Leasing Land in Koh Samui and Koh Phangan – a Brief Guide.
All potential investors into real estate in Koh Samui and Koh Phangan learn rather quickly that the ownership of freehold land by foreign persons in Thailand is prohibited with no viable exceptions.
As a result, the most common means for foreigners to secure long term rights over land is to acquire a leasehold interest in the land beneath their properties.
It is important for potential investors to be aware that the longest registerable lease term in Thailand is 30 years, considerably shorter than the maximum lease term in other countries. The following article examines leasehold ownership in Thailand and discusses ways in which a foreign investor can enhance the security of a leasehold investment through robust legal structures, contracts and understanding the nature of leaseholds in Thailand.
The Laws Relating to the Leasing of Land by Foreigners in Thailand:
Thai law states that a registered lease is limited in law to a term of 30 years. Section 540 of the Civil and Commercial Code of Thailand states that: “The duration of a hire of immovable property cannot exceed 30 years. If it is made for a longer period, it is to be reduced to 30 years. The aforesaid period may be renewed, but it may not exceed 30 years from the date of renewal”. Accordingly, Land officers at Provincial Land Offices will refuse to register any lease with a term of more than 30 years. Clearly a 30 year lease is not a particularly attractive investment opportunity as any capital appreciation is offset by the ever diminishing remaining term of the lease and the capital appreciation in the land value vests in the freehold land owner who shall re-possess the land at the end of the lease term.
Is a 30 Year Lease Renewable?
One solution available to foreign buyers in order to allow them to occupy the leased land for a term of more than 30 years is to secure a contractual promise from the person or entity granting the lease (known in law as the ‘Lessor’) to grant contractual options to the foreign buyer allowing them to renewal the lease term for subsequent lease terms of 30 years each. As set out above, the provisions of Section 540 of the Civil and Commercial Code expressly allow the renewal of leases for subsequent terms of not more than 30 years. The lease renewal options usually take the form of a series of clauses in an addendum to the lease agreement to the effect that immediately upon the expiry of the initial registered lease term, the parties shall immediately register a new lease on precisely the same terms for a further term of 30 years or the longest registerable lease term at the time of each contractual renewal. The rental for each contractual renewal is usually limited to no more than the costs of registering the subsequent leases.
Things to look out for in Lease Renewals
Whilst contractual options to renew leases are a legitimate means for foreign buyers to acquire an interest in land in Thailand, foreign buyers must ensure that the provisions for the renewal of the lease are as robust as possible and that the procedure set out in the addendum to the lease agreement with regards to the lease renewal options are clearly defined. The identity of the Lessor in leasehold structures is an important consideration for foreign buyers and can have a huge impact upon the likelihood of the lease being renewed at the end of the initial 30 year term.
If the Lessor is a living person, it may not be possible for the foreign buyer to enforce the lease renewal options against the heirs of the Lessor in the event that the Lessor dies during the initial 30 year registered lease term. A contract is usually only enforceable between the parties who originally signed the contract and consequently the heirs of the Lessor will not usually be bound by the promise made by the Lessor a generation earlier. Foreign investors must be aware that a Lessor who signs a lease at the age of 55 years old must reach the age of 85 in order to effect the renewal at the end of the first registered term.
A foreign buyer can significantly strengthen the security of the lease renewal options if the Lessor is a limited Thai company. Legally speaking, a limited Thai company is a “legal person” in the sense that it can be sued in the same way as a living person if it fails to perform its obligations under a lease contract, however, unlike a living person, a limited company cannot die or disappear. Notwithstanding the benefits of leasing from a limited Thai Company, the Thai company itself must be correctly and legally formed and properly maintained during the lease term, furthermore, foreign buyers should ensure that the terms of the lease do not undermine the benefits of leasing from a limited company. For example, any provision in the lease agreement which allows the Lessor to assign its rights under the lease to a third party should be resisted.
Other Important Provisions of the Lease for Foreign Investors
The lease agreement and any addendum to the lease agreement must be carefully reviewed by the foreign investor and their legal representative prior to any payments being made. An “investor unfriendly” lease may not only restrict the foreign buyer’s enjoyment of the property but may also adversely affect the saleability of the property. For example, any provision of the lease which allows the Lessor to terminate the lease in the event that the buyer breaches any of the lease terms should be strongly resisted. Further, any clause which requires the buyer to obtain the Lessor’s written consent prior to carrying out certain acts upon the land should also be resisted, unless there is proper justification for such a clause (such justification may include the Community Rules and Regulations in an apartment or condominium project).
Leasehold investments are a secure and viable means of acquiring an interest in real estate in Koh Samui and Koh Phangnan for a term of years beyond the maximum registered lease term of 30 years. Indeed several high-end luxury developments in Koh Samui and Koh Phangnan only offer a leasehold option to their customers. Notwithstanding the potential benefits of leasehold investments, foreign buyers and their legal representatives must ensure that the leasehold structure which is being offered is fully compliant with the laws of Thailand and that the proposed terms of the lease do not restrict their enjoyment of the property unnecessarily. Particular care must be taken to ensure that the lease renewal options are as robust as possible within the parameters of Thai law.
在苏梅和帕岸岛的所有潜在投资者都很容易了解到，外国人一般在泰国直接持有的土地是不被允许的。 因此，外国人获得对土地的长期权利的最常见手段是在其房产下的土地上取得租赁权益。 投资者必须意识到，泰国最长可登记租期为30年，大大小于其他国家的最长租期。 下面的文章审查了泰国的租赁所有权，并讨论了外国投资者如何通过强有力的法律结构、合同和了解泰国租赁权的性质来提高租赁投资的安全性。
泰国法律规定，注册租赁的有效期限为30年。 《泰国民法》第540条规定：“租用不动产的期限不得超过30年。 如果它是一个较长的时期，它将减少到30年。上述期限可以延长，但自延长之日起不得超过30年。” 因此，省级土地局的官员将拒绝登记任何期限超过30年的租约。 显然，30年租约并不是一个特别有吸引力的投资机会，因为任何资本增值都会被不断减少的剩余租约期限所抵消，而土地价值中的资本增值则由在租赁期结束后重新拥有土地的永久土地所有者承担。
如果出租人是自然人，假设出租人在最初的30年注册租赁期内死亡，外国买方可能不能对出租人的继承人强制执行续租选择权。 合同通常只能在最初签署合同的当事人之间执行，因此出租人的继承人通常不受出租人先前作出的承诺的约束。 外国投资者必须意识到，若与55岁的出租人签订租约，在出租人年满85岁后，才能在第一个登记期限结束时续租。
如果出租人是一家泰国有限责任公司，则外国买家可以大大增强租赁续租选择权的安全性。 从法律上讲，泰国有限责任公司是“法人”，在某种意义上，如果它未能履行租赁合同下的义务，可以以与自然人相同的方式被起诉，与自然人不同的是，有限责任公司不能死亡或消失。 尽管从泰国有限责任公司获得租赁的便利，但是泰国公司本身必须在租赁期内正确合法地成立并得到适当维护公司运营。此外，外国买家应确保租赁协议中没有损害从泰国有限责任公司获得租赁权益的条例。 例如，应拒绝租赁协议中允许出租人将其在租赁中的权利转让给第三方的任何规定。
本文由Limcharoen Legal（Samui）律师Tanun Rungwiwattanakool撰写，与我们的苏梅岛办事处联系，请致电0935759675，或发送电子邮件至Samui@Limcharoen.com。