Thailand is a civil law jurisdiction, and many of the common law concepts does not exist under the Thai Civil Code such as trust structures. When it comes to property there are many ways to control assets without breaching the law regarding the ownership of the land such as usufruct or long-term lease agreements in Thailand. Our law firm in Thailand H&P has prepared a summary of the most relevant aspects regarding long-term lease agreements.
– Long-Term Real Estate Lease Agreement-
In a lease agreement, there are two parties: one party is the “Lessor,” who is the one renting out the property. The lessor may be the owner of the leased building or may not own the title but has rights under a contract or by law.
The other party is the “Lessee,” who will have the right to use the leased property according to the terms specified in the contract. The lessee agrees to pay rent in exchange for the use of the property.
The lease must be documented in writing and signed by both parties with witnesses, as stipulated by the Thai Civil and Commercial Code. Based on H&P lawyers’ experience this is important in case of future disputes regarding the lease, as it allows for legal action.
– Lease Agreement Fees-
The land and building tax must be paid by the property owner, but the parties can agree on who is responsible, whether one party or both sharing the responsibility in the specified proportion.
The lease agreement must be affixed with a stamp duty of 0.1% calculated from the total rent over the duration of the contract. If the total rent exceeds 1 million-baht, stamp duty must be paid at the Revenue Department.
Leases longer than 3 years must be registered with the Land Department, with the following fees:
Registration fee: 1%
Stamp duty: 0.1%
Application fee: 5 baht
Witness fee: 20 baht
– Lease Duration of Buildings/Commercial Areas-
The parties can agree on a short or long lease term according to each party’s needs. The law specifies the following guidelines:
Leases not exceeding 3 years do not need to be registered with the Land Department.
Any lease longer than 3 years must be in writing and registered with the Land Department.
Lease agreements cannot exceed 30 years; if extending the lease, it can only be done in increments of up to 30 years.
The lease period can be set to last for the entire lifetime of the lessor or lessee.
– Important Clauses to Include in the Agreement-
In the professional experience of H&P lawyers these are the most significate clauses of these agreements.
Party Information: Names and addresses of the lessor and lessee.
Property Details: Location, type, size, and characteristics of the leased property.
Lease Duration: Start and end dates of the lease.
Rent Amount: The rent to be paid, payment method (monthly, yearly), and due date.
Security Deposit: Amount of security deposit required and conditions for its return.
Rights and Duties of Parties: Provisions regarding the transfer of the lease or rights to another party.
Termination Conditions: Methods and conditions for terminating the agreement.
Transfer of Rights: Provisions related to transferring the lease or rights to another party.
Dispute Resolution: Methods of resolution through court or arbitration.
Indemnification Clauses: Protects the lessor from liability for injuries or damages resulting from the lessee’s use of the property.
Additional Provisions: Limitations or special conditions, such as appropriate use of the property.
Signatures: Signatures of the parties and witnesses, along with the date, to confirm agreement to the contract.
It is crucial to clearly define the rights and responsibilities of the parties to prevent any future loss of benefits. Our property law practice taught us that is highly advisable to conduct a due diligence or legal investigations to avoid any legal risk for the lessee, especially when it comes to set up hotels or resorts.
If you need to consult with a property lawyers in Thailand, please contact H&P at [email protected]
