Protected Lease
It is commonly understood that purchasers of real estate in Thailand may acquire property through two primary forms of tenure:
- Freehold Ownership – In this form of ownership, there are generally no legal concerns, as full title to the property vests in the purchaser. The purchaser holds exclusive rights to possess, use, transfer, assign, and protect the property from any interference.
- Leasehold Tenure (Long-Term Lease) – Under Thai law, lease agreements may be executed for a maximum term of 30 years. In practice, purchasers are often offered a 30-year lease term accompanied by a promise to renew the lease twice, each for an additional 30 years, resulting in a total of 90 years.
However, the Supreme Court of Thailand recently issued Judgment No. 4655/2566, which held that a promise to renew a lease for two further terms of 30 years each is void, as such a promise is contrary to mandatory provisions of law.
This judgment has raised concerns as to what will happen upon the expiration of the initial 30-year lease term, particularly regarding the legal enforceability of any promised renewals.
To mitigate such concerns, it is advisable that, in addition to entering into a 30-year lease agreement, the leasehold purchaser also acquires shares in the developer or seller’s company. This shareholding enables the lessee to participate in the management and decision-making processes of the project, including the control of common property and the facilitation of lease renewals for additional 30-year periods upon the expiration of the initial term.
This structure is commonly referred to as a “Protected Lease.”
