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What is the meaning of ‘Leasehold’ purchase in Thai property?

Leasehold is denoted under Thai law in the Civil and Commercial Code as a ‘hire of immoveable property’.

This means that the hire is temporary and limited in time.

The maximum period of time allowable under Thai law is currently for residential property – 30 years.

There is no mention in the Civil and Commercial Code of any provisions relating to ‘renewals’ or leases or additional periods of time.

If the terms of the lease attempt to make a lease longer than 30 years, then the entire lease can be deemed ‘void and unenforceable’.

If the terms of the lease allow a ‘renewal’ but do not attempt to make the lease longer than 30 years, then the entire lease shall not be void.

A ‘renewal’ is an agreement ‘outside of’ or separate to the lease itself. It is an agreement to agree to do something in the future after a certain event – the expiry of the lease term has occurred.

A renewal can be relied upon if the renewal is between the original parties to the lease because any party violating the agreement will be able to sue the other party. Please note that ‘suing another party’ isn’t a particularly attractive proposition.

If the owner of the ‘freehold’ sells its interest to another party, the other party does not have to honour the renewal – it can choose to do so, only by specific agreement or in practice.

Many developers set up structures including corporate structures, to try and avoid the situation where a third party could acquire the freehold and undermine any ‘renewal’ provisions. Such structures include ‘collective leasehold’ structures, and should be vetted for reliability and all documents checked for an assessment of stability of such a structure.

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