As we've discussed, any lease that will last more than three years must be registered at the land office with jurisdiction over the area in which the lease is being granted.
This means that if you're leasing a house, apartment or condo and the lease period is longer than three years _ a long lease _ it must be registered at the land office.
As we mentioned in an earlier column, a 30-year lease is the maximum you can register at the land office. If you register more than a 30-year lease, it will legally be treated as only as a 30-year lease. For example, if you go to register a 40-year lease, the land office will probably insist that you reduce the lease period to 30 years. Legally, you can add a provision that the lessee will be allowed to extend the 30-year lease for another equal period under the same terms and conditions, but some land offices, as a matter of policy, do not allow this to be included.
Here are some examples of properties for which you would have to register a long lease:
A condo leased from its owner. The long lease must be recorded on the condo's certificate of title.
A house and land. The long lease must be recorded on the certificate of title for the house and land.
Just the land on a lot consisting of house and land. A foreigner might, for example, want to own the house, which he or she can do in Thailand, but lease the land because foreigners can't own land. This lease would be registered the same way as for both house and land, above. We will discuss this legal structure in much greater detail in a later column.
An apartment. The long lease must be recorded on the building's certificate of title.
There are lots of deals in Thailand, by the way, where the landlord says he or she wants to lease the property for more than one consecutive period of three years each, signing a separate lease for each period at the outset. For example, instead of a nine-year lease commencing in December, 2012 and terminating December, 2021, the landlord might want to enter into three leases, all signed now, as follows:
One starting in December, 2012 and ending in December, 2015.
A second starting in December, 2015 and ending in December, 2018.
A third starting in December, 2018 and ending in December, 2021.
This is done to avoid the land office fees on a lease we'll discuss in a later column and to avoid registration at the land office. Not registering will make it much easier for the landlord to get out of this kind of arrangement if he or she wants to than one registered at the land office.
A deal with successive three-year leases without registering in the manner described above is easier to get out of because using successive leases in this way to avoid registration, under Section 538 of the Civil and Commercial Code, is enforceable for only one three-year period. If the tenant stays on the property after the first three-year period and the landlord doesn't object, the parties are deemed under Section 570 of the code to have renewed the lease for an indefinite period. In this case, under Section 566 of the code, the landlord can terminate with no more than two months' notice.
Why would a landlord like to have the option of getting out of a long lease he or she has signed? If property prices go up and the landlord is offered a higher price for a lease on the property, it may be convenient for the landlord to get out of an earlier lease and enter into a new one with another party.
James Finch of Chavalit Finch and Partners (finch@chavalitfinchlaw.com) and
Nilobon Tangprasit of Siam City Law Offices Ltd (nilobon@siamcitylaw.com).
For more information visit www.chavalitfinchlaw.com.
Questions? Contact us at the email addresses above.