Rental laws and leasing a commercial shop or office
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).
In case of commercial property for small businesses (shops, restaurants) often a lease term of 5 years is offered. To avoid registration and taxes this often means a 3 year rental with an option for another two years. However, any lease over 3 years must be registered at the Land Office to be enforceable over 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 lesee, it is enforceable only for three years unless it is made in writing and registered by the competent official'). A renewal in a short term rental is basically an enforceable option but may not be enforceable against a transferree owner as the renewal option is considered a personal contract promise (and illusory promise in a 30 year lease agreement), and not part of the rental agreement that will automatically transfer with ownership of the property hired under section 569 Civil and Commercial Code.
Supreme Court Judgment 6451/ 1995; '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'. This will be seen as an avoidance of section 538 CCC and therefore not enforceable.
Key-money and rental price
Commercial leases often include key-money, but key money in Thailand does not have a fixed definition read more...
Registration of commercial rentals exceeding 3 years
If the rental exceeding 3 years is not registered with the competent official (the Land Department) only the first 3 years is enforceable by legal action. Should the lessor sell the property within the first 3 years or just does not want to give you the option to renew for the extra 2 years you would have to go to court with an uncertain outcome read more...
Special reciprocal contract vs rental agreement
Note, in specific situations where a lessee has made a substantial investment in the improvement of the property that will upon expiration of the contratct benefit the owner of the property according to the agreement between the owner and the lessee (mutual agreement of making the investment by the lessee and the benefit for the owner upon expiration). The Supreme Court of Thailand has deemed some contracts with such elements a special type of contract (special reciprocal contract) that is enforceable for the whole term exceeding 3 years, even without registration of the rental agreement with the Land Department. This type of contract is not specified in the Civil and Commercial Code but is created by the Supreme Court but has limited application.