In Thailand, a foreigner may only own a condominium in his/her own name. If the foreigner wishes to acquire land and build a house, he/she should obtain a long term lease on the land (for a period not exceeding 30 years each term).
The foreigner should apply for the construction permit to build the house in their own name. This way the foreigner owns the house and has a secured long term lease on the land.
The lease can be written with the option to reassign to another person (if you sell), ability to sublease and with a purchase option (should the law change in the future to allow freehold ownership by the foreigner). Therefore, a lease is the most common legal method for the foreigner to acquire property in Thailand.
Option 1: Setting Up Your Thai Company
Once you have decided which land you are going to purchase, always consult a lawyer before signing any documents.
Foreigners may not own land in their name; however their Thai registered company may own the land. There are different forms of business entities in Thailand;
- The most commonly used is a Thai Limited Company. There are certain business registration criteria which must be met when incorporating a limited company.
- The Thailand Amity Treaty is also permits Americans to do business in Thailand, however this type of structure cannot own land.
There are also tax considerations so check the Corporate Tax in Thailand if you are going to do more than own a house or need a Thai Work Permit.
Option 2: Leasehold Agreements
Buying Thai real estate under a leasehold interest is a very popular and preferred way for foreigners to acquire property in Thailand.
Why is it the favored alternative?
- It is simple and straightforward.
- Foreigners can obtain full interest on a lease in Thailand throughout the specified lease term.
- This is preferred over purchasing through a limited company where you have several shareholders who may have interests that are different from yours.
- You can transfer the leasehold interest or even sell it the same as you would for any other freehold title conveyance in Thailand.
- The maximum lease term is 30 years.
An option to renew will not be automatic and an additional 30 year periods will depend on careful drafting and discretion of the Registrar at the Land Office.
Leases in Thailand
As foreigners cannot claim ownership over land as freehold, the preferred method of acquiring land is through leasehold.
A foreigner can safely acquire the right to use the land and register the right for a maximum lease term of 30-year lease at the Land Department.
Lease term – A lease agreement will usually guarantee the initial 30-year lease term.
Renewal Of Lease
Renewal of lease in Thailand is not in Perpetuity. There is no automatic right to renewal and parties must take an active step to renew the lease towards the end of the initial term. It is difficult but possible and success will depend upon careful drafting of the clause regarding the intention to renew and there it will still subject to the Registrar’s discretion. Renewal periods thereafter the initial period must not exceed 30 years.
Lease Agreements And Registration
Drafting of the Lease
The lease contract is usually drafted in the Thai language, however please asking them to do provide English versions if needed. It is recommended to include family members such as young adults as co-lessees in the contract. In the uneventful demise of the parents, the children can carry on the full term of the lease period.
Leases for more than 3 years are able to be registered at the Land Office, which will then further protect your interest in the house, as it becomes an encumbrance.
Upon registration, the title deed will then contain your name and particulars as to the lease. The lease contract is then attached to the title deed and maintained at the Land Department.
The foreigner can construct a house on the land if the lease agreement permits. The construction permit must be applied for in the name of the foreigner and subsequently the foreigner will own the structure in his/her own name.
Most importantly, leases are valid even upon the demise of the lessor, or in the event that the land is sold. However, leases are only transferable to third parties in the event that the guarantor of the lease permits it.
The advantage of leasehold is a lower registration fee. The registration fee for registering such a lease is 1.1% of the rental value.
Source : Siam Legal