Although Thai law does not allow a foreigner to own land in his/her name, it does not forbid a foreigner to lease land. Any lease of real estate longer than 3 years must be registered at the Land Department to be legal binding. For residential property, the maximum register-able lease term is Thirty (30) years. It is a very common practice to include in the terms of the lease, optional renewal of a second and a third 30 years lease terms, bringing to a total of 90 years. In practice, the full consideration of the property is paid up front and not on a regular basis, as in a real lease.
There are some drawbacks to using leasehold to acquire real estate.
• First of all, “a lease … is a lease … is a lease”. In law, the rights and entitlement of a lessee is very different from an owner.
• Since a lease is an ongoing relationship between a lessee and a lessor, a contract (lease agreement) is in place to stipulate the rights and obligations of both parties. If any party breaches any provision in the contract, the innocent party has to enforce the contract to compel the defaulting party to correct the breach.
• Since a lessee is not the owner, technically any registered dealing on the property requires the consent of the lessor (the owner), including re-sale.
• Developing a big piece of land acquired by leasehold, and subsequently re-selling it in several smaller portions poses a lot of obstacles.
In essence, we do not discourage acquiring land through leasehold if
• the property to be acquired is a stand alone, one unit, land and house,
• there is no intention of re-sale or any other registered dealing on the property, and
• all necessary precautions are taken to protect the interests of the investor.
Proper legal advice should be sought to prepare a lease agreement that could best protect the investor.