Thursday, September 09, 2010
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Written by Property Lawyer
Book Cover Civil CodeLease agreement and land law in Thailand (property law)
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By Robert M. Spelde (LL.M) partner Siam Expat Law

Whether the contract is called rental agreement, lease agreement or hire of property for residential purpose, the rights and obligations under the agreement are governed by section 'hire of property' in the Thailand Civil and Commercial Code and further specified by the Thailand Supreme Court. The law is applied in the same manner if the hirer (lessee) is a foreign or a Thai national.

There is no specific law issued regulating hire of real estate by foreigners in Thailand.
For specific commercial rentals and under specific requirement hire or lease of immovable property for Commerce and Industry is in addition governed by the Hire of Immovable Property for Commerce and Industry by Alien Act B.E. 2542.

Section 538 Civil and Commercial Code: registration of a lease agreement

A lease in Thailand over 3 years is enforceable by legal action if the lease is made in writing and registered by the competent official (section 538). The lease agreement states the location of the property which must be covered by a land title deed (sections 71 to 83 of the Land Code Act). No registration of a lease can take place over lower land rights. The local land office must record the Thai script lease agreement in the official registers of the Land Department and note the existing of the lease on the land title deed copy of the owner.  Thailand land title deed sample

The land owner's title deed document (i.e. Nor Sor Sam, Nor Sor Sam Gor or Chanote) should look as the document shown on the right and has the size of a large A-4 document. 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 official title, location, area and survey status of the land, the owner of the land and if any legal acts and/ or third parties rights are registered against the land.

The registered 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. This is not aimed against foreign land ownership, but a legal choice 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'.

Separate ownership of land and building

In a long term lease interest it is under Thai law allowed for foreigners to own the structures upon the land. Ownership is obtained through a separate sale agreement for the structures in addition to the land lease, or basically ownership is obtained by paying for the building (if any, the building permit should be issued by the Or.Bor.Tor in the foreigner's name).

An on the title deed registered right of ownership of the structures upon the land under Thai law is obtained by a right of superficiies in addition to the land lease agreement.

Lease renewal

Transfer of ownership does not break the hire of property.
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.....

The question is does the whole agreement, for example including renewal options, transfers to the new owner? No, it is important to distinguish and separate real hire of property rights (or real lease rights) from personal rights and obligations (non-lease rights) in the lease agreement. Rights and obligations in the lease agreement that are by nature true hire of property rights transfer by law to the new owner.  Only true hire of property laws follow based on section 569 the real property when the property is transferred during the lease term. The other option clauses remain with the parties to the original lease.

Commonly a long term lease agreement includes a lease option to extend the 30 year lease period. This lease option must and can only be enforced at the end of the lease agreement (otherwise it would be in conflict with the law), however this option is not considered a true lease right, but a personal promise between the parties therefore: transfer of ownership does not break the lease, but it does break the option to renew.
Common contract rights in a lease agreement that are not true lease rights according to the Thailand Supreme Court:
  • A promise or contract obligation to renew the lease.
  • Option to purchase the property
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).

Death of the lessee breaks the lease agreement

It is important to realize that a property lease in Thailand is a hire of property, and as such not a fixed asset or inheritable right. The principle of Thai law is  that any lease agreement is terminated upon death of the leaseholder. According to the Thailand Supreme Court, the lessee is the essence of the agreement, therefore if this party falls away the contract is terminated! A superficies is an inheritable right and if granted for a period of time not terminated upon death of the superficiarius.

Transfer of wnership of the structures built upon the land

An existing building in Thailand is transferred through the official Thai Land Office sale procedure...

learn more...

For Rent Sign

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.

Building and land tax is 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 terminated 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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