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Legal Matters: Article #13 (December 2007 - February 2008)
Issues for the Leasehold investors
“Many developers offer a 90 year lease term but I have read that a lease cannot be longer than 30 years”
“Although its is correct to state that the longest registerable lease term permissible in accordance with Thai law is 30 years, many projects offer property in their marketing materials on a 90 year lease, sometimes expressed as a 30 x 30 x 30 year lease. What is being offered here is a 30 year lease which is registered at the local land office plus two contractual options to extend the lease for two subsequent terms of 30 years. Whilst the 30 x 30 x 30 lease term is a common and legitimate means for foreigners to acquire an interest in land in Thailand, buyers must ensure that their lawyers scrutinize the lease renewal provisions to ensure that they are as robust as possible and that the procedure set out in the lease agreement for the registration of the subsequent lease terms is clear to the buyer.”
(Desmond Hughes, Partner)
“Are all of the terms of the lease really so important?”
“Many buyers will pick up on the provisions of the lease which relate to the ‘pre-paid’ rent, the lease term and the contractual renewals and if the buyer sees in the lease what was promised in the sales pitch they may be assured that they are receiving what they bargained for. However, the devil may be in the detail that was not specifically discussed as a sales point by the developer or agent. A ‘buyer unfriendly’ lease could restrict your enjoyment of the property and the saleability of the property in the future. Your lawyer should consider the impact and potential consequences of each lease clause prior to you paying any money to the developer.”
“By way of example, any clause which allows the Landlord to terminate the lease in the event that the Buyer breaches any lease term should be strongly resisted by a Buyer unless there is estate management justification and other protection. Such a clause could result in the lease being terminated on spurious grounds.”
(Kris Limcharoen, Partner)
“Is it advisable for disputes under the lease to be resolved by recourse to the courts?”
“In the event of a dispute, advisors recommend recourse to Arbitration in accordance with the Thai Commercial Arbitration Rules rather than recourse to the courts. Arbitration proceedings can be conducted in English and can initially be resolved more quickly than matters referred to the courts. A Buyer’s lawyer must ensure that any Arbitration clause is correctly drafted to ensure that they are fully protected under it.”
(Desmond Hughes, Partner)
“Is it true that under Thai law the Buyer must pay the lease registration fees and taxes upon registration?”
“Thai law provides no guidance to Buyers or Sellers as to who should bear the transfer fees and taxes upon the registration of a lease. Consequently this is entirely a commercial point to be negotiated between Buyer and Seller prior to the signing of the lease and payment.”
(Desmond Hughes, Partner)
This article is the 13th in a series of articles for Exclusive Homes and was co-written by Desmond Hughes (Partner) and Kris Limcharoen (Partner) based in the Phuket, and Bangkok offices of Belmont Limcharoen respectively and now with a new office in Koh Samui.
Information supplied by:
Belmont Limcharoen (Phuket)
4/1 Prabaramee Rd., Patong, Kathu, Phuket 83150
Tel: +66 (0) 7634 2882-4 Fax: +66 (0) 7634 2885
Email: desmond@belmontlimcharoen.com
Belmont Limcharoen Company Limited
39 th Fl., 3904 A United Center Building.
323 Silom Rd., Bangrak, Bangkok 10500
Tel: +66 (0) 2635 5071-3 Fax: +66 (0) 2635 5074
Email: kris@belmontlimcharoen.com
Belmont Limcharoen (Samui) Co., Ltd
23/30 Moo4 Bophut, Koh Samui, Suratthani 84320
Tel: +66 (0) 7724 6185-7 Fax: +66 (0) 7724 6188
Email: samui@belmontlimcharoen.com
www.belmontlimcharoen.com
