By Sebastian H. Brousseau, LL.B., B.Sc., Managing Director of ThaiLawOnline.com
The easiest place to begin your search for properties is online. One website with numerous property listings throughout Thailand is DDproperty.com. Another one would be propertyhub and you can also check on Facebook marketplace.
These sites allow you to apply search filters including price, location, and property type. It also has Thai and English menu options. You can also use Facebook to search for properties. There are many groups that post rental listings. There is also the option to search in the Facebook Marketplace for available property rentals.
However, often the best option is to hit the streets and find properties for rent. Many properties are simply unlisted anywhere online. Likewise, you can often find cheaper properties by driving around the area you wish to stay. I personally like to drive at night because all shops are closed and it is easier to see rental signs on houses and shops. You will need to look for signs written in Thai that say “chao” (ให้เช่า) which means “for rent or lease”. Typically these signs will be hung outside of the property itself, and with no other information than a phone number.
Bear in mind, that if you do find a property you like and have only a phone number to contact, the owner is very unlikely to speak English. You will want to have someone who speaks Thai to contact the owner on your behalf.
Lease Options and Taxes
A property or rental lease agreement can be in Thai, in English, or both. But it needs to be written. Two months in advance deposit is totally normal but it is up to you to negotiate.
If your lease is for 3 years or more, according to the law, it must be registered with the Thai authorities. It is called a hire of property and there is a clause that says a lease of 3 years or must be registered to be enforceable. This is Clause 538 of the Thai Commercial and Civil Code. Do note that the land department has its own forms. However, law firms should normally be able to draft a lease, and/or an addendum that will protect you more.
Lease Agreement Thailand – More than 3 years must be registered to bind third parties
When registering your lease agreement at the local Land Department they will need a document written in Thai. Generally, they will make their own single-page document that states the name of the property owner and the name of the renter or lessee. Also included will be the duration of the contract, the price, and any additional contacts for the property.
Rarely will the Land Department include supplementary clauses in their documentation. If there are agreed upon clauses for the lease, these must be stipulated in your original contract with the property owner. For a short-term lease, most Thai people use a general contract form. This form is available at any Land Department office, but it is only written in Thai.
If you are already renting a property and would like to continue to do so, there are options for renewing the agreement on a yearly basis. All negotiations can be conducted between the lessor (property owner) and lessee (renter) in regards to price and payment. Yearly rental or lease agreements are used for properties such as apartments, townhouses, and single detached homes.
Negotiation is always possible
You can negotiate about renovations you intend to make that can decrease the price. In the longer term, this may be welcome by the lessor who might give you a free month or something else. However, a long-term Lease Agreement Thailand should be properly drafted by a law firm. This is the best way to protect the lessee as they might be living/using the property for 10 to 30 years with an option to renew.
In order for a long-term lease agreement – more than 3 years – to be enforceable (opposable to third parties) it must be registered at the Land Department. This means it can only be done with a title deed like a “Nor Sor Sam” and/or higher, such as a chanotte. A one-time tax will be asked by the government at 1.1% of the total price of the lease for the whole term of the lease.
Maximum 30 years with an option to renew for normal lease
The maximum term for a lease is 30 years as defined by the Thai Civil Code. However, a commercial lease for up to 50 years can be created under a different law. The Thai government has frequently proposed extending the 30-year maximum term limit. Unfortunately, it has been all talk up to this point.
To be honest, I never registered any lease over 30 years since 2006 working with Thai lawyers. We have done commercial leases, leases between partners, companies, Thai people, Thai people and companies, Thai people and foreigners, between gay partners, and everything you can imagine but never more than 30 years.
Currently, the law clearly specifies a 30-year maximum with ONE option to renew. Clause 538 (Commercial and Civil Code of Thailand, hereafter “CCCT” stipulates this condition and further states that any lease for a period greater than 3 years MUST be registered with the Land Department.
The 30-year lease with an option to renew is a safe and secure legal agreement. Yet, it is advisable to have in writing that the lease has been prepaid in advance.
You find an official text about the 30-year lease here but this is very basic, without much protection and only in English:
Regardless of the duration of the lease having some kind of written receipt is beneficial, so the property owner cannot later claim they have not been paid.
For example, a foreigner intends to invest 3 million THB in a property. Since they cannot own the land outright, they agree to lease the property for 30 years at 1.5 million THB, and renew for an additional 30 years at the same price. The property owner needs to provide a written receipt of 3 million THB received. Without this receipt, the foreigner is at the mercy of the property owner’s claims. The first 30 years will be registered for 1.5 million so taxes will be around 16,500 THB.
That is for the first 30 years and another registration will be needed for the second 30 years but generally can’t be done until 27 years have passed on the first 30 years.
Again, each Land Department can have different policies and procedures, but this is usually the rule. Do note that I have seen a Chanotte with 2 registration of 30 years one after each other. So 60 years in one shot. It was a Chanotte from Phuket, and I never saw anything else like that in 14 years of law in Thailand.
TAXES FOR LEASE AGREEMENT THAILAND
When it comes to property taxes, there is no difference between a Thai national and a foreigner as the lessee. For any lease agreement, the lessee will have their name written on the back of the title deed as being the renter and taxes are the same. If you do not understand the taxes for long term leases at the land department, here’s another example. Like we explained, the property tax assigned to the lease is 1.1% of the TOTAL lease agreement. For example, a lease agreement for 10 years at 10,000 THB per month gives a total of 1,200,000 THB.
The taxes levied are 1.1% of the total amount of 1,200,000 THB, which equals 13,200 THB. Additionally, this amount is a one-time fee. It covers the entire duration of the lease. The taxes should be paid directly at the Land Department when you register the lease and currently the land department only accepts cash. Conversely, commercial leases ARE subject to monthly taxes at 12.5% of the monthly total. This again must be paid directly to the Land Department.
This monthly tax is applied throughout the duration of the commercial lease agreement. In the end, the accumulated taxes on a commercial property lease will be much higher than a residential one. Unless the government changes the current laws, which they have been talking about for years.
Clauses, Conditions, and Additional Considerations
Many landlords will refuse to enter into a lease over 3 years. This is typical because the property owner wishes to avoid paying for the registration of the lease. Since most short-term rental agreements are conducted solely between lessor and lessee, there are no “official” documents and the owner does not have to declare the extra income (They should, but in reality, they don’t).
They will use forms without sub-leasing clauses. They will ask for a 2 months deposit paid in advance. Up country, they rarely have furnished houses, except maybe in Bangkok or places with lots of tourists.
AIRBnB and TM30
However, this is not as common as it once was. New immigration regulations for property owners to report if a foreign national resides at their property has diminished this tax loophole. Hotels and Guesthouses owned by Thai people are also furious against people renting through Airbnb and not paying taxes, not having a license to be a hotel, and/or working illegally without a work permit. Be aware that Koh Samui and Ao Nang were raided by the police before Covid and many foreigners had to stop doing business with AirBNB or others.
One consequence of the new regulations is that fewer Thai property owners are willing to rent to foreigners. We saw it with TM30 in 2019. Fortunately, TM30 was modified by the government in 2020 because of the pressure of medias. (Article 38 of the Immigration Act). Mr Sebastien H. Brousseau worked with many foreigners and others to help accommodate foreigners that didn’t want to see the old regulations put back in place.
RIGHT TO SUBLEASE
If the lease agreement does not include a clause about the right to sublease, it is illegal to sublease. This is an important clause to think about if you plan on entering into a longterm lease. (clause 544 CCCT)
A lease is transmissible to heirs if explicitly outlined as a clause in the lease agreement. It means that if you have a 30-year lease agreement and have paid in advance, but die after 10 years, the balance of your 20 years can be transferred to your heirs, both foreigner and Thai. Lease agreements between spouses are often refused by Land Departments. For such situations, there are other agreements like a usufruct, superficies according to Thai Law, or right of habitation that can be used. Even the new rights of Sap Ing Sith since 2019.
ThaiLawOnline believes that in Civil Law, a real right (attached to a thing) is stronger than a personal right (attached to a person). Therefore, a usufruct agreement in Thailand tends to be very strong and powerful and could be better than a lease but each situation is different. You must verify the age of the people, the length of the term, what they wish to accomplish, what will happen at their death, the value of the property, the location of the property, the title deed of the property, and many others.
Some properties will have a fixed price for utilities such as water or electricity. The fixed price may be higher than the normal price for the use of these utilities. This must be stipulated as a condition of the Lease Agreement Thailand.
However, there is a new law seeking to protect renters in the event the landlord rents more than 10 units at the same time:
AIR CONDITIONING AND OTHERS
Be careful if you install air conditioning, add some kind of structure, or invest extra money in the rental property. These can become part of the property and therefore the property of the owner. This again is something that will need to be outlined and stipulated in the lease agreement.
Any lease or rental agreement can become null and void. Normally, this is the result of a breach of contract, failure to pay rent or taxes, using the property for illegal/immoral purposes, and so forth.
COMPLEX LEASE STRUCTURE OF LEAE AGREEMENT THAILAND
Remember, failure to adhere to the lease agreement is something both the renter and the owner can be guilty of. This is another reason why having a law firm construct your lease agreement can be extremely helpful.
One recent example of this comes from Phuket. Certain projects were offering 30-year leases with an option of 3 renewals.
The scheme involved a company owning the land and controlling the leases, with foreigners owning the structures on land, like a house. These have been canceled by the appeal court in Phuket. The case is currently in Supreme Court. The mechanisms used for secured leases are for the moment, considered void:
Finally, in regards to condominiums, a long-term lease or purchase through a third party is never the best option for foreigners. Since foreigners can legally own a condominium the best option is full ownership, or freehold, rather than a leasehold.
As with most things in Thailand, it is preferable to consult a specialist. A lawyer can help you before making or signing a lease agreement. Once signed, the agreement will be binding for both parties. Any changes to the contract will be incredibly difficult to implement. A quick consultation before signing any agreement is generally cheap and easy to do. Likewise, drafting a long-term lease agreement is a common service provided by law firms in Thailand.
There are other arrangements, such as separating a lease and an addendum, that are best handled by a lawyer. The lease will have the basic clauses and information and given to the Land Department. The addendum will remain private, and give additional rights to the foreigner lessee.
An addendum can have the option to purchase and an automatic renewal. We like to add a declaration of intention to renew that will bind heirs in case the lessor dies. Hopefully, this information has given you a better understanding of lease and rental agreements in Thailand. We will be discussing other types of contracts, like a usufruct, in upcoming articles. We will also be going into greater detail about property use, ownership, and agreements in upcoming exclusive videos, along with our webinars.
For additional information or questions please contact email@example.com or visit our website. If you are ready to make a lease, send an email to firstname.lastname@example.org. You will receive an automatic reply explaining you everything that we need. Check your spam if you do not receive it in the next 1 or 2 minutes. Fast, efficient and professional agreement at low cost.