Buying a Property: Leasehold is a 30 years period enough? issue

Buying a Property: Leasehold is a 30 years period enough?

February 1 2010 Categories: Leasehold Ownership, Thailand Property No comments yet

Thailand and Retirees a match made in heaven?

One of the first paradoxes of the offshore real estate market is this: Most buyers are retirees or people preparing for retirement, and Thailand has become over the years one of their preferred destinations because of course of its exotic beauty, unique culture, friendly people but also because of its modern infrastructures, the high quality of health services and of course the reasonable costs of living.

Between Thailand on the one hand and the retirees on the other hand, it’s almost a match made in heaven but for a very small detail:

On the one hand Thailand wants to attract retirees and persuade them to spend part of their life savings in purchasing real estate and later on to come, live and spend their retirement pensions. And Thailand is right to do this because this is a market worth billions USD in spending every year.

Freehold vs Leasehold

On the other hand Thailand does not allows (but for one exception) those same retirees to purchase and own land freehold for residential purpose (foreigner may own buildings freehold but not land).

Therefore Retirees who wants to purchase a property in Thailand in freehold sole option will be to purchase a condominium. Unfortunately not many retirees want to spend their retirement closed up in an apartment building. Most of them would actually prefer a house with a garden and a private swimming pool.

Therefore the only option for a foreign buyer that whishes to purchase a land and house in Thailand will be to do it under the form of a leasehold.

Is leasehold a valid alternative to freehold land ownership?

It could be! Prima facie leasehold may appear to be a valid alternative to foreign landownership but for one issue

The only reason why leasehold is not yet considered by foreign buyers as a valid option to foreign land ownership is because under Thai laws a leasehold on immovable property may be registered only for a short period that is to say 30 years only.

While the law allows in theory the Lessee at the end of the initial 30 years period to renew the lease for another term of 30 years the problem is that there is legally no ways to guarantee to a potential buyer under a leasehold that his option to renew his lease agreement will indeed be executed 30 years from now, which rise the issue of legacy

Short lease period and the legacy issue

Now the fact is that most people are not only saving amd investing for themselves and their retirement but they are also saving and investing to build a patrimony for their children and grandchildren.

When a future retiree is about to invest part of his/her life saving into a property he/she generally will also want this property to benefit his/her children and grandchildren .

By only offering a 30 years old leasehold period Thailand is making it difficult for retirees to decide to invest part of their life saving there.

Because why should they decide to invest part of their life saving in a property located into a country that does not offer them a leasehold period that is long enough to guarantee that their children or grandchildren will be able to use and benefit of said property?

The answer to this problem is not necessarily to allow foreign investor to own land freehold. To the contrary I do not think that Thai society is ready yet for such a bold move and I do not believe that such a move is necessary yet.

From 30 to 99 years?

A simple answer would be simply to modify the Thai and Civil Commercial code to extend the duration of leasehold from 30 to 99 years. A 99 years lease option would go a long way to satisfy foreign investors and to fulfill their need for a legacy.

Note: This post is an excerpt of Rene Philippe Dubout first book: “How to Purchase Real Estate Offshore Safely: The Case of Thailand” published in february 2009.

It was also first published as a post by Rene-Philippe Dubout on his former blog www.howtopurchaserealestateoffshore.com. The version posted this day is a modified version.

About the Author:

The author Rene-Philippe DUBOUT is a lawyer since 1990 when he was admitted to Geneva bar (Switzerland). He practiced as a litigator there for 10 years until he moved to Thailand in 1999. In 2002 he founded with a group of Thai lawyers Rene Philippe & Partners Ltd a local law firm that specialized in Cross Borders Investments and Real Estate. He has been lecturing in several Thai Universities and a speaker to numerous conferences and seminars. He is the author of a must read book:”How to Purchase Real Estate Offshore Safely: The Case of Thailand”.

http//:www.renephilippe.com

Originally posted 2009-07-27 09:45:37.

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