Land and property in Thailand, how to protect your assets as a foreign national.
Thai law under the Land Code Act B.E. 2497 (1954) prohibits foreigners owning land.
It is so important to take all precautions possible to protect your land and property in Thailand investments, as when you buy land or property in Thailand it will in most cases be in the name of your Thai partner, wife or girlfriend.
Many foreign nationals will set up home here in Thailand. When you do will want to buy land and property in Thailand to build or buy a house and live happily forever. Sadly life is not that simple, relationships breakdown for many reasons. When they do it is important that your home and assets are as protected as they can be.
The land and property in Thailand, your home, will be in a Thai citizens name or in certain circumstances owned by a company, but we will not be discussing that option here. As the title to your land and property in Thailand will be in a Thai name if you fail to protect your property your land house or home could be sold, mortgaged or transferred to another without your consent or knowledge leaving you homeless and financially at a loss.
The good news is that you can protect your property, simply.
When you invest your hard earned savings and spend a small or large amount on land or property why not spend a little protecting that asset via a Usufruct, Lease or Superficies Agreement.
Isaan Lawyers were one of the first Law Firms in Thailand to protect clients assets by means of an Usufruct many years ago. Now it is the way forward for many. An Usufruct will allow you enjoyment of the land and its fruits for your lifetime. The Usufruct is registered on the property title(chanotte) at the Land Office for all to see.
Usufruct contracts are governed by sections 1417 to 1428 of the CCCT. A Usufruct is a right granted by the owner(s) of the land/house in favor of a Usufructuary whereby this person has the right to possess, use and enjoy the benefits of an immovable property (section 1417 CCCT). The Usufructuary has the right to manage the property (sect 1414 CCCT). It can be on a piece of land, on a house or on both of them.
A Usufruct is a real right (real means in Civil Law = attached to a thing) that originates from Roman and Civil Law. The holder of a Usufruct, known as “Usufructury”, has the right to use, possess and enjoy the property, as well as the right to receive profits from the fruits of the property. The Usufructuary could be a person or an entity (eg: a company).
In Civil Law, a property is divided into three parts. They are called in latin “usus” (use), “fructus” (fruits) and “abusus” (abuse). The word Usufruct is normally unknown in Commonwealth Countries. It combines the two first parts of the property in Civil Law, the usus (use, or possession) and fructus (fruits, or as we will see, more or less the “profits”). In French, it is called “usufruit” and in Thai “See-tee-kep-kin”. It is interesting and useful to know that Thai Civil Law was largely inspired by French Civil Law. (see “the work of codification in Siam” by Rene Guyon, 1919.)
In Civil Law, the owner who gives the Usufruct is called in French “nu-propriétaire” or by literal translation in English “naked-owner”. It means that the owner has nothing else than the ownership: He can’t use his possession, even if he is the owner. Besides possession and enjoyment of the property, the Usufructurary has also the legal right to use and derive benefits from the property that belongs to another person, as long as the property is not damaged. “Fruits” should be understood as its natural (fruits, livestock, etc) and/or its legal definition (rent, etc.).
A lease can give you the same enjoyment for a specified time period and can be left for your heirs to enjoy. A lease will involve some taxes where as a Usufruct will not.
A property or rental lease agreement can be in Thai, in English, or both. But it needs to be written. Two months in advance deposit is totally normal but it is up to you to negotiate.
If your lease is for 3 years or more, according to the law, it must be registered with the Thai authorities. It is called a hire of property and there is a clause that says a lease of 3 years or must be registered to be enforceable. This is Clause 538 of the Thai Commercial and Civil Code.
When registering your lease agreement at the local Land Department they will need a document written in Thai. Generally, they will make their own single-page document that states the name of the property owner and the name of the renter or lessee. Also included will be the duration of the contract, the price, and any additional contacts for the property.
Rarely will the Land Department include supplementary clauses in their documentation. If there are agreed upon clauses for the lease, these must be stipulated in your original contract with the property owner. For a short-term lease, most Thai people use a general contract form. This form is available at any Land Department office, but it is only written in Thai.
You can check the Land Department website for further information: https://www.dol.go.th/Pages/en/interneteng.aspx
If you are already renting a property and would like to continue to do so, there are options for renewing the agreement on a yearly basis. All negotiations can be conducted between the lessor (property owner) and lessee (renter) in regards to price and payment. Yearly rental or lease agreements are used for properties such as apartments, townhouses, and single detached homes.
You can negotiate about renovations you intend to make that can decrease the price. In the longer term, this may be welcome by the lessor who might give you a free month or something else. However, a long-term lease should be properly drafted by a law firm. This is the best way to protect the lessee as they might be living/using the property for 10 to 30 years with an option to renew.
In order for a long-term lease agreement – more than 3 years – to be enforceable (opposable to third parties) it must be registered at the Land Department. This means it can only be done with a title deed like a “Nor Sor Sam” and/or higher, such as a chanotte. A one-time tax will be asked by the government at 1.1% of the total price of the lease for the whole term of the lease.
The maximum term for a lease is 30 years as defined by the Thai Civil Code. However, a commercial lease for up to 50 years can be created under a different law. The Thai government has frequently proposed extending the 30-year maximum term limit. Unfortunately, it has been all talk up to this point.
To be honest, Isaan Lawyers has never registered any lease over 30 years. We have done commercial leases, leases between partners, companies, Thai people, Thai people and companies, Thai people and foreigners, between gay partners, and everything you can imagine but never more than 30 years.
Currently, the law clearly specifies a 30-year maximum with ONE option to renew. Clause 538 (Commercial and Civil Code of Thailand, hereafter “CCCT” stipulates this condition and further states that any lease for a period greater than 3 years MUST be registered with the Land Department.
The 30-year lease with an option to renew is a safe and secure legal agreement. Yet, it is advisable to have in writing that the lease has been prepaid in advance.
The right of Superficies is also a Civil Law concept that was incorporated in the Commercial and Civil Code of Thailand (CCCT). You will find a small section in the book about property, under sections 1410 and 1416 CCCT. It’s a real right, like the Usufruct, meaning it’s attached to an immovable property, a thing, and not a person. So, the owner of the land can change, but this right will stay until it’s extinguished by the contract made between the parties.
By giving the right of superficies, the owner of a piece of land creates in favour of another person, a Foreigner or a Thai national, also called superficiary, the right to own upon or under the land, buildings, structures and plantations. (Section 1410). Unless otherwise provided, this right is transmissible to your heirs by way of inheritance. (section 1411). In other words, the owner of the land grants another person to OWN the structures upon the land for a maximum of 30 years, if it’s a fixed period (section 1412 referring to section 1403 paragraph 3) OR for the life of the owner of the land or of the superficiary. (Secton 1412). Generally, the right of superficies will be added to a lease agreement on the land and both contracts will have the same length of time. And like a lease agreement or other contracts, renewals are possible.
Like a usufruct agreement, superficies must be registered in order to be valid. To register the right of superficies, the owner of the land must bring her title deed to the land department. Both parties must sign and the name of the superficiary will be added in Thai on the back of the title deed.
Superficies can be given for some consideration (money) or for free. If given for some money, there is a tax of about 1.1% to pay directly to the land department, for the full agreement, on the day of the registration.
Isaan Lawyers have protected the interests of foreign clients by registering the above agreements in over 30 provinces in Thailand. These agreements will be tailormade by us for your protection and importantly at a reasonable cost. Can you afford not to have us complete one for you??
Also think about this, if you are unprotected and god forbid something happens to your loved one holding the title, where does that leave you if there is no last will and testament providing the asset to you, it leaves you homeless and your investment is gone.
Isaan lawyers can again assist with last wills for all parties.
Contact us today. Protect yourself, Its the right choice. The team are ready to assist.