Real Estate

The Thai Government has always been very concerned to restrict ownership of land to Thai citizens or their companies, which Thai citizens control. Under the Land Code, foreigners cannot own land with very few specific exceptions**. However, foreigners can take interests in land through a Thai company or with a tenure such as leasehold, usufructuary or superficies rights. The most popular options are to register a Thai company or to enter into a long-term lease agreement. Buying a property through a Thai spouse is not recommended as it cannot be jointly-owned.

• Buying land with a Thai company

A Foreigners is defined as a non-Thai individual or as a company where more than 49% of the shares is owned by foreigners. As a consequence, a company where 51% of the shares is owned by Thai persons is considered as a Thai company and can legally own land in Thailand provided that the Thai shareholders are not nominees. This is the so-called 51/49 Thai company that has been used for years by foreigners to circumvent the restrictions on land ownership in Thailand.

The Thai authorities have increased scrutiny on Thai companies with minority foreign shareholders to deter the use of “nominees” or “agents” of the foreign partners. When using a Thai company with foreign shareholders to buy and own land, it is important to ensure that Thai shareholders are real shareholders and not nominees.

• Long-term leasehold

A long-term lease (30 years) is a popular option for foreigners to get interest on land due to its simplicity. Under Thai law, leasehold allows possession and use of the land for successive terms of not more than 30 years (up to 50 years for industrial or commercial purposes under certain circumstances). Once registered at the land office (registration of the lease is mandatory if the lease period is 3 years or more), the lease becomes a lien upon the title deed (if the land is sold to a new buyer, the lessee keeps his right to use the land until the term of the lease).It should be noted that the renewal of the lease after the term is not automatic and may be hazardous if the original lessor who signed the renewal lease agreement is not here 30 years later to process the registration of a new lease with the land office. In case of death of the original lessor or sale of the land, the contractual option to renew the lease may not be enforceable against the heirs or the new landlord. This is the reason why one must be careful with the 90 years lease structure (30+30+30) that is often marketed by some promoters while it is in reality a 30 years lease with 2 options to renew for 30 years each.

To cope with the renewal issue, it is possible to use a legal entity as a lessor (the company is unlikely to pass away) and a set of legal documents to secure the renewal of the lease for successive terms. Such schemes can be complex and must carefully analyse but when properly set up they allow long-term foreign use and possession of land.

• Buying property through a Thai spouse

The Thai Government has always been very concerned to restrict ownership of land to Thai citizens to the point that until 1999 Thai citizens married to foreigners were prohibited to buy land. It is now possible for the Thai spouse to buy land provided that the land remains his or her individual property. In other words, the land cannot be jointly owned even if all the funds have been invested by the foreign spouse (the land is excluded from the communal marital property).

In practice, the officials at the land office may ask the spouses to certify that the funds used to buy the land belong to the Thai spouse and require the foreign spouse to sign a document stating that he will not make any claim on the land in the event of a divorce.

However, the foreign spouse has several options to get a minimum protection such as entering into an usufruct agreement over the land and distinguishing the ownership between the land and the building thereon (the house of the villa) as there is no restriction on foreign ownership of buildings.