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 tenant, 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.
The land offices in Thailand only use Thai language and Thai script documents (like their own official Thai script lease contract registration form), even the foreigner's name in the contract is written in Thai script. The lease between the parties must be drawn up in the Thai language but may contain a translation in another language.
In practice a lease can only be registered over land with a confirmed right of possession or freehold ownership title deed (land with a title). A long term condominium apartment lease in a licensed condominium is registered with the local land office where the condominium is located and will be noted on the backside of condominium unit ownership title deed (image right). A lease agreement of a unit in an apartment building not registered under the Condominium Act will be registered as a lease over part of the building on the land title deed and specified in the plan of the building read more...
Lease registration fee
A lease registration fee shall be collected by the provincial or local land office at the rate of 1% of the total rental throughout the lease term. Rental shall include the remuneration for the lease, the remuneration during the construction, the key money, the fee for the land's survey, the construction cost contribution or other amount of money paid by the lessee to the lessor for the lease benefits. Stamp duty shall be collected on the registration of the lease at the rate of 0.1% of the total rental throughout the lease term.
Land Office lease
When the lease is registered the Land Office will require the lessee and lessor to sign an additional official land office lease form. A 1 page document with the government Garuda symbol, in winch they must refer to the lease between the parties. The actual lease between the parties will be attached to the official form and a copy is held by the Land Registry (see sample).
Content of the registered lease
The written content of a registered lease can be divided into rights given under lease of 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 read more...
Practical questions about lease term and lease registration
Is an office rent with a term of 5 years (split in a 3 year term with another 2) enforceable for the term of 5 years?
- A 3 year lease with an option for another two years is under hire of property laws enforceable by action as a rental with a fixed term of 3 years (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 tenant, it is enforceable only for three years unless it is made in writing and registered by the competent official'). The option for another 2 years is considered an enforceable option under general contract law, meaning against the owner of the property who you signed the lease with. Should for any reason ownership of the property hired have been transferred prior to the expiration of the first 3 year term the new owner is not automatically bound by a renewal option given by the previous owner and the option may not be enforceable by legal action (e.g. Supreme Court Judgment 6763/ 1998 'In case the lessor promises in the lease agreement to extent or renew the lease term, but has sold the leased land before the lessee was entitled to accept, the contractual rights (renewal option) are not binding upon the new owner and only lease rights that are real lease rights under the section hire of property will transfer to the new owner'.).
I have signed 3 consecutive back-to-back 3 year lease agreements, is this enforceable for the total of 9 years?
- Entering into multiple back-to-back short-term 3 year leases without registration with the Land Department is generally not enforceable as this is seen as an avoidance of section 538 Civil and Commercial Code (e.g. Scj. 6451/ 1995 Supreme Court Judgment: 'Should both parties have made 10 lease agreements at the same time, each contract has a three year term and pre-specified dates of execution consecutively for 30 years, it will only be enforceable for the first three years'.), unless the lessee finds protection in supreme court judjements (e.g. Scj. 5770/ 1996Supreme Court judgment: ' The lessee entered into 2 separate consecutive building lease agreements with each a 3 year term. The agreement between the lessee and the owner was considered as a special reciprocity contract and therefore enforceable by legal action for the whole 6 year term even without registration at the Land Office' read more under articles: reciprocal contracts.).
The Phuket land office has registered 2 consecutive back-to-back 30 year leases over a property. How legal is this?
- Under hire of property laws and in line with supreme court judgments if both leases are made with the same person it will be deemed one lease and the total term reduced to 30 years (section 540Thai 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.'), irrespective of registration of the second lease. If the second lease is made with a different party the registration of the second lease term is considered void pursuant section 152 or voidable under section 151 Civil and Commercial Code. It has happened that land officers in the tourist areas of Thailand have registered additional leases on a property title following the first registered 30 year lease term, especially to assist sellers of expensive leasehold properties, even though the registration of the second term does not create a valid lease there is legally no liability for the land officers involved (Section 73 Land Code Act Section 73 Land Code Act: 'When it appears to the competent authority that the legal act to be recorded by the parties is void, he shall not be obliged to record it. If the legal act to be recorded by the parties appears voidable the competent authority shall record it when the party who may be damaged thereby insists'.).
Can a lease protect me when I register ownership of land in my Thai girlfriends name and can a lease give me the right to transfer to ownership?
- It is under the Thailand Land Code Act not allowed to use a Thai national to buy land on your behalf (section 113 Land Code Act Thai law translation Land Code Act section 113 Land Code Act: 'Any person who acquires land as an agent of an alien or juristic person under the provisions of Section 97 or 98 shall be punished with a fine not exceeding twenty thousand baht or an imprisonment not exceeding two years, or both'.). The Thai national could be deemed holding the land as the agent or nominee on behalf of a foreigner. In this structure both the Thai and foreigner are liable for criminal charges read more...
Can a lease agreement protect me (foreign) when a property is registered in my wife's (Thai) name?
- Leasing real estate from your Thai wife has several practical problems (payment of rent, income tax). The main reason this structure does not offer protection is that any agreements between you and your wife entered into during marriage can be voided (section 1469 Civil and Commercial Code) and the Land Offices in Thailand generally refuse for this same reason registration of a lease between husband and wife. A right of superficies or right of usufruct may offer a better protection.
