Property Leasehold in Thailand

Property Leasehold in Thailand. Foreigners are generally prohibited from owning freehold land in Thailand under the Land Code B.E. 2497 (1954), leading many to pursue alternative property interests—most notably through leasehold arrangements. Leasehold, while legally recognized and extensively used in residential and commercial settings, must be carefully structured to ensure enforceability and long-term security.

This article offers an in-depth examination of leasehold property rights in Thailand under the Civil and Commercial Code (CCC), outlines the registration process and limitations, and addresses renewal, transferability, inheritance, and dispute resolution mechanisms.

1. Legal Framework for Leasehold Interests

1.1 Source of Law

The legal foundation for leaseholds in Thailand is found in Sections 537–571 of the Civil and Commercial Code, which governs lease agreements of both movable and immovable property. For immovable property such as land, houses, and condominiums, additional provisions apply under the Land Code, the Condominium Act B.E. 2522 (1979), and the Land Department regulations.

Leasehold is a personal right (jus in personam), not a real right (jus in rem), and does not confer ownership of the property or the land on which a structure sits.

2. Maximum Lease Term and Registration

2.1 Duration

Under Section 540 CCC, the maximum term for leasing immovable property is:

• 30 years for a private lease

• An additional 30 years renewal may be agreed upon in the lease contract, but this is not automatically enforceable unless registered again

For commercial or industrial leases, the Land Department regulations allow up to 50 years under special laws (e.g., the Industrial Estate Authority of Thailand Act), subject to BOI or Cabinet approval.

2.2 Registration Requirement

• Lease agreements for more than 3 years must be registered at the local Land Office to be enforceable against third parties.

• Registration involves the payment of:

  • Registration fee: 1% of the total rental over the term

  • Stamp duty: 0.1%

Unregistered leases exceeding 3 years are enforceable only for the initial 3-year period.

3. Rights and Obligations of the Parties

3.1 Lessee (Tenant)

The lessee has the right to:

• Possess and use the property as agreed

• Demand lessor’s maintenance of the property (Section 546 CCC)

• Sublease or assign the lease, only with written consent of the lessor

• Enjoy the premises peacefully and without interference

3.2 Lessor (Landowner)

The lessor is obliged to:

• Deliver possession

• Maintain the premises in a usable condition

• Not interfere with the lessee’s quiet enjoyment

• Honor lease terms even if the property is sold, if the lease is registered (Section 569 CCC)

4. Leasehold for Foreign Nationals

4.1 Residential Use

Foreigners may lease:

• Land for residential purposes for up to 30 years

• Condominium units, where ownership is restricted to 49% of total area in a project

4.2 Commercial Use

Foreigners may lease land for commercial or industrial activities, especially with support from the Board of Investment (BOI), in which case longer terms and tax incentives may be available.

Key restriction: Foreigners cannot own structures built on leased land unless they hold a separate right of superficies (see Section 1410 CCC), allowing them to own the structure independent of the land.

5. Renewal and Option Clauses

5.1 Renewal is Not Automatic

Although lease agreements may contain renewal clauses, Thai law does not automatically enforce them. Renewal must:

• Be agreed to by both parties at the time of renewal

• Be re-registered with the Land Office

• Be based on a valid agreement (not merely an intention)

Unilateral renewal clauses (e.g., “The lessee may renew for another 30 years”) are not binding unless the lessor reconsents and signs a new registration.

5.2 Workaround Structures

To overcome the limitation, some developers or lawyers create:

• Successive lease contracts, signed in advance (though the second lease may be void as it attempts to bypass Section 540)

• Corporate structures, where the lessee controls the lessor company (subject to scrutiny under the Foreign Business Act)

Courts may declare these void if found to be attempts to circumvent Thai land ownership laws.

6. Transferability and Subleasing

6.1 Assignment of Lease

The lessee may assign the lease to a third party only if permitted in the contract and with the lessor’s consent. The assignee must also register the assignment at the Land Office.

6.2 Subletting

Allowed if:

• Provided for in the lease

• Consent is granted in writing

If subletting occurs without authorization, the lessor may have grounds for termination.

7. Termination and Remedies

7.1 Statutory Grounds for Termination

• Breach of contract (e.g., failure to pay rent)

• Expiration of term

• Destruction of property making it unusable

• Agreement of parties to terminate early

Either party may claim damages for wrongful termination under general contractual principles (Section 420 et seq. CCC).

7.2 Lessee’s Improvements

Unless otherwise agreed, improvements or structures built by the lessee become property of the lessor upon expiration, unless removed by the lessee. If the lessor keeps the improvements, they may be required to pay compensation for added value under Section 574 CCC.

8. Inheritance and Succession

Leasehold is a personal right, not automatically inheritable. Upon the lessee’s death, the lease typically terminates, unless:

• The lease agreement contains an explicit clause allowing assignment to heirs

• The Land Office agrees to register a transfer to the heir

In practice, inheritance of leases is subject to officer discretion and often contested, especially if lease was created to bypass foreign ownership rules.

9. Common Disputes and Litigation

• Failure to register renewal: Lessees relying on unenforceable renewals

• Eviction disputes: Especially in expired or unregistered leases

• Ownership of structures: Lessee claims ownership under a superficies; lessor disagrees

• Improper subleasing or commercial use

• Fraudulent leases or forged titles

Such disputes are litigated in civil courts, and courts strictly construe lease terms. Remedies include eviction, damages, restitution, or injunctions.

10. Strategic and Practical Considerations

• Insist on registration: Without it, leasehold protection is minimal

• Combine with superficies: Especially if foreigner builds on leased land

• Avoid informal renewals: Must be re-registered to be enforceable

• Use a bilingual lease agreement: Ensure alignment of Thai and foreign versions

• Monitor land title class: Avoid Nor Sor 3 or lesser titles for long-term leaseholds

• Confirm that the lessor has legal authority: Leases granted by unauthorized parties are void

Conclusion

Leasehold remains the primary legal instrument through which foreigners and investors secure medium- to long-term property interests in Thailand. While Thai law allows for up to 30-year lease terms with potential renewals, enforceability depends on registration, contractual clarity, and regulatory compliance.

Given that leasehold rights are personal, time-bound, and non-ownership based, they require careful structuring to protect long-term use, investment value, and potential transferability. Poorly structured leaseholds expose lessees to disputes, termination risks, and asset loss.