Freehold or Leasehold?
Buying Property in Thailand
Buying your first property in Thailand is so exciting especially on an island like Phuket, however there are a few things to take into consideration as the process is a little different from Australia. It is relatively straight forward though and just like in Australia you should always use a lawyer to process and settle the sale.
Contracts are often written in Thai so you need to have your lawyer look at all documents before you sign them to fully understand what is being offered. There are plenty of English-speaking lawyers.
Unlike Australian law once you sign a contract to purchase there are no outs, so normally an offer to purchase is signed prior to signing a contract on the property you are looking to acquire. In this document are the terms and conditions. Once these conditions are met then a contract is signed.
There are two main ways to purchase property which is Freehold or Leasehold. Normally condominiums are the only freehold available to individuals who are buying. With Condominiums up to 49% of the development may have freehold title and the rest will be lease hold without exception. It’s not usual for individual Foreigners to own houses in Thailand however a foreigner who has a Thai partner may buy a house in their partners name or a Thai company can usually own a house in the company name. Once again there is are rules and regulations around this so it’s important to deal with a lawyer who specialises in this area.
Freehold v. Leasehold
It’s important to know that when purchasing in Phuket, foreigners as individuals are not allowed to own land in Thailand. However, you can purchase a building which is less than 49% of the total development freehold or Leasehold dependent upon the government approval. But don’t worry, we’ve outlined all you need to know, so you can find which purchase works best for you!
Currently, Foreign Freehold and Leasehold ownership are the most common and legal ways foreigners can own property in Phuket. Each option has advantages and disadvantages that should be considered before deciding which option best suits your needs.
Leasehold Contracts
A leasehold contract in Phuket is usually for 30 years, per the legislation. That is the maximum duration allowed by Thailand’s Civil and Commercial Code, Section 540. (CCC). The land owners may offer additional an additional option or options to renew the contract for another 30 years. However, at the end of each contract, rights must be restored to the Thai owner.
The most crucial thing to know is, in terms of leasehold practice in Phuket, foreigners would normally look sign leasehold contracts for 30 years with 2 x 30-year options. Keep in mind; that under Thai law, only the first 30 years are enforceable (supreme court judgement no. 4392/2547). As a result, when the time for renewal arrives, the Lessee must tell the Lessor before the present lease expires that he intends to extend it. However, even if the Lessee fulfilled this mandatory procedure and wishes to extend the lease, the Lessor may still refuse to renew. Then there may be legal action to recoup some of the losses. Thailand has no precedents in its legal system unlike ours so its just something to be aware of. Most Thai are very honourable.
So! Is Leasehold Safe?
The first 30-year period of a leasehold contract is very safe and legally protected under Thai Law. This ownership period cannot be interrupted. After this initial 30 years, is where problems may begin to arise. For example, there have been cases where the land owner has passed away and the successor hasn’t been willing to extend the lease. To avoid these kinds of issues, you may look to involve a Thai company rather than an individual – this removes all possible personal risks from the contract.
Freehold Contracts
When buying a property within a freehold contract, you are the sole owner for an unlimited amount of time. This property can be sold, rented, inherited or given away. However, this does not include the land on which your property is. Therefore, the freehold contract only applies to the building (villa or condo).
Freehold restrictions also apply to the building of condominiums. Where foreigners cannot own not more than 49% of the total units, Thai nationals must own the remaining 51% of condos within the building.
With a freehold purchase, a blue book is supplied from the government explaining your ownership.
What are the advantages of Freehold over leasehold?
Certainty in most cases is the biggest plus as well as an asset that doesn’t diminish in worth. If you want to buy a house in Thailand and you don’t have a Thai company or Thai partner then the only option is leasehold or rental. Leasehold gives you a figure to work back to zero. Rental is easy but rents increase year on year so long term not the best option. The main advantage of freehold ownership will be that when you choose a freehold, you can be sure about your property!
*The information contained in or available on International Villas platform is of a general nature only and does not take into account the personal circumstances of any person, persons or legal entities. When making decisions we advise you should always take into account your personal circumstances and you should seek the assistance