Lease Law

Legal subjects concerning rent, tenancy and leasehold or lease of real estate in Thailand (land, land and house, condo apartment). The legal rights of foreigners under the Civil and Commercial Code contracts rent of property, possession of a real estate property under a lease or rental agreement under Thai law.

Whether the contract is called rental, tenancy, lease or leasehold such agreements in Thailand are governed by the civil and commercial code, chapter 'rent of property'. Any agreement whereby the owner of a property agrees to let another person have the use of the property for a limited period of time and the other party agrees to pay rent therefore must be read as a rent of property contract between a tenant and a lessor. Below common questions and answers on lease/ rental contracts.

Enforceability of a rental with a fixed term and consecutive leases

Thai Lease Registration

REGISTRATION OF LEASES LEASEHOLD RENTALS EXCEEDING A 3-YEAR TERM

Under property rental and lease laws in Thailand any property lease (rental with a fixed term) exceeding 3 years must be in writing and recorded on the land ownership title deed (land or condominium title deed) as kept in the registers of the provincial or local land office section 538 Civil and Commercial CodeThai law translation section 538 Civil Code: 'A hire of immovable property is not enforceable by action unless there be some written evidence signed by the party liable. If the hire is for more than three years or for the life of the letter or hirer, it is enforceable only for three years unless it is made in writing and registered by the competent official'. If the lease agreement between the parties is not registered with the Land Department the lease is enforceable by legal action for a 3 year term only. The term of a registered lease agreement cannot exceed 30 years (section 540 Thai law translation section 540 Civil and Commercial Code: 'The duration of a hire of immovable property cannot exceed thirty years. If it is made for a longer period, such period shall be reduced to thirty years. The aforesaid period may be renewed, but it must not exceed thirty years from the time of renewal.') and is automatically extinguished at the end of the registered term (section 564Thai law translation section 564 Civil and Commercial Code: 'A contract of hire is extinguished at the end of the agreed period without notice.' In Thai: มาตรา 564 อันสัญญาเช่านั้น ท่านว่าย่อมระงับไปเมื่อสิ้นกำหนด เวลาที่ได้ตกลงกันไว้ มิพักต้องบอกกล่าวก่อน ). A short term contract does not have to be registered but must be in writing to be enforceable by legal action.

Possession of real estate in Thailand under a lease agreement

Payment of rent

ESSENTIAL ELEMENTS OF A LEASE OR HIRE OF PROPERTY CONTRACT

Payment of rent is under Thai law an essential element of a lease agreement (section 537Section 537 'A hire of property is a contract whereby a person, called the letter, agrees to let another person, called the hirer (tenant/ lessee), have the use or benefit of a property for a limited period of time and the hirer agrees to pay rent therefore', In Thai: มาตรา 537 อันว่าเช่าทรัพย์สินนั้น คือสัญญาซึ่งบุคคลคนหนึ่ง เรียกว่าผู้ให้เช่า ตกลงให้บุคคลอีกคนหนึ่ง เรียกว่าผู้เช่าได้ใช้หรือ ได้รับประโยชน์ในทรัพย์สินอย่างใดอย่างหนึ่งชั่วระยะเวลาอันมีจำกัด และผู้เช่าตกลงจะให้ค่าเช่าเพื่อการนั้น). Possession of a real property under a lease agreement in Thailand without payment of rent would not be enforceable as hire of property under the Civil and Commercial Code. A lease without a lease price would not be governed by the chapter hire of property but for example by right of habitation or usufruct laws and a different set of rules would apply. For the registration of a lease agreement the land office will require that the lease includes a rent. The lease price or rental price must be considered a reasonable rent or the land office wil refuse registration of the lease agreement or will assess the rent based on the government appraised value of the property (registration fees, property tax, income tax for the owner will be based on this amount). Lease as opposed to superficies, usufruct or habitation cannot be registered for a nominal (1 baht) amount or without consideration to be paid.

Leasehold and re-sale of a lease agreement

Lease of Immovable property

THE RIGHT TO SUB-LEASE AND ASSIGNMENT OF A PROPERTY LEASE

Lease in the Civil and Commercial Code is placed under the rubric contracts and as a hire of property primarily a personal contract right of the lessee (termination upon death of the lessee) with aspects of a real property right'Real property rights are rights over real estate enforceable against all other persons (e.g. right of the lessee to sublet if agreed), as opposed to contract promises (e.g. lease renewal option) which are enforceable against a particular person or persons - under Thai hire of property laws the dividing line between real property (lease) rights and personal contract promises in a lease agreement is not always easy to draw'. This is the reason why under Thai law the right to sub-rent or assignment of a residential lease agreement is only allowed if the lease agreement contains the right of the lessee to transfer his lease rights or transfer possession of the leased property to a third person (section 544 Section 544 (Civil and Commercial Code): 'Unless otherwise provided by the lease contract, a lessee/ tenant cannot sublet or transfer his rights in the whole or part of the property hired to a third person. If the lessee fails to comply with this provision, the letter may terminate the contract.' In Thai: มาตรา 544 ทรัพย์สินซึ่งเช่านั้น ผู้เช่าจะให้เช่าช่วงหรือโอนสิทธิ ของตนอันมีในทรัพย์สินนั้นไม่ว่าทั้งหมดหรือแต่บางส่วนให้แก่บุคคล ภายนอก ท่านว่าหาอาจทำได้ไม่ เว้นแต่จะได้ตกลงกันไว้เป็นอย่างอื่น ในสัญญาเช่า ถ้าผู้เช่าประพฤติฝ่าฝืนบทบัญญัติอันนี้ ผู้ให้เช่าจะบอกเลิกสัญญา เสียก็ได้). The right of the lessee to sublet or assignment of his lease must be included in the lease agreement or the lessee is under Thai laws not allowed to sublet or assign the lease to another person.

Lease and an agreed investment in land or real estate that will benefit the owner upon expiration of the lease term

Special Reciprocal Contract

SPECIAL TYPE OF (LEASE) CONTRACT CREATED BY THE SUPREME COURT

Contrary to a lease agreement governed by normal hire of property laws this type of special lease contract is not specified in the Civil and Commercial Code but created by the Thailand Supreme Court. In some specific situations where the lessee has made an agreed substantial investment in the improvement of the leased property that upon expiration of the contract will benefit the owner the lease could be deemed a special reciprocal contract. When there is mutual agreement between the parties of making the investment by the lessee and the benefit for the owner upon expiration of the contract term the hire of property contract could be consider a special reciprocal contract and (based on Supreme Court Judgments) a different set of rules would apply on the contract (beyond hire of property laws). This type of special contract is not specified in the Civil and Commercial Code but is created by the Supreme Court but has limited application.

Laws governing leasehold, lease and rentals of real estate and condos

Rent lease of immovable property laws

The legal agreement whereby rent is paid in order to use another man's real estate property (residential or commercial property) in Thailand is governed by the lease agreement between the parties and the Civil and Commercial Code. The laws governing hire of property in Thailand is applied in the same manner if the hirer is a Thai or foreign national. The primary source of laws governing hire of property is the Civil and Commercial Code. The general principles of lease (as a contract) is governed by Title VI Juristic Acts and Book II Obligations and more specifically the Chapter Hire of Property, but the Supreme Court of Thailand gives rules for the exact interpretation of words and sections of the Civil and Commercial Code and therefore lease in Thailand cannot be fully understood without also taking into account specific Supreme Court judgement. You can read the Civil Code but won't be able to fully understand it.

Lease contract and lease term

THE TERM OF THE LEASE AGREEMENT CANNOT EXCEED 30 YEARS

The term of a real estate lease in Thailand may be fixed or periodic. The maximum lease term in Thailand is 30 years (section 540Translation Civil and Commercial Code section 540: 'The duration of a hire of immovable property cannot exceed thirty years. If it is made for a longer period, such period shall be reduced to thirty years. The aforesaid period may be renewed, but it must not exceed thirty years from the time of renewal'.). Any lease of immovable property for a longer period than 30 years in Thailand may only be made by renewal of the lease contract upon its expiration. Based on supreme court judgment it is possible to say that a valid and enforceable renewal can only be made within a period of 3 years prior to the expiration of the first lease term (not 30 years prior to expiration). If for example the lessor and lessee have executed 2 or more consecutive 30-year lease agreements it shall by law be deemed as 1 lease and reduced to 30 years.

Options in a lease contract

TRANSFER OF OWNERSHIP DOES NOT BREAK RENT BUT BREAKS CONTRACT RIGHTS IN THE LEASE AGREEMENT

Contract rights vs real lease rights

The content of a registered lease agreement in Thailand can be divided into rights given under hire and property laws and rights based on general contract law and the freedom of contract between the parties. The practical importance of the two relates to the future enforceability of contract promises and obligations in a contract, especially in case ownership of the property is transferred during the term of the lease. Real lease rights in a lease agreement are enforceable against third parties and once given the promisor can't change his mind or take it back should the circumstances change. A simple promise by the lessor to do something in future (renew a lease in 30 years time) can be revoked or may turn out unenforceable under Thai contract law.

Real lease rights and contractual obligations in lease agreements in Thailand

THAILAND LEASE AGREEMENT

A lease agreement in Thailand can contain clauses based on general freedom of contract between the parties and clauses based on specific hire of property laws. The importance of the distinction between the two lies in the future enforceability of contract obligations and true hire of property right (real lease rights). Real lease options and obligations are enforceable against all other persons and by law binding upon successors of the leased property (real lease rights follow the property along with the ownership), and once given the owner (lessor) can't take the option in the lease back and he cannot change his mind, in contrast to contract promises in the lease agreement and possible difficulties in future enforceability. Under Thai law and Supreme Court rulings the agreed term in the lease is considered a real right of the lessee, but an option to renew the lease is considered a contract option or contract obligation (not a real lease right) that needs to be enforced in the future.

Lease and inheritance

THAI PROPERTY LAWS DO NOT GIVE THE HEIRS OF THE LESSEE THE AUTOMATIC RIGHT TO TAKEOVER A LEASE BY SUCCESSION

A lease agreement (hire, rental) is under Thai law as a hire of property a personal right of the lessee. In the event of death of the lessee during the lease term the lease contract is terminated according to Thai contract laws and Supreme Court judgments. As opposed to for example a right of superficies (the right to use the land owned by another for the purpose of owning buildings and plantations), 'lease' in Thailand is actually a contract right and not a fixed asset or by law inheritable right. The right of possession of the property will not automatically transfer to the heirs of the lessee upon his death.

Rental laws and leasing a commercial shop or office

Commercial rentals

LAWS THAT DEAL WITH RENTAL OF RESIDENTIAL AND COMMERCIAL PROPERTIES IN THAILAND

Commercial rentals and residential rentals are governed by the Chapter Hire of Property in the Thailand Civil and Commercial Code. Rental of commercial properties exceeding 3 years must be registered with the Land Department and cannot exceed a period of 30 years. Only in specific commercial leases (for commerce and industry by foreigners) the Thai government issued a specific act for foreigners, but apply only if the foreigner meets the requirements (substantial investments) and complies with the restrictions (land size and location).