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.
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.
What is the maximum lease term available?
The maximum lease term available is 30 years, with an option to renew for an additional two more 30 year terms. 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.
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.
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.
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.
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