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.

For specific leases by foreign corporations the Thai government created a longer term in a specific act; the Hire of Immovable Property for Commerce and Industry by Foreigners Act B.E. 2542.

Thai law puts a limit of 30 years on any property lease in Thailand. Parties cannot extent this term in the contract. For the same reason parties cannot make an enforceable provisiona guaranteed renewal of a 30-year lease would be in conflict with the law (section 540) as it would extent the maximum lease term by contract option for renewal of a 30 year lease term. A renewal promise in a 30 year lease agreement is under Thai hire of property laws not enforceable by legal action and legally best described as a moral obligation to the person or developer who gave the option. A renewal promise in a 30 year lease agreement merely hold the illusion of a longer lease contract.

Lease extensions (renewal)

A RENEWAL OPTION IN A 30 YEAR LEASE IS A SALES PITCH FOR FOREIGNERS

Also the commonly used controversial 90 year lease (created to sell real estate in Thailand to foreigners) is subject to section 540 Translation 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'. of the Civil and Commercial Code and if made as a 90 year lease it will by law be reduced to 30 years. A lease renewal option or any number of renewal options in a 30 year lease agreement is allowed based on a general freedom of contract principle in Thai law, even if it cannot be enforced as a contract. The parties to the lease can consent to terms in the lease agreement that are in practice not enforceable by legal action (the Thailand Land Department in general does not intervene in private contracts between the parties upon registration of the lease agreement (*)).

The Thai government did limited the freedom of contact terms in a lease agreement on certain elements in 2008 land office regulations that need to be enforced when a lease with foreigners is registered with the Land Department. Under these regulations pre-paid renewal terms in a 30-year lease registration must be rejected (as in conflict with the law) and an option given to a foreigner to transfer the leased land to a freehold title must also be refused. As a result such arrangements are now often made in an addendum to the lease agreement not registered with the Land Department.

(*) Sale and purchase agreements in a licensed condo or housing project is a government contract controlled business (not the small private developments), meaning developers are not free to form the content of a sale contract. The freehold sale contracts are part of the government licensing procedure and the sale contracts must comply with specific ministerial regulations and consumer protection laws protecting the buyer. These rules however do not apply to the leasehold sale contracts in the same project (specifically aimed at foreign purchasers) and these contracts are not controlled by the government and can include provisions that may not be legally binding and could contain void or voidable clauses.

Other than hire of property

There are a few other theories behind a 90 year lease however these are not based on hire of property laws. These alternative contract structures have as the main agreement a 30-year lease agreement but aim to give additional rights in the wording of the agreement and in supplemental agreements not registered with the Land Department. These structures are not recognized under Thai law and legally questionable (or void) because foreigners cannot own land and lease cannot exceed 30 years read more...

House ownership on leased land

Essential in any long term leasehold interest in a real estate property in Thailand is ownership over the house separate from ownership over the land (lease land own the house upon the land). The lessee obtains ownership over the house and a leasehold interest in the land without obtaining ownership over the land. This structure is ideally combined with a right of superficies - read more...

See also