buksida wrote: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