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Property leases for foreign investors
Property leases in Thailand seem to last 30 years. Is this a legal limit, and can there be an automatic option to renew such a lease?
If such a lease is held by a foreigner, can they sell or transfer it to another foreigner?
The type of lease mentioned relates to land and/or houses.
Thai law allows foreigner to take out a lease on land and buildings for up to 30 years provided the lease is registered with the relevant authority. Otherwise, it is enforceable for only three years.
It is possible that the lessor and the lessee may agree to set the lease to expire in less than 30 years or to make the lease renewable for another period of up to 30 years.
However, a new agreement for the respective renewal periods must be made and registered at the same time as the original lease. This transaction is commonly known as a 90-years lease and is often used by foreigners in the case where they cannot take ownership of the property.
The lease can be sold, assigned or subleased to a third party upon the consent of the lessor.
A new agreement with the new lessee must then be registered.
It should be noted that registration of each lease is subject to a registration fee and stamp duty charged at 1.1 per cent of the total rent for the entire lease period.
We should add that rights to the lease are not assigned. The lease will not pass to the heir of the lessee by way of inheritance.
If the lessee passes away, the lease will be considered expired even though it has been registered with the relevant authority.
For these reasons, you should seek proper legal advice from a lawyer before entering a long-term lease agreement in lieu of a purchase and sale agreement.
(Siripong Supakijjanusorn is a partner and Kamol Watcharamanee a senior manager of legal services at PricewaterhouseCoopers Thailand. They can be contacted by e-mail at siripong.supakijjanusorn@th.pwc.com and kamol.watcharamanee@th.pwc.com.
