Court voids 'secured' foreigner property leases

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buksida
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Court voids 'secured' foreigner property leases

Post by buksida »

In a shock decision by the Phuket Civil Court, backed by the Region 8 Appellate Court, it has been ruled that so-called “secured leases” offered by some real estate developers to allow foreigners to secure a cast-iron 90-year lease are not valid.

The case is now to go to the Supreme Court. If confirms the lower-court opinions, then not only will any renewal term of "secured" leases by foreigners be invalid, but also the current lease terms.

The Phuket News' legal correspondent, Jerrold Kippen, has revealed that not only has the structure been ruled invalid but the courts' decision may mean that the original underlying 30-year lease, even if registered with the Land Office, is now void - it never existed, leaving the buyer with two handfuls of nothing.

Mr Kippen explained, "as a general rule foreigners cannot own land and apartment units, but it is possible for foreigners to lease them and that is the reason why these are commonly marketed to foreign buyers on a leasehold basis.

30 years maximum

"Under Thai law the maximum lease term is 30 years, which may be renewed upon expiration of that term," he continued. "The leases marketed to foreigners typically provide for an initial 30-year term plus two additional successive 30-year renewal terms."

However, Mr Kippen noted, "the renewal of a lease in Thailand is by no means assured even if it is provided for in the original lease agreement."

He explained that in order to overcome this issue the "secured" or "collective" lease was devised and marketed to foreigners. This is meant to ensure that the lease is renewed, twice, as originally agreed.

The way this "security" is supposedly provided is by the buyer not only entering into a lease agreement with the Thai company that owns the developer's land/apartment, but also entering into a share-sale-and-purchase agreement for shares that control the Thai company that owns the developer's land/apartment.

Now, however, two Thai courts have concluded that the "secured" lease is "void" as a matter of law. A contract that is found to be void is considered never to have existed.

"This would be the case regardless of whether such a lease was already registered," Mr Kippen said.

"Why? Because a finding that a lease is void means that it never legally existed and, therefore, as far as the law is concerned, a void lease cannot be, nor ever could have been, registered," he explained.

"Even if the legally void lease went through the Land Office formalities of registration, with registration fees paid, papers signed and stamped by the land officials, it simply does not change the legal non-existence of the void lease because, legally, nothing happened by such acts."

In the test case now headed for the Supreme Court, the buyers entered into the project's "secured" lease structure. Leases, in this case for apartments, were registered several years ago.

The lessees filed a civil case against the developer of the project in the Civil Court to protect their leasehold rights. Neither the buyers nor the developer argued that the leases were not valid. Quite the contrary: they both relied on provisions of the leases to support their respective arguments.

Full Story: Bangkok Post

More: http://www.phuketgazette.net/property-l ... -you/27846
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Re: Court voids 'secured' foreigner property leases

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See, that's the thing that gets me here, and this is a great example of it, as in the goal posts move on something major like this with no warning or anything...just POW! Done!

They might as well just issue a statement that says "All foreigners leave" because that's about what they would like. Just goes to show, no point spending any money here.

Some provoncial judge at the Ministry of Banananess just makes some sweeping judgement that essentially screws up thousands of people just like that. Guess who will be left to suck it up and swallow....won't be the developers that sold the land in the first place under shakey promises.
The Phuket News' legal correspondent, Jerrold Kippen, has revealed that not only has the structure been ruled invalid but the courts' decision may mean that the original underlying 30-year lease, even if registered with the Land Office, is now void
Wow.......just turn everything on it's head in an afternoon. :shock:
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Re: Court voids 'secured' foreigner property leases

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Spitfire wrote:See, that's the thing that gets me here, and this is a great example of it, as in the goal posts move on something major like this with no warning or anything...just POW! Done!

They might as well just issue a statement that says "All foreigners leave" because that's about what they would like. Just goes to show, no point spending any money here.

Some provoncial judge at the Ministry of Banananess just makes some sweeping judgement that essentially screws up thousands of people just like that. Guess who will be left to suck it up and swallow....won't be the developers that sold the land in the first place under shakey promises.
The Phuket News' legal correspondent, Jerrold Kippen, has revealed that not only has the structure been ruled invalid but the courts' decision may mean that the original underlying 30-year lease, even if registered with the Land Office, is now void
Wow.......just turn everything on it's head in an afternoon. :shock:
:agree:
I think there has been increasing pressure by the Thai elite and generalissimos to get rid of foreign owned businesses and the foreigner influence in Thailand.
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Re: Court voids 'secured' foreigner property leases

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It's time for Thailand to open up all of its markets to foreign companies and their products and to focus on improving the overall quality of life for both Thais and foreigners in Thailand. Thailand should not continue to be a closed off xenophobic and protectionist country that just focuses on trying to sell locally made and poor quality products.
The product selection here in Thailand is absolutely dismal and pathetic.
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Re: Court voids 'secured' foreigner property leases

Post by JamesWest »

i wonder if they will go after the people who "sold" the 90 year leases? NOT.

man if i "owned" a house here i would be waiting for the other shoe to drop.

anyone ever renew a 30 year lease yet?

lets see, you are 50 years old, you "buy" a house and then when you are 80 years old you have to deal with renewing your lease? no thanks...
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Re: Court voids 'secured' foreigner property leases

Post by HHTel »

Renewal of a lease has always been illegal. The way I've seen it done is that the first 30 year lease is registered with the land office by the book. 2 separate agreements are made with the owner. The first agreement to lease the property for 30 years from xxx date (30 years after the first) and the second to lease the property for 30 years from xxx date (30 years after the first agreement).

A lease can be willed and the agreements can name a person (in the event of death) to whom that lease is offered.

This complies with land office regulations as there is no renewal.

Correct me if I'm wrong.
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Re: Court voids 'secured' foreigner property leases

Post by splitlid »

^correct.
when leases where first being done (after the company route clampdown), the land dept. here in HH was allowing the 30+ 30 extensions to be added to lease contracts that were being registered.
however, this was soon stopped and then separate documents (30+30) between land owner and buyer were introduced.
I guess that is what maybe happened in the above case. as separate agreements between owner and buyer have nothing to do with the land dept. :?
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Re: Court voids 'secured' foreigner property leases

Post by caller »

I'm not so sure this really is a shock decision. The legality of it was always open to question and now it's being tested. The higher court may find its a practice that's perfectly acceptable, despite it being used as a way around the limitations imposed by the current law. Wouldn't be a need for these other leases otherwise, would there?
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Re: Court voids 'secured' foreigner property leases

Post by Ratsima »

I don't see why anyone is surprised.

I lived on Saipan for a long time where similar land alienation laws are in effect. Lawyers got very creative with "automatic" lease renewals and other schemes to get around the law. Eventually the courts struck down all these schemes and many buyers/lessees had to walk away losing everything.

Here's one famous case:

http://openjurist.org/958/f2d/1450/wabol-v-villacrusis
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Re: Court voids 'secured' foreigner property leases

Post by SunandFun »

This is clearly a case where the developer was using an illegal tactic to try and convince foreigners to buy property at inflated prices under the assurance that they were "guaranteed" 90 years! That has always been illegal and a good lawyer would have advised against buying and registering such illegal transactions. There has never been any guarantee that a 30 year lease will be renewed and any attempt to circumvent this is illegal and can even void the first 30 years by doing so. So if you are apt to buy a property through a lease, understand that it is for 30 years only. If the numbers do not make since, then don't proceed.

Independent houses have always been cheaper than condos for foreigners. Because you can own a condo "forever" and a house for 30 years. Unscrupulous and greedy builders, developers and property dealers, in order to inflate the prices to be more at par with condos and even higher in a lot of cases, market the properties with this "false promise" of continual renewal. Many fall for this trap and give credit to these false promises and use the mis-information to justify their poor business judgement.

Independent houses should always be looked at as being leased. The cost of the lease should be evaluated based on the monthly cost. A 5 million Baht house will cost about 13,900 Baht per month not factoring any loss of capital or interest loss.

The truth is, we never own property outright in any country. We simply borrow it for a period of time we are on the earth. It then, is passed on to others.

All of the above is my personal opinion so please read it as such.
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Re: Court voids 'secured' foreigner property leases

Post by Takiap »

I agree with those who have said that this is not really a big shock at all. I am not an expert on Thai law, but I do know that 90 year leases have never been legally possible. Personally, I think most people would have far greater security with a Usefract (spelling?) agreement, which is in essence a lifetime agreement.
My wife and I recently spoke to a lawyer and to the land department, and both told us that we could draw up a Usefract agreement which would legally give me full rights to our property until I die. During this time, I would be free to either live in the house or rent it out. Any money from rent would be mine, and while my wife would be able to sell the place, the new owners would have to honor the agreement.

Personally, I think that at some point the authorities are going to crack down on those who chose the "private company" route as well, but probably not just yet.


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Re: Court voids 'secured' foreigner property leases

Post by GLCQuantum »

Takiap wrote:
Personally, I think that at some point the authorities are going to crack down on those who chose the "private company" route as well...
:cheers:
...and also those guys who bought a house and put it in the wife's name. I'd be a little worried if the wife can't prove that she, at least partly, funded the house.

Ho, hum... :mrgreen:
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Re: Court voids 'secured' foreigner property leases

Post by Spitfire »

GLCQuantum wrote:...and also those guys who bought a house and put it in the wife's name. I'd be a little worried if the wife can't prove that she, at least partly, funded the house.
Surely there would simply be too many of those to investigate and as a result too many Thais would suffer....not sure if they would bite that one, but the private company thing might be more possible or an easier target.
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Re: Court voids 'secured' foreigner property leases

Post by STEVE G »

Name Taken wrote:It's time for Thailand to open up all of its markets to foreign companies and their products and to focus on improving the overall quality of life for both Thais and foreigners in Thailand. Thailand should not continue to be a closed off xenophobic and protectionist country that just focuses on trying to sell locally made and poor quality products.
The product selection here in Thailand is absolutely dismal and pathetic.
Unelected governments don't need to worry about the quality of life of the people, there'll always be enough for those at the top and as for everyone else, they can't vote for a different government and it's illegal to protest now anyway so why would they bother trying to improve their lives?
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Re: Court voids 'secured' foreigner property leases

Post by HHTel »

GLCQuantum wrote:
Takiap wrote:
Personally, I think that at some point the authorities are going to crack down on those who chose the "private company" route as well...
:cheers:
...and also those guys who bought a house and put it in the wife's name. I'd be a little worried if the wife can't prove that she, at least partly, funded the house.

Ho, hum... :mrgreen:
No, the law is quite clear on that glc as you know. Doesn't matter who's name it's in or who paid for it, the community property laws state that the assets are 50-50 on divorce...... The same as the UK and most countries in the west.
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