Property Law

The Thai Land Code provides generally that foreign individuals or foreign companies are prohibited from owning land in the Kingdom. The rule results in obvious practical difficulties in common scenarios where foreign buyers wish to purchase real property (or real estate) in Thailand.

There are certain exceptions, most notably those concerning Thai companies and concessions granted to foreigners by the Board of Investment and the Industrial Estate Authority of Thailand.

In our experience, more usually relevant to our clients are the provisions allowing foreign buyers to lease land and buildings, own buildings that are constructed on leased land and own condominium units, subject to some restrictions which will be more fully explored below.

A Thai registered company may own land in Thailand. However, it must be considered a Thai company and majority Thai owned. In practical terms, this means that no more than 49% of the total issued shares of the company are owned by a foreign entity (a natural person or a company). The majority of shareholders must also be Thai nationals, or majority Thai owned companies.

Land Office officials are afforded broad discretion in determining whether a company registered in Thailand is a Thai company for the purposes of owning land. In our practical experience, this often translates into a refusal by officials to transfer the title of land to a Thai registered company with any foreign shareholding without conducting an investigation into the background of the transaction to ensure it is not an attempt to circumvent the rules.

The law relating to the lease of (non-commercial) property is generally governed by the Civil and Commercial Code which broadly provides the following:

• A contract for the lease of immovable property (land, houses, condominium units or other buildings) for 3 years or less is not enforceable unless made in writing and signed by the relevant parties. Leases for more than 3 years must be registered at the relevant land office or they will be unenforceable for any period beyond 3 years.
• A lease of immovable property may be made to a foreign entity for a period of up to 30 years. Provision for an additional 30-year extension may be included in the lease, but see the further discussion of the enforceability of such provisions below.
• A lease is automatically terminated at the end of the agreed lease period and no notice period is required. However, in the event a lessee retains possession of the property following the end of the lease term and there is no objection from the lessor, a lease will be deemed extended for an indefinite period and subject to termination by either party following a notice period of at least one rental period of not more than two months.

Not in the absence of a good reason. A lease can be terminated before the expiry of the term by a lessor on the basis of non-payment of rent or some other serious breach of the terms of the lease agreement by the lessee.

In the event of early termination by a lessee, and in the absence of any serious breach by the lessor, the lessee is generally responsible for any actual loss suffered by the lessor until a replacement for the lessee can be found or a reasonable period of time has elapsed.

As discussed, the Civil and Commercial Code allows for the lease of immovable property for a maximum term of 30 years. However, provisions to extend a lease for a further 30 years are commonly seen in leases. The question of whether or not such provisions are enforceable is a common one.

In our view, even if such provisions are ultimately enforceable, they should be treated as if they are unenforceable. The reasoning is that any such agreement will likely be treated by a court as a private agreement between the original parties and separate from the lease. Given a period of 30 years, it is not difficult to imagine a scenario where the original lessor sells or otherwise transfers the property and how issues of enforceability against a new owner might therefore arise.

Foreign ownership of condominiums in Thailand is permitted under provisions of the Condominium Act B.E. 2522 (1979), in the event certain conditions are met. The rules permit all foreign entities, both natural persons and companies, to own condominium units.

The conditions to be met are as follows:

• Foreign ownership in the relevant condominium project does not exceed, in the aggregate, 49% of the total saleable area of all condominium units in the building. Evidence of this must be obtained from the condominium juristic person and presented to the relevant land office before any transfer of title can take place.
• Where the purchaser is a foreign natural person (as opposed to a foreign company), that person is either a permitted resident of Thailand under provisions of the Immigration Act, or is permitted to reside in Thailand under provisions of the Investment Promotion Act.
• Alternatively, in the event the residency conditions are not satisfied, or the purchaser is a foreign company (not registered in Thailand), evidence must be produced that the funds for the purchase of the condominium unit were transferred into Thailand in foreign currency or that the funds were withdrawn from a non-resident’s bank account or from a foreign currency account. In any event, evidence of transfer or withdrawal in an amount not less than the full purchase price of the condominium unit must be presented to the relevant land office before any transfer of title can take place.

Although this is only a brief overview of some of the most common questions raised when foreign individuals or companies attempt to acquire property in Thailand, it should be clear that, particularly given the onerous restrictions on foreign ownership, this can be a difficult and complex space to navigate for prospective foreign buyers.

Our property specialists, and, in particular, the co-founder of our firm, Sirichot Chaiyachot, have many years of practical experience in dealing with such issues and the necessary expertise to guide a transaction to a successful conclusion from beginning to end. For further information or assistance, please contact the LAFS property practice at info@lafs-legal.com.