Thaksin hints at new maximum lease term?

Posted on Updated on

Some new details emerged today about Thaksin’s proposed new city and land reclamation project, buried with a story about the flood prevention works where Thaksin reveals details about the proposed pricing & structure: i.e. 10 million per rai for a 99 year lease.

Read the full story here

I say its interesting as the current, maximum lease term in Thailand is 30 years, well ok, 50 years under special circumstances.

So is this a hint that the current government may accept the various proposals from real estate industry to increase the maximum lease term to 99 years? It would be a good thing for the property industry if they did.

Foreign land ownership in Thailand is restricted to promoted commercial activity, or individuals who meet a very particular set of circumstances requiring ministry of the interior approval and investing an additional 40 Million Baht in government bonds for 5 years. It is also possible to inherit land, but it must be disposed of within a short period of time.

An unmarried foreigner who prefers to live in a house is left with only one option. To rent it for as long as possible, and at the moment, the maximum lease term is just 30 years, which of course many people will live to see the expiry of.

It is possible of course to build an option to renew into a lease agreement, but this should be treated with much caution.

An option to renew will not be registered on the title deed at the land department, it is merely a contractual promise between the parties. So what happens if say the landlord dies or becomes insolvent? Well in that situation the promise would not be binding on the landlord’s successor. However, if the property changes hands whilst the lease is still in effect, the successor is obligated to honour the real terms of the lease up until the expiry date.

In effect the option to renew (and any other contractual promise) dies with the original landlord and there is no legislation in place that provides a tenant with security of tenure beyond the expiry of the lease, unlike say the landlord and tenant act 1954 of the UK.

The “short” maximum lease term and lack of security of tenure are some of the reasons why most banks refuse to lend on leasehold properties here.

Increasing the lease term to 99 years then would be good for the property industry as a whole. It would create a more valuable marketable asset for Thai landlords and provide more security of tenure for tenants whether they be Thai or foreign.

I have already addressed my other concerns about the land reclamation project and new city in a previous post. Pricing needs to be reviewed in detail, as these levels are comparable to areas of Bangna Trad, albeit off the main road.

So it does not sound too unreasonable, but the question though is whether it can be built, profitably, for that much and whether it would be able to satisfy all the environmental concerns that have been raised.

OR he could have just forgotten that the maximum lease in Thailand is 30 years…


Leave a Reply

Please log in using one of these methods to post your comment: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s