Leasehold in Thailand
What are the restrictions on foreign ownership?
In Thailand, your rights as a foreign owner of property hinge on a single factor: are you buying a villa or a condominium?
If you purchase a condominium, the situation is clearcut. You can gain full freehold ownership, as long as you buy a unit within a building’s foreign quota.
With villas, the issue is more complex.
Freehold vs Leasehold ownership
With a villa, foreigners can currently only register a 30-year lease at Thailand’s Land Department – although, in practice, buyers with a well-drafted contract at a well-managed development can expect to extend their ownership.
The current legal limit on ownership to 30 years is mitigated by two key factors:
First, almost everyone in Thailand’s property industry expects property law to liberalize over the next three decades – so anyone buying now can benefit;
Second, many villa developers adopt various strategies to provide longer ownership.
Will leasehold law change?
Thailand is more open than most countries to foreign property ownership, but full freehold ownership of land – as opposed to buildings – is politically controversial. The consensus opinion is that Thailand will soon offer longer leaseholds on villas to foreign owners, although full freehold ownership is less certain.
Patima Jeerapaet, chairman of the property committee of the Joint Foreign Chambers of Commerce in Thailand (JCCT), told the Bangkok Post (30 April 2010) that the JCCT has submitted a final white paper on extending leasehold ownership to the Thailand Trade Representative Office.
This proposal would enable foreigners to register two consecutive 30-year leases at the Land Department, providing a cast-iron guarantee of 60 years of secure ownership.
Meanwhile, Aliwassa Pathnadabutr, managing director of influential property consultancy CB Richard Ellis, has called for a 99-year leasehold term.
Will the law change? Almost certainly. Thailand’s gathering economic strength will erode the fear of foreigners buying up the country, especially with the liberalization of neighbouring markets.
As long as they put a relevant clause in their contract, foreigners buying villas under the current 30-year lease should also benefit from any change in the law.
Extending a 30-year leasehold contract
Plenty of villa developments already offer buyers extended leasehold ownership – and many of these developments can be trusted to deliver.
While the Land Department cannot register a lease on a villa that lasts more than 30 years, a development can specify the renewal of a buyer’s lease in their contract. In addition, the contract may contain a clause that ensures the buyer can upgrade his ownership in line with any relaxation in Thailand’s property law.
Other, more questionable, ways to ensure longer-term ownership of the villa includes registering property in the name of a Thai or setting up a Thai-majority company. In practice, these strategies seem to work, although they might not survive a court case.
Is a 30-year leasehold enough?
Investors uncertain about buying a villa under Thailand’s current legal restrictions may consider the likely returns from their villa over the 30-year term of their lease.
With the market’s current rental yield of 6% per year, buyers should be able to recoup their investment within 30 years. The cost of renting a villa for this period would also far exceed the price of a 30-year leasehold purchase.
That said, buyers who are looking for longer-term ownership of their property should find a developer they can trust, with the security of experience and a good reputation.
The renewal clauses have to be stipulated clearly in the lease agreement registered in the land department (Thaï language).