Luxury Six Star House For Sale/Rent/Trade

 We are offering you our Thai registered company with Thai shareholders if you require, however you can easily change the Thai shareholders to your own Thai partner/family or acquaintances. In addition we are offering our Thai trading consulting business in art, antiques, marble and household furnishings with over a hundred business contacts, if sold at sale price Options 2 and/or 3. The business comes with two websites. See the Sale Price/Rental Rates page for in depth details.

This is an up to date company that has paid  taxes per year and uses an accredited Thai accounting company in Chiang Mai. With the sale of this property we are giving our Thai registered company for free, with all approved documents and without all the daunting tasks mentioned below, .

Below is some general information regarding land and house ownership in Thailand.  For your own benefit, we recommend you seek legal advice of your own regarding the matters of ownership.

Understand the law

There is no such thing as a "bogus" company. A company is a legal entity and comes into being when the appropriate authority issues a Certificate of Incorporation. A Thai company is a legal entity and it is Thai. It is legally a "person" and its "personality" is quite distinct from that of its directors and shareholders. Also please don't confuse "business" with "company" - they are two very distinct concepts.

The company should trade and pay appropriate taxes - but even that is a separate issue. By leasing the land to a foreigner and providing maintenance services the company is trading.

There is no law in Thailand that says shares cannot be given as a gift and a company is not funded by shares alone. There is no obstacle to loan finance even from a foreigner. The authorised share capital of a Thai company is 1 or 2m baht. This is what the commercial office can investigate in terms of source of funds. *7 shareholders are required and Thai shareholding must be 51%, = 510,000  baht. 510,000 baht divided by 6 Thai shareholders = 85,000 baht.                    

*As from July 2008, you only require 3 shareholders.

-If a foreigner had purchased property with a Thai company formed through use of nominees, there were ways to ensure compliance with the FBA and the Land Act. One method would be to have the company actually operate a business no matter how rudimentary, employ the required number of Thais, and ensure that all taxes (employment and income) are up to date. If this is not feasible, then a Thai could be made the managing director of the company, with safeguards put in place through a lease and mortgage arrangement to ensure continued possession and use of the property. Alternatively, the company could sell the property to a Thai or foreigner with similar safeguards. In Thailand, a foreigner can own the structure in their own name, but not the land. Also, a foreigner can own a leasehold interest on land and can own a mortgage for money loaned to buy land.

-A foreigner can loan money to a Thai person or company for the purpose of purchasing property and hold a mortgage on the property, which prevents sale of the property unless the mortgage and interest is paid. The foreigner can then lease the property for 30 years with an option for another 30 plus 30 for a total of 90 years. The lease and the mortgage must be registered at the Land Office and this is usually done simultaneously with the Thai or foreigner purchasing the property and obtaining the title deed. If there is a mortgage, the foreigner, as the mortgage holder, usually retains physical custody of the original land title document.

-The foreigner gets a “power of attorney” from the Thai land owner authorizing the foreigner to act in their name to sell the property (would have to be to another Thai or  foreigner company) in order to satisfy the repayment of their loan (mortgage).

-Should include a “right of assumption” in its provisions so that, if needed, the foreigner could transfer the lease to another party. The foreigner should have a Thai will with provisions on who would inherit the lease and/or mortgage.
A foreigner can legally register any structure (house) on the land in his name. (i.e. ownership).

An Example:

Value of land: say, 5m baht
Value of building, say 5m baht

What do you own? Not the land.
House; 5,000,000 baht
49% of company's assets (ie. (hopefully, appreciating) value of the land - N.B. that is money's worth represented by shares - not the land per se) 2,450,000 baht

30 year lease - this effectively secures your interest in the Thai "ownership" element of the company's asset (land) for the next 30 years (the 51%) = 2,550,000.

Equivalent to a cost of 85,000 baht per year, (2,550,000 baht for 30 years) (if 90 years this is 27,777 baht p.a.)
Right to repayment of any loan you extended to the Thai company to buy the land. (plus interest if you have structured it right)

 

What do the Thai shareholder's own?
Not the house. Not the rights under the lease for the next 30/90 years.
51% of a company with a debt of 5,000,000 baht + annual interest = -255,000 baht and a reversionary interest in land that is legally leased out for the next 30/90 years.
They may own 51% of the value of the land (less the value of the loan finance + interest) in 30/90 years time.

 

Would all the Thai lawyers who have advised and set up companies for foreigners to enjoy the benefits of land in Thailand (N.B. not "OWN") be immune from any backlash if the government were, perversely, to claim that land was actually "owned" by foreigners. They would all be liable for negligence and would be more culpable under the law than any foreigner. Ask yourself, is this likely to happen? Have they all got it wrong or do they know the actual risks?

 

Buyers wishing to establish their own Thai company should take specialist qualified legal advice.

 Leasehold WITH A COMPANY

You can arrange for the registration of a 30 year lease when the land is registered at the Land Dept under the name of the company or your name. This 30 year lease (and two pre-paid extensions of 30 years each) contract, enables you to lease for a total of 90 years from the company (the registered company leases the land to you).  The articles of the land owning company will state that this automatic right to perpetual lease extensions may only be revoked by a 100% majority shareholders vote. Therefore, unless a shareholder votes against his own extension, he will have a secure and contracted right to continue leasehold ownership.

Leasehold WITHOUT A COMPANY

You can put the land under the name of any Thai person of your choosing and register the house in your own name, under a 30 year lease with two extensions of 30 years each, giving you a total of 90 years.  Use the USUFUCT in addition to secure your rights. (Please see the USUFUCT section below)

               

USUFRUCT – Putting the land in your Thai partner’s name without the use of a company.

The right of usufruct refers to the rights granted under the Civil and Commercial Code whereby the owner of an immovable property (condominium, land and/or house) grants to another person for a limited period of time the right of possession, use, management and benefits the property may produce without destroying, damaging, or diminishing the property. The benefits ('fruits') of the property could be rental income from the property or in case of farm land the crops etc which are collected from the land.

The right of usufruct is a specific right
Rights of usufruct is a property right that origins from Roman Law and is currently still used (for limited purposes) in most Civil Law systems, including Thailand. Usufruct in Thailand is a real right (attached to the land title) with specific rights and obligations (sections 1417 to 1428 law text). The concept of usufruct does not allow a great deal of freedom of contract between the parties and must be drafted in line and within the elements of the right of usufruct. It is important that the legal professional who is drafting the usufruct agreement is familiar with the concept of usufruct and not, say, draft the agreement using a lease as a template, or what sells or even what sells the property to a client. In Court a wrongly drafted agreement could be (partly) unenforceable as usufruct even though registered at the Land Department. For example, a usufruct agreement with the elements of a lease could in Court be deemed a lease and a different set of rules would apply on this agreement. It is not a usufruct agreement merely because the parties say it is a usufruct or even because it is registered.

The elements of usufruct
The person who holds the property in usufruct must take care and maintain the property as a person of ordinary prudence would take of his own property (section 1421 Civil and Commercial Code). At the end of the term of the usufruct the property must be returned to the owner (section 1420) and if reasonably possible in the state it was at the time the right of usufruct was granted. Usufruct is in fact for 50% built around the interest of the real owner and the return of the property without depreciation (if possible). The law says in this matter (section 1424), the usufructuary is bound to keep the substance of the property unaltered, and is responsible for ordinary maintenance and petty repairs. If the usufructuary fails to comply with his obligations and/ or the owners rights are in peril the owner may for example demand security from the usufructuary (section 1423 Civil and Commercial Code). The usufructuary is liable for the destruction or depreciation in value of the property (section 1420), unless he proves that the damage was not caused by his fault. He must replace anything which he has wrongfully consumed, but is not bound to give compensation for depreciation in value caused by reasonable use. The person who holds the property in usufruct has the use and profitable possession of another's immovable property for a limited period of time, but, as part of his right, also has responsibilities towards the property under usufruct and the real owner.

Rights of the usufructuary and renting out the property
The usufructuary can as the manager of the property legally rent out the property for terms up to 3 years (this is not based on a Supreme Court judgment but within the rights of usufruct). Often it is referred to Supreme Court judgment 2297/1998 which says that a rental agreement is not automatically terminated together with the usufruct. The rental agreement entered into by the usufructuary can continue for the remaining rental term after the usufruct has ended. This ruling, and the fact that the usufructuary can rent out the property without consent of the real owner, is often wrongfully explained as 'with a usufruct you can have the property for your life, + 30 years under a leasehold'. This is not correct as any lease exceeding 3 years must be registered (to be legally enforceable) at the local Land Office and this is not a right the person who holds the property in usufruct has. Only the real owner is allowed to register legal acts (like a registered lease) over the property, not the usufructuary.

I want to have a usufruct interest in the land but own the building in my own name.
The right to own or acquire a building on the land owned by another is not a usufruct right and right of usufruct would normally include land and house together. To achieve such a construction you would first have to separate ownership of the house from the land through a superficies, however, in practice, the benefits are limited as when there is no legal ground left for the building to remain on the land (when the usufruct ends) the building remains unlawfully on the land owned by another and must be removed or becomes property of the land owner.

Can a usufruct be for free?
Unless there is a moral duty, like from a Thai spouse, money will almost certainly change hands (even though the usufruct in the agreement is granted for free). A usufruct for free does really not make sense. The Land Department could refuse to register such a usufruct (unless there is a moral duty), and the Revenue Department could investigate this structure and trace the source of the money that is used to purchase the property. I would be careful with this 'usufruct for free' construction as it could lead to potential legal problems and tax fines. Did the foreigner use a Thai national to buy land on his behalf? Is the usufruct not actually a lease? Is it set up to circumvent taxes or the law?

A lifetime usufruct
The maximum term of a usufruct in Thailand is 30 years or for the life of the usufructuary (meaning for the life of the person who holds the property in usufruct). If the usufruct is for the life of a juristic person the maximum term will be limited to 30 years. A usufructuary holding a property under a lifetime usufruct can't leave the property to his or her heirs (also not a via a 30-year lease issued by the usufructuary). By law, in any case the lifetime usufruct comes to an end on the death of the usufructuary (section 1418). Any promise by a land owner to enter into a new usufruct for free with your heirs is legally of no value. Also the possibility of selling a lifetime usufruct to a third person would be practically impossible.

Can I use a usufruct to protect my property investment?
Unless you are married to a Thai national and bought property in his/ her name the right of usufruct offers no benefits for foreigners to own property in Thailand. It is not a suitable legal tool to protect a property investment in Thailand. It merely offers profitable possession of another's immovable property for a limited period of time. Usufruct allows little freedom of contract between the parties and this and a usufruct being a specific right brings more drawbacks than benefits, compared to a proper lease construction combined with a superficies.