Leasing options

[2dandan]

I posted this question on another thread and it was ignored because of the squabble going on in that thread.

I'll try it here and I repost it for discussion.

Would it be possible for prospective purchasers who are currently waiting for Land Registration or likely to be in the forseeable future, to change to lease and have Lease contracts or other legal contract drafted between purchaser and developer which stipulates that,

a) at the termination of the lease period (30 years) and in perpetuity the lease will automatically be renewed at no cost, except registration fees, to the purchaser.

b) The developer or his agent will agree to change from leasehold to freehold, again at no cost except registration fees, if at any time Thai law changes to allow Foreign ownership of land.

The contracts could include some additional clauses which takes into account absent developers, who disappear after completion to avoid the Land transfer.

The above are just my thoughts.

So, is it possible to have a lease legally linked to a legal contract, which are both enforceable together, therebye giving the lessor some sort of guarantees for the future

[johnnyk]

contracts like that already exist and are offered by some developers..
land office, who are the only ones who really count, do not recognize any lease beyond 30 years. anything else is a private agreement between individuals and not binding on heirs or successors.

[mozzy]

sounds like a good idea to me. if its allowed Im definitely going to put it into any contract when buying a house.

[johnnyk]

you can have it in the contract but it is not binding on the landowner's heirs or successors as it is a private contract betwen two individuals and not recognized by the land office who are, again, the only ones whose opinion matters.

[johnrxx99]

I posted this question on another thread and it was ignored because of the squabble going on in that thread.

I'll try it here and I repost it for discussion.

Would it be possible for prospective purchasers who are currently waiting for Land Registration or likely to be in the forseeable future, to change to lease and have Lease contracts or other legal contract drafted between purchaser and developer which stipulates that,

a) at the termination of the lease period (30 years) and in perpetuity the lease will automatically be renewed at no cost, except registration fees, to the purchaser.

b) The developer or his agent will agree to change from leasehold to freehold, again at no cost except registration fees, if at any time Thai law changes to allow Foreign ownership of land.

The contracts could include some additional clauses which takes into account absent developers, who disappear after completion to avoid the Land transfer.

The above are just my thoughts.

So, is it possible to have a lease legally linked to a legal contract, which are both enforceable together, therebye giving the lessor some sort of guarantees for the future

If you are waiting for land registration one assumes you have exchanged contracts. If your contract was half decent it may provide for rescision
in the event of a change of circumstances between exchange and completion. Ask your lawyer if the recent clarification is sufficient change. If it doesn't, or something similar, no, you cannot change to a lease.

If you havn't exchanged, you can do what you want, subject to legal fees.

Thoughout the recent discusions on other threads, leasehold has been shown to be, in my opinion, the best route to occupy land with a building, (ie not a condo) subject to the following.

1. I have read that in addition to the original lease of the land, one can be granted 2 reversionary leases, each for 30 years. In effect a 90 years term certain of the land.

2. I have also seen someone say you can only have one extension (60 years certain). I have not checked this out with a Thai lawyer.

3. There would be no problem whatsoever to have an option to transfer the freehold, or the like, should Thai law change, assuming you have some confidence in the freeholders whereabouts.

4. Remember, the lease can be in respect of the land AND building OR just the land. There is nothing to stop you owning the fabric of the building but at the end of the leases a grey area exisits as there is no right of renewal and the building would revert to the owner if you didn't demolish it. I understand this situation has not been clarified or legislated for.

5. A lease is a very complex and long document. All the questions you raise could be answered but get the BEST lawyer.

6. Absentee landlords are no doubt a risk. An insurance policy may be available or if you are buying on an estate, the freehold MUST be placed in a management company in which each unit has a share. That should be insisted on.

7. Units on a single plot pose the greatest problem. While probably more desirable I'm not sure the 90 year + future can be perfectly sorted but again a good lawyer may be able to sort, or you take a risk. There will always be value whatever assuming, location.......

Unless you are -5 at this time, why should you worry? At anytime you could always do a deal with the known owner of the land to grant new leases. 90 years is a hell of a long time. Valuation is of course an issue but see my recent post about risk on another thread: NEVER do it for investment purposes alone cos it's too risky.

In my view you'd need at least 30% pa over 5 years to beat the UK stock market. That's 200% over 5. You may well do it, and many have done, but ask yourself, are you lucky!!

Anyway, I would advise you to urge this site to prepare a sticky thread so these rather repetitive questions and lengthy answers don't bog down this section of the site.

Good luck.

[caller]

Or your answer! Suggest you check up on leasing law or read what Johnyk has written, all that is recognised by the land office is a 30 year lease, everything else appears to be a private agreement added to the lease, not sure what legal weight it carries?

The other thing is that I would imagine most seeking to lease, have Thai wives, negating some of the other problems you identify with this route.

On saying that, its one I'm now seriosuly considering.

[Burger]

2dandan wrote:

Would it be possible for prospective purchasers who are currently waiting for Land Registration or likely to be in the forseeable future, to change to lease and have Lease contracts or other legal contract drafted between purchaser and developer

Yes, if developer agrees, but as land office is now registering land again, doubt he will.

30 year leases:

Johnnyk is correct .....

The first 30 years are registered at the land office and printed on the back of the 'chanote' paper. Totally legally binding for 30 years.

The 30 year 'option to extend' is something quite different.
It is a legal contract between you and the land owner personally. If after 30 years the land owner is the same, then you have a legally binging contract to make him extend you for 30 years.

But as it is only a personal contract between you and the land owner, it does not under law I believe, become legally binding on any new land owner should the land change hands during your initial 30 year period.
Therefore if the original land owner dies, his heirs are not binded to your extension contract.

More concerning would be that IF the land owner did not want to extend you as he wants the land back, then he simply 'sells' the land to his brother one day before your initial 30 year lease is up, then 'buys' it back again one day after you sod off.

To summarise, the 30 year 'extension' can not be relied on.
This is as told to me by lawyer, please check with your own.

Burger

[STEVE G]

Burger wrote;
More concerning would be that IF the land owner did not want to extend you as he wants the land back, then he simply 'sells' the land to his brother one day before your initial 30 year lease is up, then 'buys' it back again one day after you sod off.

Hi Burger, that is the same story I have heard; apparently it’s a common dodge amongst Thais in the property sector.

[PeteC]

Many contracts in the West, not just for property, have wording "...binding upon heirs and assigns..." assuming "assigns" is the legal jargon for anyone taking over responsiblity for the contract, regardless of reason.

I assume that wording could be in a contract here, however do not know if it is something that is recognized in Thai law thus enforceable. Pete

[Burger]

prcscct wrote:

Many contracts in the West, not just for property, have wording "...binding upon heirs and assigns..." assuming "assigns" is the legal jargon for anyone taking over responsiblity for the contract, regardless of reason.
I assume that wording could be in a contract here, however do not know if it is something that is recognized in Thai law thus enforceable.

Certainly if the lessor (land owner) dies during the original 30 year lease, then the responsibilities passes to their heirs:
In the event of death of the lessor the lease will not be terminated but will transfer to the lessors heirs. Section 569 Civil and Commercial Code; 'A contract of hire (lease) of immovable property is not extinguished by the transfer of ownership of the property hired. The transferee is entitled to the rights and is subjected to the duties of the transferor towards the hirer'.

But currently under Thai law the 'extension option' does not pass to new land owner:
Supreme Court Judgment 6763/ 1998; 'In case the lessor promises in the lease agreement to extent or renew the lease term, but has sold the leased land before the lessee was entitled to accept, the 'contractual rights' are not binding upon the new owner and only lease rights that are 'real rights' will transfer to the new owner'.

Whether or not you could put a clause in that says if the land owner sells or dies then the contractual obligation MUST be applicable to the new land owner, and whether that will stand up in court if challenged by an 'heir', I do not know ??
I can't see that a land owner would want to agree to that as it will restrict him from selling the land, as buyers may not like that extra 30 years forced on them.

Burger

[johnnyk]

You are safe for the initial 30 years no matter if the lessor dies or the land is sold. The contract assures you have the right to the land for 30 years.
After that, nothing is recognized by the land office and who in their right mind wants to be in a Thai court watching lawyers eat your money when you are old and gray?
Now, if you are in a growing area, eg. Hua Hin, it is maybe just possible the land will be worth a teensy bit more money in 30 years than it is now. Land appreciation is known to happen.
That is all the motive needed by someone to get your ass off the land in 2036.

[pinksquid]

I admit I am very curious about the whoel lease thing as people do not tend to talk about it much. I often hear the 30 year part (and the 30 plus 30) but there are basic questions that I wonder about that I have yet to find answers for:

So, what happens when the 30 years is up and you have paid for a house to be built on the land (it is my understanding you own the house, but not the land)? Is everything lost? Do you just walk away and leave it at that? I know most people coming to Hua Hin are older, but some of us are still quite young.

I read somewhere about you should be able to sell the house but no one seems to have experience with this happening (re: selling the house after the lease is up) so they think you'll just be out of luck.

I can easily see a situation similar to what happened to my MIL occurring: she owned part of her land and a house while her dead boyfriend's kids owned another portion of the land (it was inherrited), when she went to sell the "kids" wanted far more than their portion of the property was worth and refused to budge so she could not sell the house.

Is it any different if you lease from a developer?

Also, does anyone have experience with selling a property that was originally done on a lease?

[johnnyk]

My understanding is that there should be compensation for leaving the house.
How much? Who knows.
How will you get it? Who knows.
I do know I don't want a court fight in Thailand when I am old.
We are talking 30 years from now and nobody, nowhere can predict anything 30 years out.

[pinksquid]

My understanding is that there should be compensation for leaving the house.
How much? Who knows.
How will you get it? Who knows.
I do know I don't want a court fight in Thailand when I am old.
We are talking 30 years from now and nobody, nowhere can predict anything 30 years out.

Which was one of my points-- no one seems to know anything. On top of it no one seems interested in finding out because they'll all be "too old" or they are more interested in the company route (which is fine if it works for them).

In 30 years I, personally, will still be a spring chicken.

[Onlyme]

Lease the land and buy a caravan. Promplem solved!
On a serious note, why can't you just be happy with having a CONDO?
Onlyme.