Real Estate leases in Thailand are often misunderstood by foreigners as lease could in other jurisdictions around the world mean a fixed tradeable real property right attached to the property, where in Thailand real estate lease in the first place is a hire of property contract attached to the lessee. A real estate lease is a contract and cannot be bought and sold on the open market, but can only be assigned. Assignment of a lease is a three party agreement between the owner, the current tenant and new lessee/ tenant and registration on the title deed.
To understand lease in Thailand it is important to understand the system of Thai law. Laws governing lease in Thailand can be found under the rubric contracts in the Civil and Commercial Code (sections 537 to 571) and not under the chapter property in the Civil Code (e.g containing usufruct and superficies). Real estate lease in Thailand is in essence a (prepaid) rental and a personal contract right of the lessee.
A lease or rent is not binding upon third parties, unless the rights under the lease agreement are protected by section 569 of the Civil and Commercial Code. This is the reason why a property lease (tenancy) in Thailand is terminated upon death of the lessee, but not upon death of the owner (section 569), however death of the owner does terminate the contract rights in the lease agreement that are not in essence hire of property rights, read more…
Leasehold in Thailand means a prepaid tenancy for a period not exceeding 30 years. Some real estate sale contracts for land leasehold in Thailand aim to create more rights and a longer tenancy than the under Thai law given maximum term of 30-year. These contracts between the seller and the leasehold buyer can be complex and must at least separate ownership over the house and land and include additional 30-year prepaid hire periods and the option in the contract (or addendum to the contract) to transfer the land to a freehold title without further payment.
However; legally recognized it remains a contract structure between 2 or more parties only. These structures are in principle not binding upon third parties and are not protected by Thai law, other than general contract laws. Enforceability is far from guaranteed and despite the contract structure, the owner may at the end of the registered 30 year lease regain possession of the property because the registered and legally recognized rights (the 30 year tenancy) is terminated at the end of the term without notice. It will then have to be up to a court to decide what the actual rights of the leasehold purchaser are, if any more than a 30 year prepaid rental contract.
A term more in line with Thai real estate laws for leasehold is tenancy or rental with a fixed term. A real estate investment in Thailand through lease must be approached as a tenancy with often a separate contract structure that is not part of the tenancy.
It would be a lot more clear for foreigners buying real estate in Thailand if the sale structure or the lease agreement would be separated in a true hire of property agreement and a separate agreement containing the set of promises made by the landlord that are personal to the parties. If part of the sales contract is seen as a normal contract that needs to be enforced in the future, foreign investors would better understand the insecurities and drawbacks associated with these structures and enforcing a contract promise years from now, and the impossibility of enforcing a contract 30 years from signing!
