THE LAW
1) Can a
foreigner obtain 100% interest for a land lease in Thailand?
Yes. A foreigner can obtain 100% interest for a land lease in
Thailand. Unlike direct land ownership, the law allows
foreigners to obtain long-term land leases.
2)
Do I have to register the land lease at the Land
Department?
Leases up to three years need not be
registered but registration at the Land Department is mandatory
for leases that are three years or more.
3)
What is the maximum lease term available?
The maximum lease term available is 30 years, with an option to
renew for an additional 30 years. Each lease renewal that is
agreed upon with the landowner must be registered at the local
land office. For each new registration, taxes will be levied.
Land for industrial or commercial purposes may be leased for up
to 50 years by a foreign company under certain circumstances,
with the possibility of extending the lease thereafter.
4)
Why is land leasing favored by foreigners who wish to
own property in Thailand?
There are numerous obstacles faced by
foreigners who wish to buy land or purchase property in
Thailand. To avoid these obstacles, many foreigners choose to
acquire land on a 30-year leasehold with an option for
extension. This is the simplest and most straightforward way for
foreigners to acquire property in Thailand. In addition, a lease
stays valid even in the event that the property or the land is
sold.
5)
What are the advantages of having a land lease over
purchasing land with a company?
A foreigner’s lease rights are formally recognized by the Thai
law. The land lease is executed and registered only once, after
which very little legal maintenance is required. In comparison,
a limited company has several shareholders who may have
interests that are different from yours, and this could
translate into potential risks for you and your objectives.
Also, a company requires regulatory compliances such as yearly
balance sheets to be filed with the Tax Department.
6)
What are some of the drawbacks of land leases?
Even a well-constructed land lease and a
separate option agreement to extend the lease between the
landowner and the lessee cannot guarantee the timely renewal of
the lease. A landowner may refuse to sign any registration for
the lease extension beyond the 30-year expiration. Although the
lessee can sue the landowner for breach of contract, the legal
process entailed may be costly and time-consuming. Other
drawbacks include the difficulty in obtaining a mortgage for a
lease (as opposed to direct ownership); a lower resale value;
and potential lawsuits from the landowner for lease violations.
Entering into a lease, or forming a company to buy land or purchase property - both methods have its advantages and disadvantages. It would be wise to examine your individual needs and obtain legal counsel from knowledgeable and trustworthy attorneys before you make a decision.
