A lease agreement or leasehold purchase in a residential project aimed at foreigners (leasehold apartment or villa) often includes mandatory maintenance and property management contracts.
Buying LEASEHOLD real estate in Thailand
Leasehold in Thailand is in essence a prepaid rental contract with a maximum term of 30 years. Lease is placed under the section contracts in the Civil and Commercial Code and governed by the specific section Hire of Property. A leasehold in Thailand is therefore not a real property right or fixed asset attached to the property but in essence a personal contract right of the lessee. This for example means, if there is no enforceable succession clause included in the lease, that a normal lease is by law terminated upon death of the lessee (as the lessee is the essence of the contract). This also means that if the lessee (tenant) does not comply with the lease agreement or contract structure under which possession of the property is sold the contract can be terminated even though rent has been paid in advance.
The importance of supplemental contracts in a real estate leasehold
Management and maintenance contracts could put a significant extra financial burden on the lessee for the duration of his lease.
Long term maintenance and management contracts as part of a leasehold purchase could be practically impossible to terminate. The main drawback of such agreements could be that decisions regarding maintenance and management are made by the developer solely and the residents of the project have no say in how or by who the project is managed and at what costs. The residents of the project have to comply with the desicions made by the developer, even though services may be poor or expensive or apperently made in the developer's own financial interest. If management and maintenance is unsatisfactory it does not give the residents automatically the right to witthold payment of maintenance fees and this could be a breach of contract and could in the end lead to legal action against the lessee and possible loss of the property.
The rule with every residential real estate project aimed at foreigner in Thailand (this could also apply to time-sharing or fractional ownership projects) is to double or triple check the supplemental agreements as written Thai law does not protect leasehold purchasers in Thailand and these contracts could follow you for the term of the leasehold.
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