Unless it is a unit in a registered condominium, ownership and long term possession of real estate property by foreigners in Thailand at least includes a land lease agreement as foreigners can't own land in Thailand (section 86 Land Code Act). It is allowed for foreigners to own the structures upon the land (which should be through a separate sale agreement in addition to the land lease), or lease land and then build on that land in their own name (which should be through a building permit issued by the Or.Bor.Tor in the foreigner's name).
The first and most important document to assess in any real estate investment is the  land title document. The legal acts and rights registered against the land are noted on the back-side of the document (i.e. shown on the land title deed copy of the owner). The land title document shows the status of the land (title), the location and area of the land, the owner of the land and if any legal acts and/ or third parties rights are registered against the land.
The lease term in Thailand
The maximum fixed and registered term under Thai law an owner can legally burden his property with a right of possession (e.g. lease, right of habitation, usufruct, superficies) is by law thirty years (sections 540, 1403, 1412, 1418 Thailand Civil and Commercial Code). The limited fixed term of thirty years is not unique for Thai law but is in line with many other (Western European) countries (i.e. it is not aimed against foreign land ownership, but a legal choice that is made with regards to rights of possession of immovable properties opposite freehold ownership).
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'.
Section 564: 'A contract of hire is extinguished at the end of the agreed period without notice'. |
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The lease may be renewed, however, a promise in the current lease to renew the lease is generally a personal right (i.e. it follows the parties to the agreement and not the land). |
Registered and personal rights
In lease or leasehold agreements (or usufruct agreements) it is important to distinguish real rights (or real lease rights) from personal rights (non-lease rights). Real rights are attached to the real property rather than a person and are enforceable against third parties (e.g. transferee owners). Real lease rights follow the title of the property rather than the person. If the owner of the property dies, or transfers ownership of the property during the lease, the property transfers including the real rights it is burdened with. Personal rights will generally not follow the title to the property but the person. If the person dies a personal right or obligation dies with him. Personal rights and obligations are contractual promises relating to the property between the parties signing to the lease agreement only (e.g. under present law a promise to renew the lease).
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Section 569; 'A contract of hire of immovable property is not extinguished by the transfer of ownership of the property hired.
The transferee is entitled to the rights and is subjected to the duties of the transferor towards the hirer'. Only the real lease rights will transfer with the freehold title of the property. |
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A land purchase option by the lessee (under present 2008 land office regulations a land purchase structure in the foreigners name may be refused when registering the lease) or renewal option clause are deemed personal rights by the Thailand Supreme Court and not a real lease right or registered rights on the land title, therefore under present law do not follow the property if the property is transferred during the lease term. Future law and regulations could however give greater protection to the lease owner, and long term leases (e.g. where the investment is aimed to exceed the 30-year period) are drafted with this in mind, but under present law renewal promises remain a personal right given by the owner party to the lessee party signing to the lease (i.e. after 30-years a new period must be registered at the Land Department and this is not enforceable against or by persons who are not party to the lease agreement)).
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Under Thai Contract Law there are several defenses the lessor could take not to grant a personal promise (e.g. renewal option, option to purchase) or grant a promise on the terms he gave you 30-years ago. |
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Considering the legal status of non-lease rights in the lease an additional superficies agreement could offer additional protection when purchasing undeveloped land (e.g. you could lose your rights under a land lease agreement, but your rights to the land under the right of superficies agreement could remain and enforceable). However, it will in the end up to a Court's decision if greater protection to the lessee and superficiary is granted.
Ownership of the structures built upon the land
Foreigners are allowed to own structures upon the land freehold in their own name, which in the case of undeveloped land should be effected through a separate registered right of superficies. A right of superficies is not required and proof of ownership is primarily established through either (1) a building permit (e.g. who's name is in the building permit is assumed to be the owner of the building) or in case of an existing building the (2) official Thai Land Office sale agreement (e.g. the name shown in the sale agreement administrated at the local land office is assumed the owner of the house) learn more...
Building and Land Tax
Not only makes it common sense as an investment protection to own the building freehold by the foreigner (as this is allowed by Thai law), it also reduces Building and Land tax. Building and Land tax is governed by the Land and House tax Act B.E. 2475. Therefore building and land tax shall be collected at the rate of 12.5% of the yearly rental according to the lease agreement or the annual rental value assessed by the Land Department, whichever is higher learn more...
Sub-lease and assignment
One of the principles of lease in Thailand is the fact that the leaseholder can only sub-lease or sell (assign) the leasehold interest to another person if this is agreed in the lease agreement. Also transfer of the lease interest in the land or property to the heirs of the lessee must be properly included in the lease agreement or the lease will be termintated on the death of the lessee(s).
Lease registration fee
Lease registration fee shall be collected 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, or other amount of money paid by the lessee to the lessor for the lease benefits.
Stamp duty shall be collected on the register of the lease at the rate of 0.1% of the total rental throughout the lease term.
Related subjects
 The land leaseholder needs to ensure that the building permit is issued in his name and that the construction contract offers them sufficient protection in the event that the contractor is in default.
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Thailand Online legal lease law explained, leasing information, agreement, rental contract and leasehold of land and or house condominium.
