Leasing Property in Thailand
It’s so easy to fall in love with a property in Koh Samui. At Real Samui Properties, we specialise in selling luxury vacation residences and resort property. Many of our homes have fantastic views, infinity-edge pools and tropical gardens. Some even have spas, tennis courts and saunas. It is possible to live the dream in Koh Samui but don’t let luxury blindside you.
First of all, you need to know that a lease is the right to use a property, it does not mean that you own the land; that is owned by the freeholder. Another thing to remember is how different leaseholds are in Britain compared to Thailand. In the UK, we often have long leaseholds, usually lasting a lifetime and sometimes up to 999 years. In Thailand, leases last no longer than 30 years and if you are told any different then you need to be wary.
Sometimes sellers try to make the property more attractive by suggesting the lease period is 90 years. They make this claim based on Thailand’s 30+30+30 leasehold structure. Repeat, the 30+30+30-year lease is not a 90-year lease. Under Thai law, the first 30 years of the leasehold is legally binding as it is registered with the Land Office and appears on the freehold land title document.
Beware however, the second two 30-year options to renew are not so straightforward. The original leasehold agreement was between the freehold owner and lessee. It is the freehold owner that grants lease renewals but to renew your lease you need the permission from the freeholder with whom you made the agreement in the first place. Given that freeholds are investment opportunities and freehold landowners often sell their land you may find yourself with a new freehold owner. Under Thai law, the new freehold owner is not under contract to renew the lease and therein may lie the problem for anyone for the 2nd and 3rd lease terms.
Fortunately, there is a way around this problem and that is to buy a leasehold with a share of freehold. Often used by developers of whole apartment blocks, this structure offers leaseholders more protection and control over future lease renewals. In order for this to work, the freehold land is owned by a Thai company. Owners of the apartments are issued with the 30-year lease (and the renewal options) but they receive shares in the Thai company that owns the freehold land. By becoming part-owners of the freehold, owners have voting rights and control over lease renewals. However, like all property deals in Thailand, it is crucial to ensure that your contract is clear and that the company that owns the freehold land is properly set up.
There are many other considerations when you commit to a leasehold or leasehold with a share of freehold, so tread carefully.  Always remember that, even though registered with the Land Office, the lease is a rental contract. Make sure you fully understand the terms of your lease before signing and seek legal advice. If there is a breach of contract by the lessee, the lease can be terminated. Finally, leases apply to the person that signed the lease agreement. In theory when the lessee dies, the lease is terminated and there is no guarantee that their heirs will inherit the lease. It is vital to address the issue of inheritance before you proceed with the purchase of any property.