There is recent legislation in Thailand which may help to solve many of the frustrations of owning or leasing property in Thailand. Although a surprise to many expats living here Thai law provides for a Usufruct and Right of Habitat in the Civil and Commercial Code Act – these two simple pieces of legislation are similar in nature and the Usufruct, a right also written into Canadian legislation, would usually be the first choice. We will also discuss the attractive benefits of the new 2019 leasehold legislation.
The Usufruct allows a person the lifetime right of use of land and property (the word usufruct is derived from a Greek and the right to take fruit from the land).
A Usufruct can be a useful tool between a Thai spouse and foreign national who is unable to own land. It can also help with succession as you may wish to leave a property a spouse, but you also need a space for a relative such as an ageing family member or perhaps a child from a previous marriage.
'This new Act is a big step towards enabling property and land ownership rights for periods of up to 30 years. It is more straightforward as does not require or depend on the specific clauses of a written agreement but simply on the registration of the transfer of the rights. This removes the sometimes ludicrously onerous clauses in typical lease agreements such as returning the house or property in the same condition as it was 30 years previously or disallowing subletting, mortgaging or charging annual land fees or demands for paying specific utilities bills.
You can modify or have work done to the property and use your rights as security (e.g. for a mortgage) without the owner’s permission.
A rights holder under the new agreement (the worst part is that we don’t know how to describe it – a lot more than a tenant but not quite an owner) is also free to sublease the property (although of course other legislation might still apply such as The Condominium Act 2010).
The owner must effectively wave goodbye to their control of the property and expect to receive back only the bare asset even if all that remains is the land.
The rights over leasehold asset is automatically inheritable while the conventional Thai lease requires the inheritance of the lease to be written into the agreement otherwise the land and property will be returned back to the lessor (or their heirs) on death of the lessee.
It’s possible for the land or property owner to terminate the rights but only once the owner and the rights holder come to an agreeable financial settlement, having also ensured that there are no other parties, such as sub-tenants disadvantaged.
MBMG recommends that clients carefully review their property arrangements in light of the provisions of the 2019, Rights over Leasehold Assets Act.
MBMG provides full legal services to expats in Thailand.
You can contact james@mbmg-investment.com.
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