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Hire - lease of real estate property in Thailand

Customized lease agreement (Thai/English) by lawyers

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Hire of immovable property (land, house, condominium) for residential purpose by foreigners is governed by Civil and Commercial Code (sections 537 to 571) and further specified by the Thailand Supreme Court. Foreigners are under Thai law allowed to lease real estate property for up to 30 years and the law is applied in the same manner if the lessee is a foreign or Thai national. Whether it concerns a lease of a condominium or land and/ or house for residential purposes by foreigners there is no requirement of bringing foreign currency into Thailand, as opposed to buying a condominium freehold or leasing commercial property under the 'Hire of Immovable Property for Commerce and Industry Act'.

Lease term and registration of the lease agreement

A lease exceeding 3 years must be registered with the local land office to be enforceable over 3 years (the lease agreement must in any case be registered within 3 years of signing the agreement). Under the Civil and Commercial Code the period of lease shall not be over 30 years and any longer term in the contract to lease shall automatically be reduced back to 30 years (section 540 CCC). This period may be renewed upon expiration, but it must not exceed thirty years from the time of renewal.

A few facts of lease/ rental in Thailand:

A written rental or lease agreement is enforceable by action (a verbal agreement not);
A rental or lease up to 3 years can be written in another language and does not need to be registered with the Land Department;
A rental or lease agreement exceeding 3 years must have a Thai script version registered with the Thai Land Department to be enforceable;
A registered leasehold cannot exceed 30 years, renewal options in the lease agreement are not secured over the property, therefore in principle not binding on any transferee owner or successor of the property;
A lease agreement can only be registered over titled property (land with a proper title deed)
A leaseholder can only sub-lease or sell (assign) his leasehold interest to another person if this is agreed in the lease agreement;
A lease registration fee (for registered leases exceeding 3 years) shall be collected at the rate of 1% of the total rental throughout the lease term and stamp duty shall be collected at the rate of 0.1%, also over the total rental throughout the lease term
A sublease, rental or lease income is subject to personal income tax.

In a leasehold purchase the most complicated part of the transaction is the drafting of the terms and conditions and structuring the lease in a way that it offers the best protection for the foreign leasehold purchaser. The lease agreement must be drafted by an experienced property legal professional and include the necessary protection or the lease may not be enforceable throughout the term (e.g. no secure succession right). There are various ways to draft a lease or hire of property agreement in Thailand, see our template contract page for samples of the types of lease agreements.

Common mistakes:

The lease agreement exceeding 3 years is not registered with the Land Department (therefore not enforceable by action for the period exceeding 3 years);
The standard short form land office lease document is registered and not the lease agreement agreed between the parties;
The land does not have a proper title deed or is not suitable (or restricted) for building or has other legal problems or restrictions (this can be prevented by conducting due diligence prior to entering into a lease agreement);
The lease agreement is poorly drafted and will end at death of the lessee, irrespective the term in the lease agreement.

Long term lease combined with ownership over the house

In a long term leasehold interest in a real property by foreigners in Thailand the lease could be structured with ownership over the structures upon the land. It’s only the land part under the Land Code Act which is restricted for foreign freehold ownership and not the building. The preferred legal structure in Thailand to obtain a long term interest in a property is a land lease with all options combined with a right of superficies or a separate sale of the building.

Housing and Land Tax

Thailand charges Building and Land Tax at the rate of 12.5% of the yearly rental according to the lease agreement or the annual value assessed by the Land Department, whichever is higher over property that is not the primary residence of the owner (e.g. a second home or a property that is rented out by the owner). In case of a property that is owned by a company 'Building and Land Tax' must be paid by the company irrespective rent is paid or income is received by the company from it...

Rent and lease for commercial purposes

Hire of immovable property for commerce and industry by foreigners is in addition governed by a specific law, 'The Hire of Immovable Property for Commerce and Industry by Aliens Act B.E. 2542'. Unless the conditions under this act are met (a considerable investment and remittance into Thailand) hire of immovable property for commerce and industry is also governed by the section 'Hire of Property' in the Civil and Commercial Code.

Our service and prices; we draw up customized quality contracts for lease or hire in Thai and English, short or long term, private clients and developers for use in all provinces of Thailand:

Online lease drafting service - from 4,800 THB	Traditional lawyer service - pricing from 18,700 THB

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Source: Thailand Civil and Commercial Code

Hire of property

Chapter I

General provisions

Section 537. A hire of property is a contract whereby a person, called the letter, agrees to let another person, called the hirer, have the use or benefit of a property for a limited period of time and the hirer agrees to pay rent therefore.

Section 538. A hire of immovable property is not enforceable by action unless there be some written evidence signed by the party liable. If the hire is for more than three years or for the life of the letter or hirer, it is enforceable only for three years unless it is made in writing and registered by the competent official.

Section 539. Costs of a contract of hire are borne by both parties equally.

Section 540. The duration of a hire of immovable property cannot exceed thirty years. If it is made for a longer period, such period shall be reduced to thirty years. The aforesaid period may be renewed, but it must not exceed thirty years from the time of renewal.

Section 541. Contract of hire may be made for the duration of the life of the letter or of the hirer

Section 542. When several persons claim the same movable property under different contracts of hire, the hirer who has first taken possession of the property by virtue of his contract shall be preferred.

Section 543. When several persons claim the same immovable property under different contracts of hire:
(1)
If none of the contracts is required by law to be registered, the hirer who has first taken possession of the property by virtue of his contract shall be preferred.
(2)
If all the contracts are required by law to be registered, the hirer whose contract was first registered shall be preferred.
(3)
If there is a conflict between a contract which is required by law, and a contract which is not required by law, to be registered, the hirer whose contract has been registered shall be preferred, unless the other hirer has taken possession of the property by virtue of his contract before the date of registration.

Section 544. Unless otherwise provided by the contract of hire, a hirer cannot sublet or transfer his rights in the whole or part of the property hired to a third person.

Section 545. If the hirer rightfully sublets the property hired, the subhirer is directly liable to the letter. In such case a payment of rent made in advance by the subhirer to the hirer who sublets cannot be set up against the letter.
The provisions does not prevent the letter from exercising his rights against the hirer.

Chapter II

Duties and liabilities of the letter

Section 546. The letter is bound to deliver the property hired in a good state of repair.

Section 547. The letter is bound to reimburse to the hirer any necessary and reasonable expenses incurred by him for the preservation of the property hired, except expenses for ordinary maintenance and petty repairs

Section 548. In case of delivery of the property hired in a condition not suitable for the purpose for which it is let, the hirer may terminate the contract.

Section 549. The delivery of the property hired, the liability of the letter in case of defects and eviction and the effects of a non-liability clause are governed by the provisions of this Code concerning sale, mutatis mutandis.

Section 550. The letter is liable for any defects which arise during the continuance of the contract and he must make all the repairs which may become necessary, except those which are by law or custom to be done by the hirer.

Section 551. If the defect is not such as would deprive the hirer of the use and benefit of the property hired, and can be remedied by the letter, the hirer must first notify the letter to make it good. If the defect is not made good within a reasonable time, the hirer may terminate the contract provided the defect is serious enough to justify this course.

Chapter III

Duties and liabilities of the hirer

Section 552. The hirer cannot use the property hired for the purpose other than those which are ordinary and usual, or which have been provided in the contract.

Section 553. The hirer is bound to take as much care of the property hired as a person of ordinary prudence would take of his own property, and to do ordinary maintenance and petty repairs.

Section 554. If the hirer act contrary to the provision of Sections 552, 553 or contrary to the terms of the contract, the letter may notify the hirer to comply with such provisions or terms, and if the hirer fails to comply, the letter may terminate the contract.

Section 555. The hirer is bound to allow the letter or his agents to inspect the property hired at reasonable times.

Section 556. If the property hired requires urgent repairs during the continuance of the contract, and if the letter desires to do an act necessary for such repairs, the hirer cannot refuse permission to have such act done, though it may cause him inconvenience. However, if the repairs are of such nature as would take unreasonable length of time and thereby cause the property unsuitable for the purpose for which it is let, the hirer may terminate the contract.

Section 557. In any of the following cases:

• If the property hired is in need of repairs by the letter, or
• If a preventive measure is required for avoiding a danger, or
• If a third person encroaches on the property hired or claims a right over it, the hirer shall forthwith inform the letter of occurrence, unless the letter already has knowledge of it

If the hirer fails to comply with this provision, he is liable to the letter for any injury resulting from the delay occasioned by such failure.

Section 558. The hirer may not make alterations in, or addition to, the property hired without the permission of the letter. If he does so without such permission, he must, on request of the letter, restore the property to its former condition, and he is liable to the letter for any loss or damage that may result from such alteration or addition

Section 559. If no time for payment of rent is fixed by the contract or by custom, the rent must be paid at the end of each period for which it is stipulated, that is to say: if a property is hired at so much per year, the rent is payable at the end of each year, if a property is hired at so much per month, the rent is payable at the end of each month.

Section 560. In case of non-payment of rent, the letter may terminate the contract. But, if the rent is payable at monthly or longer intervals, the letter must first notify the hirer that payment is required within a period not less than fifteen days.

Section 561. If no written description of the condition of the property hired has been made and signed by both parties, the hirer is presumed to have received the property in good state of repair and he must return the property in such condition at the termination or extinction of the contract, unless he can prove that it was out of repair at the time of delivery.

Section 562. The hirer is liable for any loss or damage caused to the property hired by his own fault or by the fault of persons living with him or being his subhirer.
But he is not liable for loss or damage resulting from proper use.

Section 563. No action by the letter against the hirer in connection with the contract of hire can be entered later than six months after the return of the property hired.

Chapter IV

Extinction of Contract of Hire

Section 564. A contract of hire is extinguished at the end of the agreed period without notice.

Section 565. A hire of garden land is presumed to be made for one year.
A hire of paddy land is presumed to be made for the agricultural year.

Section 566. If no period is agreed upon or presumed, either party may terminate the contract of hire at the end of each period for the payment of rent, provided that notice of at least one rent period is given, but no more than two months notice need be given.

Section 567. If the whole of the property hired is lost, the contract is extinguished.

Section 568. If part only of the property hired is lost without the fault of the hirer, he may claim that the rent be reduced in portion to the part lost.
If in such case the hirer cannot with the remaining part accomplish the purpose for which he entered the contract of hire, he may terminate.

Section 569. A contract of hire of immovable property is not extinguished by the transfer of ownership of the property hired.
The transferee is entitled to the rights and is subjected to the duties of the transferor towards the hirer.

Section 570. If, at the end of the agreed period, the hirer remains in possession of the property and the lessor knowing thereof does not object, the parties are deemed to have renewed the contract for an indefinite period.
Section 571. If a contract of hire of paddy land is terminated or extinguished after the hirer has planted the paddy, the hirer is entitled to remain in the possession till the harvest is finished, but he must pay rent.

TITLE V

HIRE-PURCHASE

Section 572. A hire-purchase is a contract whereby an owner of a property lets it out on hire and promises to sell it to, or that it shall become the property of, the hirer, conditionally on his making a certain number of payments.

The contract of hire-purchase is void unless made in writing.

Section 573. The hirer may at any time terminate the contract by redelivering the property at his own expense to the owner.

Section 574. The owner may also terminate the contract in case of default of two successive payments, or breach of any material part of the contract; in which case all previous payments are forfeited to the owner who is entitled to resume possession of the property.

In case of breach of contract by default of the last payment, the owner is entitled to forfeit previous payment and resume possession of the property only after the expiration of one installment period.