Usufruct

[mohammed]

Information from an excellent Thai Law firm...

The right of usufruct is a real property right whereby the owner of a real estate property (condominium, land and/or house) grants by agreement to another person the right of possession, management and benefits the property may produce for a limited period of time. Unless restricted by the usufruct contract the right of usufruct grants all the rights of use and management of the property to the usufructuary, however, he can't sell or consume the property and he must take normal care of the property and keep the property in good condition. The usufructuary will be liable for loss of value or destruction of the property unless he can proof that damages are not caused by his fault.

Registration of the usufruct agreement
The agreement granting the right of usufruct in Thailand must be in writing, in Thai script and registered by the local Land Office. The usufruct contract will be noted on the backside of the land title deed copy of the owner and in the registers of the Land Office. The right of usufruct may be registered in the foreigner's name. Registration fees are 1% and 0,1% stamp duty over the total price, or if the usufruct is registered without consideration the registration will cost less than 100 THB per plot.

Usufruct is a personal right
Usufruct is granted to a personal or persons and is not transferable to a third party, nor is a usufruct transferable by inheritance. The usufruct will end with the life of the person or persons granted the right of usufruct and the property will return to the real owner. Unless restricted in the agreement granting the right of usufruct the usufructuary is allowed to transfer the exercise of his rights to a third person, however, not the actual right of usufruct.

Term
The maximum term of a usufruct agreement in Thailand is 30 years or for the life of the usufructuary, meaning for the life of the (registered) person who holds the property under a usufruct. If the usufruct is for the life of a juristic person the maximum term will be 30 years. After this period the right of usufruct may be renewed. Again, in any case and by law and the usufruct comes to an end with the death of the usufructuary. The right of usufruct is not terminated with the death of the real owner of the property and follows the freehold title of the property.

Rights of management and renting out the property under usufruct
The usufructuary as the manager of the property is allowed to rent out the property without the consent of the real owner (unless restricted in the usufruct contract). As a benefit of usufruct is sometimes referred to Supreme Court judgment which says that a usufructuary may rent out the property and in this case the lease/ rental term will not automatically be terminated together with the death of the usufructuary/ the end of the usufruct. As a sales argument is sometimes suggested that the foreign usufructuary can have the property for his life + pass on the property under a 30-year lease to his heirs. In practice such a construction will not be possible. Management of the immovable property under usufruct and registering legal acts against the land at the land department, is not an allowed right given to a foreign usufructuary (the land office will deal differently with a foreign usufructuary opposite a Thai national as the usufructuary). Secondly, the lease may not be automatically terminated upon the death of the usufructuary but the real owner can claim misuse or unlawful use of the usufruct if he is damaged hereby. The right to benefit from the property and enjoy the 'fruits' (rent) of the property will by law end with the death of the usufructuary and property and its benefits will return by law to the real owner. The real owner must in the first place be the recipient of a reasonable rent from the date of termination of the usufruct.

Can a usufruct be for free, without consideration?
Opposite to for example a lease agreement a usufruct agreement does not need to contain a consideration, however, the Land Department could refuse to register the usufruct and the Revenue Department could investigate this structure to see if it is not actually set up to circumvent taxes.

Can usufruct protect a property investment?
Compared to a well crafted lease agreement, and if possible combined with a right of superficies, a usufruct may not the best choice to protect a property investment because usufruct is not transferable and will end with the death of the person or persons granted the right of usufruct. The right of usufruct can last for a specified period of time up to 30 years or for the life of the usufructuary, however in both cases end at death of the usufructuary. In this case the property will absolutely and by law return to the owner, any contractual clause stating different will be void.
Because a right of usufruct can be granted without consideration a right of usufruct is often used to protect the foreign spouse's interest in a property should the Thai spouse (registered owner) predecease the foreign spouse, and in some cases to protect in a divorce.

[crazy88]

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[chopsticks]

Very useful information, Mohammed.

Easy to read and definitive guide to the subject under discussion.

[stgrhe]

I'm not really familiar with Superficies, but is it the case that they can only be inherited if was originally set-up for a 'fixed period of time', which is a maximum of 30 years. In other words if you set it up for your entire lifetime, then it can not be inherited ? or have I read it wrong, it doesn't state this in the CCC's, but all the lawyers articles seem to say it!?

Very informative post by the way

SJ

No, it doesn't matter whether a superficies is "for life" or "for a period of time", in either way its right can be transferred and inherited. See section 1411 below, which I have hignlighted.

This is the English translation of the code:

THE CIVIL & COMMERCIAL CODE – CHAPTER III

TITLE VI – SUPERFICIES

Section 1410 – The owner of a piece of land may create a right of superficies in favour of another person by giving him the right to own, upon or under the land, buildings, structures or plantations.

Section 1411 – Unless otherwise provided in the act creating it, the right of superficies is transferable and transmissible by way of inheritance.

Section 1412 – A right of superficies may be created either for a period of time or for life of the owner of the land or the superficiary.
If it is created for a period of time, the provisions of Section 1403, paragraph 3*), shall apply mutatis mutandis.

*) If it is granted for a period of time, the period may not exceed thirty years; if a longer period is stipulated, it shall be reduced to thirty years. The grant may be renewed for a period not exceeding thirty years from the time of renewal.

Section 1413 – If no period of time has been fixed, the right of superficies may be terminated at any time by any partner giving reasonable notice to the other. But when rent is to be paid, either one year’s previous notice must be given or rent for one year paid.

Section 1414 – If the superficiary fails to comply with essential conditions specified in the act creating superficies or, when rent is to be paid, he fails to pay it for two consecutive years, his right of superficies may be terminated.

Section 1415 – The right of superficies is not extinguished by destruction of the buildings, structures or plantations even if caused by force majeure.

Section 1416 – When the right of superficies is extinguished, the superficiary may take away his buildings, structures or plantations, provided he restores the land to its former condition.
If instead of permitting the removal of the buildings, structures or plantations, the owner of the land notifies his intention to buy it at a market value, the superficiary may not refuse the offer except on reasonable ground.

[CDNinKS]

I can confirm that the usfruct charge was still 10,000 baht at the HH land office 3 weeks ago.

I didn't use a lawyer and my name is registered on the back of the Chanote for my life time.

I did consult a lawyer and he tried to talk me out of a Usfruct and into a lease. He wanted 15,000 baht for drawing up the lease and said that I would have to pay an additional tax in the neighborhood of 7500 baht. Staff at the land office said that even if we would have used a lawyer, he would have had to pay some tea money as well.

As a further protection my wife and I have drawn up wills where I inherit the land.

It is true that if you are married at the time of the usfruct, either party can cancel it. I was not legally married to her when I registered the Usfruct.......


As many people have said, this all sounds great on paper, but the real test would be if you end up in court someday.

[stgrhe]

It is true that if you are married at the time of the usufruct, either party can cancel it. I was not legally married to her when I registered the Usufruct.

Then your wife cannot cancel it as it was registered when you were not married.

[CDNinKS]

Then your wife cannot cancel it as it was registered when you were not married.

That was the plan

[Super Joe]

No, it doesn't matter whether a superficies is "for life" or "for a period of time", in either way its right can be transferred and inherited. See section 1411

Thanks a lot for that stgrhe, the more I look into them the more I think you're spot on about in many cases them being a better option than a land lease.

Many of the crucial clauses are 'real rights' under the law with superficies, (ie: that 'follow the land title' and therefore legally binding upon future new landowners), as opposed to land leases where the clause is a 'contractual agreement' tied to the individuals rather than the land.
In addition to it providing us with 'lifetime' rights as per a usufruct agreement, the massive plus it also has, as you have pointed out, is that access rights can be inherited upon death. I wonder if by having your heir/s specifically named, this also satisfies the 'third party involvement' issue!?!?


SJ

[Farang]

I was under the impression that HH Land Office accepts only maximum 30 years usufruct for a foreigner, not for a life-time one.
This is a recent and maybe just a local change from the jurisprudence and, very particularly, from the actual letter of the Law?

Was I wrong, has any foreigner gotten a life-time usufruct confirmed by the HH LO of late?

[mohammed]

I was under the impression that HH Land Office accepts only maximum 30 years usufruct for a foreigner, not for a life-time one.
This is a recent and maybe just a local change from the jurisprudence and, very particularly, from the actual letter of the Law?

Was I wrong, has any foreigner gotten a life-time usufruct confirmed by the HH LO of late?

As stated above: The maximum term of a usufruct agreement in Thailand is 30 years or for the life of the usufructuary, meaning for the life of the (registered) person who holds the property under a usufruct. If the usufruct is for the life of a juristic person the maximum term will be 30 years. After this period the right of usufruct may be renewed.

I thought that means if you live longer than 30 years after the usufruct is registered you need to renew it but after reading the civil code it doesn't stipulate that anywhere.

[Super Joe]

I was under the impression that HH Land Office accepts only maximum 30 years usufruct for a foreigner, not for a life-time one.
This is a recent and maybe just a local change from the jurisprudence and, very particularly, from the actual letter of the Law?

Was I wrong, has any foreigner gotten a life-time usufruct confirmed by the HH LO of late?

With usufructs they do definately enter the foreigners name and the period as 'lifetime', or equivalent wording to that effect, on the back of the duplicate land title papers. First one was just over 2 years ago, but we've only done a few of them mind. It's in Thai and always make the wife read it out loud to the customers, mostly because she hates doing it as always pronounces their names funnily.

I could well believe it if some have had 30 years entered though, as different officials can do things differently there, and maybe some customers don't specifically request it!?

SJ

[Khundon1975]

CDNinKS "Staff at the land office said that even if we would have used a lawyer, he would have had to pay some tea money as well".

I'm surprised that the land office staff actually announced to you, that tea money was a requirement. They must be getting very brazen in their little sideline.

[CDNinKS]

Well they never used the words "tea money" that is my term. According to my wife the word would translate closer to "fee"

[petercr]

I have read through this post with interest as I'm considering taking the Usufruct route. Have just returned from a meeting with a local law firm and they advised that a Usafruct can only be registered at HH land office if you have a legal marriage. I asked twice about this and the answer was the same followed by a recomendation to go the lease route

This seems to be incorrect if others have registered Usafruct's in HH without being married. Some even suggest registering a Usufruct before a legal marriage is better in terms of overall security

I know forum rules do not allow names etc but I would be grateful for any advice by pm on the subject and wich law firm to use

[CDNinKS]

I suspect the "local law firm" you used was the same one I did.......he really dislikes the Usfruct and advises a lease and a 15,000 baht fee to draw it up. I can tell you for a fact that we were not legally married when we had the Usfruct registered. They did have me sign forms to declare that the money used by my GF (at the time) was hers and that I in no way had any connection with the money used to buy the land.

Other than that, it was a done deal.

BTW, that same lawyer quoted an additional 15,000 baht to draw up wills for my wife and myself.......had it done at a lawyers here in Songkhla for 4,000