usufruct developed differently in different countries). Usufruct in Thailand is a real right registered on the land title and can be registered in the foreigner's name ( sections 1417 to 1428). A usufruct is not terminated with the transfer of ownership of the property, however it is a personal right and therefore the right of usufruct is not transferable (also not by inheritance). Unless restricted in the contract granting the right of usufruct the usufructuary is allowed to transfer the exercise of his right to a third person, however, not the actual right of usufruct. The usufruct will in any case by law be terminated with the death of the usufructuary.

Rights of the usufructuary and renting out the property
Unless restricted in the agreement granting the right of usufruct the person granted the right of usufruct has all rights of management of the property, however, he can't sell the property. The usufructuary can as the manager of the property legally rent out the property. This is a right associated with the right of management of the property under the usufruct. As an argument for usufruct is often referred to Supreme Court judgment 2297/2541( translation summary) which says that a lease/ rental term is not automatically terminated together with the end of the usufruct, suggesting the usufructuary can have the property for his life + pass on the rights of the property for 30 years under a lease to his heirs. The Supreme Court judgment rules that rights of third parties in good faith are not affected by the termination of the usufruct. This does not mean that a lease registered for a minimal amount prior to the death of the usufructuary is enforceable or acceptable if challanged in court by the land owner. The lease may not be terminated upon the death of the usufructuary, however; the real owner must be the recipient of the (reasonable) rent from the date of termination of the usufruct. The right to benefit from the property and enjoy the 'fruits' of the property will by law end with the death of the usufructuary.

A lifetime usufruct
The maximum term ( section 1418) of a usufruct in Thailand is 30 years or for the life of the usufructuary, meaning for the life of the (registered) person who holds the property in usufruct. If the usufruct is for the life of a juristic person the maximum term will be limited to 30 years. A usufructuary holding a property under a lifetime usufruct can't leave the property to his or her heirs, as, by law and in any case, the usufruct comes to an end with the death of the usufructuary ( section 1418). The rights under usufruct are therefore practically impossible to sell to a third person because the dependency on the life of the usufructuary.

Any promise by the real owner in the agreement granting the right of usufruct to enter into a new usufruct for free with the heirs of the usufructuary upon his death is not legally binding.

Can a usufruct be for free?
A usufruct can be granted without consideration, however, unless there is a moral duty, like from a Thai spouse, a usufruct for free does not really make sense. The Land Department could refuse to register such a usufruct (unless there is a valid reason) and the Revenue Department could investigate this structure to see if it is not actually set up to circumvent taxes.

Can I use a usufruct to protect my property investment?
A usufruct is not a legal tool to protect an investement. The right of usufruct will guarantee the use, management and possession of another's immovable property for a specified period of time or for the life of the usufructuary, or in case of a juristic person for periods up to 30 years. It is not possible to extend the usufruct beyond the term that is granted. At the end of the term of the usufruct ( section 1418) the property will absolutely return to the owner ( section 1420), however, termination of the usufruct will not affect thrid parties in good faith with rights against the property.

The standard use for a right of usufruct (in line with how usufruct is used in other Civil law systems) is to protect in Thailand a foreign spouse's interest in the property in the event of divorce or death of the Thai spouse

Note: Usufruct as protection in a divorce is not straightforward, and depends among others if the money used for the property is coming from personal property ( Capter IV) of the foreigner.