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Legal Matters: Article #16 (September - November 2008)
Important Issues for Leasehold Investors in Thailand
“My apartment in London has a 999 year lease term, I have read that in Thailand I cannot have a lease for longer than 30 years, please could you confirm whether or not this is correct?”
“The longest registerable lease term permissible in accordance with Thai law is 30 years, many developments offer property on a 90 or 120 year lease term. What is actually being offered by developers is a 30 year lease which is registered at the local land office plus two contractual options to extend the lease for two subsequent terms of 30 years. Whilst the 30 x 30 x 30 lease term is a common and legitimate means for foreigners to acquire an interest in land in Thailand, buyers must ensure that their lawyers scrutinize the lease renewal provisions to ensure that they are as robust as possible and that the procedure set out in the lease agreement for the registration of the subsequent lease terms is clear to the buyer.”
(Desmond Hughes, Partner)
“I am considering the purchase of an apartment which offers a “protected leasehold structure”, please could you clarify what is meant by “protected” leasehold structure.”
“In addition to a 30 year registered lease, some developers offer a share in an offshore company which indirectly owns shares in the Thai company which owns the project land and granted the lease. This structure allows the buyers collectively to exercise some control over the decisions of the Thai land owning company. This “protected” leasehold structure is particularly useful in circumstance whereby all of the buyer’s interests are the same, for example, the effecting of the renewal of the lease at the end of the 30 year lease term. Buyers must ensure that their lawyers review the corporate legal structure offered by the project to ensure that it complies entirely with Thai law”.
(Desmond Hughes, Partner)
“What are the most important terms of the lease to look out for?”
“Clauses relating to the “pre-paid” rent, lease term and contractual renewals will require close scrutiny to ensure that the structure offered by the developer complies with the laws of Thailand and to ensure that the buyer receives what they bargained for. A “buyer unfriendly” lease could restrict a buyer’s enjoyment of the property and the saleability of the property in the future”.
(Kris Limcharoen, Partner)
“Is it advisable for disputes under the lease to be resolved by recourse to the courts?”
“In the event of a dispute, advisors recommend recourse to Arbitration in accordance with the Thai Commercial Arbitration Rules rather than recourse to the courts. Arbitration proceedings can be conducted in English and can initially be resolved more quickly than matters referred to the courts. A Buyer’s lawyer must ensure that any Arbitration clause is correctly drafted to ensure that they are fully protected under it.”
(Kris Limcharoen, Partner)
“Are there any other proposed
or new laws coming into effect?”
There are also adjustments to the Condominium Act, a new Escrow Act and
a series of other proposed changes to the Foreign Business Act which are
at present, aimed at encouraging and stimulating investment.
(Desmond Hughes, Partner)
This article is one in a series of articles for Exclusive Homes and was co-written by
Desmond Hughes (Partner) and Kris Limcharoen (Partner) based in the Phuket, and Bangkok offices of Belmont Limcharoen respectively and now with an office in Koh Samui.
Information supplied by:
Belmont Limcharoen (Phuket)
4/1 Prabaramee Rd., Patong, Kathu, Phuket 83150
Tel: +66 (0) 7634 2882-4 Fax: +66 (0) 7634 2885
Email: desmond@belmontlimcharoen.com
Belmont Limcharoen Company Limited
39 th Fl., 3904 A United Center Building.
323 Silom Rd., Bangrak, Bangkok 10500
Tel: +66 (0) 2635 5071-3 Fax: +66 (0) 2635 5074
Email: kris@belmontlimcharoen.com
Belmont Limcharoen (Samui) Co., Ltd
23/30 Moo4 Bophut, Koh Samui, Suratthani 84320
Tel: +66 (0) 7724 6185-7 Fax: +66 (0) 7724 6188
Email: samui@belmontlimcharoen.com
www.belmontlimcharoen.com
