Property Leasehold in Thailand

Property Leasehold in Thailand. In Thailand, the lease of immovable property is primarily governed by Book III, Title V, Chapter III of the Civil and Commercial Code (CCC), which codifies the law of hire of property (เช่าทรัพย์). A leasehold interest grants a lessee the legal right to occupy and use land or a building for a specified period in exchange for rent, without transferring ownership.

Due to restrictions on foreign land ownership under the Land Code B.E. 2497, leasehold arrangements have become a common mechanism for foreign individuals and entities to secure long-term interests in Thai real estate. However, leasehold rights are significantly different from real rights such as ownership (กรรมสิทธิ์) or usufruct (สิทธิเก็บกิน) and are subject to strict formalities to be enforceable.

II. Legal Basis and Scope of Leasehold Rights

A lease is a personal right (สิทธิส่วนบุคคล) rather than a real right (สิทธิตามทรัพย์), meaning it is enforceable against the lessor but not against third parties unless properly registered.

III. Lease Duration and Enforceability

A. Maximum Lease Term

• The CCC permits a lease of immovable property for up to 30 years (Section 540).

• Renewable for an additional 30 years, but renewal must be expressly re-registered; automatic renewal clauses have no legal effect unless acted upon.

Practical implication: A 30+30 year lease structure must be drafted as two distinct lease instruments, with the second being a contractual promise, not an enforceable term.

B. Minimum Term for Registration

• Leases exceeding three years must be registered with the Land Office to be enforceable (Section 538 CCC).

• Unregistered leases exceeding three years are valid only as three-year leases, and the remainder is unenforceable.

IV. Registration at the Land Office

A. Requirements for Registration

1. Written lease agreement signed by both parties

2. Title deed (Chanote) or equivalent evidencing ownership

3. Identification and power of attorney (if applicable)

4. Payment of registration fees:

   • 1% of total rent payable over the term (capped for residential leases)

   • Stamp duty of 0.1%

B. Lease Annotation

Once registered, the lease is annotated on the back of the title deed, and the Land Office issues a lease certificate (หนังสือสัญญาเช่า).

V. Foreigners and Leasehold Structures

A. Foreign Individuals

• Foreigners cannot own freehold land but may lease land and buildings for residential, commercial, or industrial use.

• The lease must be for legitimate use and not circumvent the Land Code (e.g., by using “nominee” structures).

B. Foreign Companies

• May lease land for industrial or commercial use, provided it complies with:

  • Foreign Business Act B.E. 2542

  • Investment Promotion Act (if BOI-promoted)

  • IEAT Act (for industrial estates)

A lease used as a substitute for ownership (e.g., 99-year contracts) may be scrutinized or invalidated by authorities.

VI. Rights and Obligations of the Parties

Breach of contract allows the injured party to seek termination, damages, or specific performance under general contract law principles (Section 582–586 CCC).

VII. Common Contractual Enhancements

In practice, lease agreements often incorporate additional clauses such as:

1. Right of renewal – Contractual but not self-enforcing unless re-registered

2. Right of first refusal – Grants lessee a preemptive right to purchase

3. Purchase option – May not be valid if used to disguise ownership

4. Registration of usufruct or superficies in parallel – For extended protection

5. Assignment and sublease rights – Subject to lessor’s consent unless waived

To ensure enforceability, these clauses must not contradict statutory provisions or public policy.

VIII. Disputes and Remedies

A. Jurisdiction

• Civil disputes over lease rights fall under Civil Courts or Provincial Courts

• Breaches of lease may be addressed through:

  • Eviction lawsuits (if lessee remains in possession post-expiry)

  • Specific performance (e.g., demand to honor renewal clause)

  • Monetary damages (for breach of maintenance or delivery)

B. Common Disputes

• Failure to register renewal clause

• Refusal to vacate after lease expiry

• Destruction of property during lease term

• Subleasing or unauthorized use

• Non-payment of rent or taxes

Court rulings emphasize that written and registered terms control, and that courts do not infer rights beyond those expressed in the lease instrument.

IX. Succession and Transferability

• Leases do not automatically pass to heirs unless expressly stated (Section 569 CCC)

• Assignment of lease requires lessor’s consent (Section 544)

• Sublease does not release lessee from primary obligations unless expressly agreed

In long-term residential and commercial leases, parties often include heir succession clauses, but these must be registered to bind successors-in-title.

X. Leasehold vs. Real Rights Alternatives

Leaseholds are more flexible for commercial structuring, but real rights offer more durable protection in certain scenarios, particularly where foreign parties are involved.

XI. Conclusion

Property leasehold in Thailand is a legally valid but limited interest, governed by specific statutory requirements and subject to formal registration. Lease agreements must be precisely drafted, registered when exceeding three years, and structured to account for limitations on renewal, assignability, and succession.

For foreign lessees or investors, leasehold offers a pathway to land use, but it lacks the permanence or inheritable quality of ownership or real rights. Legal advisors must carefully assess the property’s title status, zoning, and registration feasibility before entering into long-term lease agreements, particularly in mixed-use developments or agricultural zones.