When a foreigner buys a house on a plot of land in Thailand the house and land are often registered as separate transactions.
Why is this?
Because under Thai law a house can be owned by a foreigner and under most situations the land can't. So the house is put in the name of the foreigner using a procedure we'll talk about in later columns. Then a 30-year lease to the foreigner is registered on the title deed.
Can this procedure be done everywhere in Thailand ? In theory yes, but it is at the government officials' discretion. Therefore before you do this you have to check with your lawyer and make sure it's possible where you're buying the house. If you can't do this where you're buying you can always just register a lease on both the land and house.
So what's the advantage of having ownership of the house in a foreigner's name?
It's the difference between a lease and ownership.
If you just rent a house for 30 years, ownership reverts to the landlord after that period. But if you own the house, you continue on as owner, even if the land on which it sits reverts back to the landlord.
So why is this such a big advantage? Remember how many leases are structured in Thailand, particularly in developments where foreigners buy.
The foreigner signs three leases with the landlord _ one for the first 30 years, a second lease for the second 30 years and a third for the third 30 years. As we've discussed earlier, only the first lease may be registered at first because of the 30 year limit.
Please note that in some areas the land office will allow the filed 30-year lease to include a provision that the lessor agrees that when the first lease expires he or she must enter into another lease for 30 years with the tenant. This promise is enforceable under the law but must be acted upon by the tenant before the end of the first lease term. It's also important to remember that not all land offices will allow such a provision.
So if you get to the end of the first 30 years and the lease expires, what if the landlord or his heirs won't cooperate to register the second one? Well, if the landlord or her heirs own both land and house when the lease runs out, they have a real incentive not to cooperate in registering the second lease, because the land and house together may be valuable.
But if you own the house, you have the right and obligation to demolish or move it before the lease expires. And if the lease is only for a small plot of land, without the house it isn't worth much. The landlord or her heirs will be best off just entering into the next 30-year lease with you for the land.
So, in short, registering the house in the name of the foreign purchaser is a tool to help ensure that the foreigner keeps his or her home in Thailand beyond just the first 30-year lease.
James Finch of Chavalit Finch and Partners (firstname.lastname@example.org) and
Nilobon Tangprasit of Siam City Law Offices Ltd (email@example.com). Researchers: Arnon
Rungthanakarn and Sitra Horsinchai.
For more information visit www.chavalitfinchlaw.com.
Questions? Contact us at the email addresses above.
About the author
Writer: James Finch & Nilobon Tangprasit