Is a lease extinguished if the leased property is sold or otherwise transferred by the lessor?
A lease is not extinguished in the event the lessor sells or otherwise transfers the property. The lease ‘goes with the land,’ and the lessee is entitled to the same rights and subject to the same duties under the provisions of the lease.
Can a lease be terminated before the lease term has expired?
What are the rules governing the lease of land to foreign entities in Thailand?
The law relating to the lease of (non-commercial) property is generally governed by the Civil and Commercial Code which broadly provides the following:
- A contract for the lease of immovable property (land, houses, condominium units or other buildings) for 3 years or less is not enforceable unless made in writing and signed by the relevant parties. Leases for more than 3 years must be registered at the relevant land office or they will be unenforceable for any period beyond 3 years.
- A lease of immovable property may be made to a foreign entity for a period of up to 30 years. Provision for an additional 30-year extension may be included in the lease, but see the further discussion of the enforceability of such provisions below.
- A lease is automatically terminated at the end of the agreed lease period and no notice period is required. However, in the event a lessee retains possession of the property following the end of the lease term and there is no objection from the lessor, a lease will be deemed extended for an indefinite period and subject to termination by either party following a notice period of at least one rental period of not more than two months.
What are the rules in relation to land ownership by Thai registered companies in Thailand?
A Thai registered company may own land in Thailand. However, it must be considered a Thai company and majority Thai owned. In practical terms, this means that no more than 49% of the total issued shares of the company are owned by a foreign entity (a natural person or a company). The majority of shareholders must also be Thai nationals, or majority Thai owned companies.
Land Office officials are afforded broad discretion in determining whether a company registered in Thailand is a Thai company for the purposes of owning land. According to our experience with Thai law on real property, this often translates into a refusal by officials to transfer the title of the land to a Thai-registered company with any foreign shareholding without conducting an investigation into the background of the transaction to ensure it is not an attempt to circumvent the rules.
What is the general rule on the ownership of land in Thailand?
The Thai Land Code provides generally that foreign individuals or foreign companies are prohibited from owning land in the Kingdom. The rule results in obvious practical difficulties in common scenarios where foreign buyers wish to purchase real property (or real estate) in Thailand.
There are certain exceptions, most notably those concerning Thai companies and concessions granted to foreigners by the Board of Investment and the Industrial Estate Authority of Thailand.
Our real estate lawyer experience, more usually relevant to our clients are the provisions allowing foreign buyers to lease land and buildings, own buildings that are constructed on leased land and own condominium units, subject to some restrictions which will be more fully explored below.