Leasehold and Freehold Rights in Phuket
This article gives you a clear picture of 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.
Leasehold and Freehold Meaning
The meanings of leasehold and freehold in Thai law are mostly the same as those in most countries laws. In Thai law, a leasehold is a long-term rental and personal right attached to the person (a right against another person for the performance of an obligation as a contracting party). Freehold is an ownership right and a real right attached to the property (a person has complete title to 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 the right of “use” on the properties, something to remember is that your rights are not “abuse” or the ‘ownership’. It is still owned by the lessee, the long-term landlord, and the owner’.
To put it another way, a leasehold is one type of right to use the property for a limited, long-term period. The owner of the leasehold has no ownership rights to the property. What is more, there may be a risk of not being entitled to compensation for land and buildings. For instance, if the property is damaged by disaster or expropriated during the leasehold period, the compensation for the property will be a right of ownership. The owner of the leasehold has a right to claim damages as an occupant only.
Leasehold in Phuket
In accordance with the law, the leasehold in Phuket is usually 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;
The most important to know, in reference to the emphyteotique rental and the leasehold practice in Phuket, is that foreigners always make 30-year + 30-year + 30-year lease contracts. Keep the law in mind: only the first 30 years are enforceable under Thai law (supreme court judgment 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 lessee could deny the renewal. Then litigation occurs to try to get some damages back.
Freehold in Phuket
Freehold is one type of ownership right for the property. The owner of the freehold has full ownership rights. Of course, it is the best legal right for the property. Firstly, there is not only no set period for the freehold, but it can also be passed on to the next generation, and the next generation can go on to infinity. Secondly, the ownership right comes with rights allowing one to mortgage or sell the ownership, and all rights are only attached to the “abusus” or ownership. Finally, if the property has suffered various disasters or is being expropriated for the sale of land, the owner will have a right to receive compensation in proportion to the damages to the property. However, there are more legal rights attached to ownership.
One Key Difference Thing to Remember
Keep this legal matter in mind. The Thai law says that through “abusus rights’ or ‘ownership rights,” as we see above, the succession of the freehold is automatic.
But, in the presence of a leasehold, a succession clause shall be clearly written into the lease agreement to allow the heirs to inherit 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 the CCC and supreme judgment no. 384/2540). However, in the event of the death of the lessor, the leasehold rights and duties of the lessor shall transfer to his or her heirs. (Section 545 of the CCC.)
To avoid confusion when the seller’s real estate agent presents you with the land or condo, most importantly, be sure what you are going to buy. So, before you understand the difference, don’t sign any contracts. Even if it is a reservation agreement. Finally, prevention is better than cure. If you are in need of a real estate lawyer or for more information, feel free to contact us at any time.