Long-Term Lease Agreement

Foreigners find Thailand to be an extremely desirable retirement destination, and there are several ownership options available to those looking to stay in the country long-term, the first of which is purchasing a condominium. 

Thai law permits foreigners to purchase up to 50% of the units in a condo development using foreign currency. The alternative to buying a condo is to invest a minimum of 40 000 000 Thai Baht in the country's economy. Once the relevant authorities approve such an investment, the foreigner is able to purchase a lot of up to 1600 square meters to serve as their primary residence. 

Many foreigners find long-term lease agreements to be the most favorable option, particularly for those seeking a family home or a condo in a development that has reached its limitation regarding foreign ownership. A long-term lease agreement can also be viewed as a promising investment, but it is essential to seek advice from a reputable Thai lawyer before signing such an agreement. This will ensure that you receive protection and that a due diligence investigation is adequately conducted.

Duration and Renewal of a Long-Term Lease Agreement

Foreigners who are not yet registered at the Land Department of Thailand should note that long-term lease agreements are only valid for up to three years. Longer leases of 30 years are available if the lease agreement is appropriately registered. If a 30-year lease agreement is not registered, the foreigner will have no protection against eviction within that time. 

Most long-term lease agreements consist of renewal clauses, providing a 30-year renewed lease after the first 30 years have passed. Although some lease agreements offer more than one renewal, most only provide one such opportunity. 

It is important to note that a renewal clause allows for a renewal but does not serve as an automatic renewal. The cooperation of the landlord is essential to executing a renewal, and without it, a renewal cannot be completed. Therefore, foreigners should take care not to sign a long-term lease agreement without concise reassurance that a lease renewal is possible. 

Selling a Lease Agreement

Suppose you purchased a leasehold of a condo and signed a 30-year lease agreement. If you've paid the total rent amount and decide to move on after a decade, there may be issues involved regarding the remaining years left on the agreement. 

In such situations, you can opt to sell the condo by subletting the remaining years of the agreement. The original lease agreement must clearly allow subletting for this option to be viable under Thai law. Before signing a 30-year lease, ensure the agreement explicitly grants you permission to sublet the property. 

An alternative option involves assigning the remaining period to an external party before the lease term expires. The original lease agreement must, again, grant you the right to assign the lease. You must also identify the responsible parties for transferring taxes to avoid conflicts.

Property Sold by Landlord

A lease agreement's provisions are divided into two distinct categories according to Thai law. The first category involves lease rights. The lease rights provisions are related to the lease term, rent, usage, right to sublet, and maintenance responsibilities. If a landlord decides to sell the property or passes away, these lease provisions remain actionable between the tenant and the next landlord. 

The second category comprises non-leased rights, referring to agreements made between the tenant and the landlord, including renewal clauses and succession clauses. Such agreements are not enforceable on the new landlord should the former sell the property or pass away. 

Buying an Apartment or Condo Leasehold

If you wish to own a condo, but the development has already reached its foreign ownership limitation, you can opt to purchase the condominium by paying the developer a 30-year lease upfront. This action is referred to as leasehold ownership and must be executed with care to ensure integrity on the part of the developer. 

If you pay the 30-year rent at once, the developer will likely still be liable for annual taxes. Such taxes typically amount to 12.5% of the estimated annual rent. The developer must also transfer all rights relating to the management of the homeowners' committee to you so you have a say in the operation and management of the building. 

Leased Condo Passed to Heirs

Thai law dictates that a lease terminates if a tenant passes away. Suppose a tenant buys a 30-year lease but passes away after 15. The tenant's heirs will not gain rights to the property for the remaining term automatically. 

There are several avenues to mitigate this problem, the first being naming both the tenant and their heirs on the lease agreement. If the tenant then passes away unexpectedly, their heirs will have the right to continue leasing the property. 

An alternative course of action involves including a succession clause in the original lease agreement. Such a clause states that the landlord is required to pass the lease on to the tenant's heirs in the case of their death. 

There are two primary issues associated with this solution. Firstly, a succession clause is only in force between the tenant and the initial landlord and cannot be enforced on the next landlord if the property is sold or the initial landlord passes away. 

Furthermore, the heirs of the tenant will only receive "real" lease rights under a succession clause, and additional provisions, including a renewal clause, will not be inherited. 

Rent a Single Family Home

The majority of foreign retirees prefer living in a small home with a garden rather than an apartment in a building. Such individuals can stay in a single family home by renting a small lot consisting of a house. Such a lease agreement is similar to that of a condo or apartment and can be constructed as a short- or long-term lease agreement. 

The Right of Superficies in Thailand

Foreigners are not legally able to own land in Thailand, but they can own buildings. Many foreigners rent land and build homes, which requires leasing the land and registering a right of superficies. 

The right of superficies acts as a lease agreement and allows the foreigner to pay rent and register the lease agreement at Thailand's Land Department. The right of superficies can be registered to be valid for 30 years with a renewal clause. The primary benefit of this right is that a tenant's heirs automatically inherit the right, and transfers are relatively straightforward. 

With a right of superficies, a tenant is legally allowed to obtain a construction permit and build on the leased land. The owner of the land on which a tenant builds a house is further incentivized to honor the renewal clauses, and selling the property involves much more difficulty on their part. 

The land owner has two available courses of action when the lease term and the right of superficies are no longer in action. They can terminate the lease and purchase the house built on the property, or they can request the removal of the house in order to restore the land to its original condition.