Difference between Leasehold and Freehold

Difference between Leasehold and Freehold in Phuket, Thailand

This article gives you a wide picture but clear for the Difference between Leasehold and Freehold in Phuket, Thailand. What are the differences between them? What are the advantages and disadvantages? Keep this difference in mind, it is important to get a clear idea of these notions before deciding. So, you know which one is a good option for your investment. In case you are looking for a clear idea about buying land or a condo in Phuket, we highly recommend reading the article 5 steps to understand when buying real estate in Phuket.

Leasehold and Freehold Meaning

Meaning of Leasehold and Freehold in Thai law are mostly the same with the law of most countries. In Thai law, leasehold is a long term rental and personal right attached to the person (right against another person for the performance of an obligation as a contract party). Freehold is an ownership right and real right attached to the property (a person has complete title or control over a property)

What are the rights ‘Freehold and Leasehold’ gives you? 

Freehold ownership provides the whole right to the Owner as defined by Roman Law, the ‘Usus’, the ‘Fructus’ and the ‘Abusus’. Legally. While, the leasehold gives you a long term tenant and consequently has the right of the ’Usufruct’ on the properties. But thing to remember, your rights are not the ‘Abusus’ or the ‘ownership’. It is still owned by the Lessor, the long term Landlord and owner’.

To put it in another way, the leasehold is one type of right of use of property for a limited long-term period. The owner of the leasehold has no ownership rights of the property. What is more, there may be a risk of not being entitled to compensation for land and buildings. For instance, if damaged by disaster or being expropriated during the leasehold period. It is because the compensation for the property will be a right of the ownership. The owner of the leasehold has a right to claim for damages as an occupant only.

Leasehold in Phuket

In accordance with the law, the Leasehold in Phuket is usually made for a period of 30 years. Of course, it is the maximum period under section 540 of the Civil and Commercial Code of Thailand (CCC). In the same Section paragraph 2 some additional contracts may be renewed for another 30 years. When the contract expires. But, the rights of use of the property must be returned to the owner; 

Most important to know, in reference to the emphyteotique rental, the leasehold practice in Phuket, foreigners always make 30 years +30 years +30 years leases contracts. Keep the law in mind, only the first 30 years period is enforceable under Thai law (supreme court judgement no. 4392/2547).So, when the time of renewal comes, the Lessee shall notify the Lessor before the expiration of the current lease that he has the intention to renew the lease. But again, even if the Lessee followed this compulsory procedure, the Lessor could deny the renewal. Then the litigation occurs to try to get back some damages.

Freehold in Phuket

Freehold is one type of ownership rights of the property. The owner of the freehold has full ownership rights. Of course, it is the best legal right of the property. Firstly, there is not only no set period for the Freehold. But also it can be passed on to the next generation, and the next generation at infinity. Secondly, the ownership right comes with rights allowing to mortgage, to sell the ownership and all rights only attached to the ‘Abusus’ or Ownership. Finally, if the property has various disasters or is being expropriated for sale of land, the owner will have a right to receive compensation in proportion to the damages on the property. However, there are more legal rights attached to the ownership rights.

One Key Difference thing to Remember

Keep this legal matter in mind, the Thai law is that through the ‘abusus rights’ or ‘ownership right’. Again, as we see above the succession of the Freehold is automatic.

But, in presence of leasehold, a succession clause shall be clearly written into the lease agreement to allow the heirs to come into the rights and duties of the deceased lessee. If nothing is mentioned, the lease is extinguished by the death of the Lessee (section 569 of CCC. and supreme judgment no. 384/2540). However, in case of the death of the lessor the leasehold rights and duties of the lessor shall transfer towards his/her heirs. (section 545 of CCC.) 

In conclusion, to avoid confusion when the seller, real estate agent presents you the Land or Condo. Most importantly, be sure what you are going to buy. So, before you understand the difference, don’t sign any contract. Even if it is a reservation agreement. Finally, prevention is better than cure. If you need help from a Law firm who offers full Legal services in real estate law in Phuket, feel free to contact us.

Article by;
Frederic Retif Master in Business law, French Lawyer and Thai Legal Advisor.
and Nuansnit Chantawong Master in Law, Thai Attorney and Notarial Services Attorney.