Phuket Gazette

Peter Day from England recently wrote:

I am thinking of buying a holiday home in Thailand and I have read some of your comments and those of others with regard to leasehold properties.  My understanding is that under Thai law, a 30-year lease can be extended only one time for an additional 30 years making 60 years total. I see that many developers are offering 3X30-year leases for a 90 year total. How can this be possible if the law allows only one 30-year extension? I appreciate any time you can take to clarify this for me.

In answer our staff replied:

Dear Peter,

In answer to your question regarding leases, the Land office will only register a maximum 30 year lease for residential property with one 30 year renewal option.  Sellers and developers however, commonly add a non registered lease addendum which expresses the intention to reregister a further prepaid 30 year extension, thus giving rise to the term '3 x 30 year lease'.  Lawyers still debate how secure and enforceable these addendum options are.  Lease renewal options can be beefed up by including penalties for non renewal and these may also include clauses which stipulate the intention obligations of the signatories to pass to the heirs of the lessee and lessor.  In so far as these obligations devolve to the heirs of the lessor, again there is debate as to how enforceable these may be.

In a residential house context, the prudent lessee may choose to seek a lease agreement which allows for purchase options clauses, thus allowing himself the opportunity to exercise such a purchase option during the secure registered lease term, if for example the lessors health deteriorated or there were other concerns that the lease renewal may be contested. They may also exercise this right if the law in Thailand ever allows foreign freehold rights over land.   A general point to note is that a standard government sanctioned lease agreement is very straightforward.  In some ways this is a good thing and the law will protect and enforce what are seen as natural lessee and lessor rights.  However, foreigners signing leases should be aware of the limitations they face in land ownership and may wish to only sign leases with the appropriate amendments to protect their interests. 

In reference to an apartment situation, it may be prudent to favour those developments in which the developers have set up a system whereby there is some sort of control of the lessor - often by way of lessee share holdings in the landowning/leasing  entity.

If your question is specific to the consideration of a particular development, I would suggest seeking the consultation of a professional legal consultant who could examine and report on the strengths and weaknesses of the proposed lease structure.

William Pinsent, who has lived in Phuket since 1981 is a director of Phuket Land Ltd., a local property developer, agent and property consultancy firm. He has been contributing a property article to the Phuket Gazette every month since 1994