Your Guide to Lease Agreements in Thailand: Understanding Legal Requirements and Avoiding Common Mistakes
Suppose you are a foreigner looking to rent accommodation, an office, a shop, a warehouse, or any other property in Thailand. In that case, it is crucial to understand the legal requirements and considerations when signing a lease agreement. Lease agreements in Thailand can be complex, and it is important to avoid common mistakes that can lead to legal disputes and financial loss.
This guide will provide an overview of Thailand’s legal requirements for lease agreements.
- Rental agreements in Thailand is a legal contract between a landlord and a tenant to use a property for a specific period.
- The rental agreement outlines the terms and conditions of the rental.
- The maximum term for a rental is a 30-year lease term.
- A rental agreement in Thailand for more than three years must be registered with the local land office.
What should foreigners be aware of regarding renting a property in Thailand?
Foreigners who are renting a property in Thailand should be aware of the following legal requirements and considerations:
- Lease agreement: It is important to have a written lease agreement. The lease agreement should clearly state the rental terms, including the lease length, the rental amount, the payment schedule, and any deposit required.
- Security deposit: Landlords may require a security deposit before allowing tenants to move in. This deposit can be up to three months’ rent and should be returned to the tenant at the end of the lease if there are no damages to the property. Please note that if the landlord owns and rents out more than one property, they can only ask for one month’s deposit.
- Rental payments: Rent is usually paid monthly, and it is important to understand when and how the rent will be paid clearly.
- Landlord and tenant rights: Under Thai law, landlords and tenants have certain rights and responsibilities. Understanding these rights and responsibilities is essential to avoid legal disputes.
- Termination of lease: The lease agreement should specify the conditions under which the lease can be terminated, including any notice periods and penalties for breaking the lease.
- Property condition: Tenants should inspect the property before moving in and document any damages or issues. This can help avoid disputes at the end of the lease.
- Rental agents: Rental agents can help foreigners find accommodation, but it is important to use a reputable licensed agent with a good reputation.
What is a rental agreement in Thailand?
A rental agreement in Thailand is a legal contract between a landlord and a tenant to use a property for a specific period. The rental agreement outlines the terms and conditions of the rental, including the rental price, payment schedule, deposit amount, and any other terms that both parties have agreed upon.
In Thailand, a rental agreement can be written or oral, but it is always recommended to have a written agreement signed by both the landlord and the tenant. The rental agreement should also be translated into both English and Thai to ensure that both parties fully understand the terms of the agreement.
Rental agreements in Thailand can be for residential or commercial properties, and the agreement terms can vary depending on the property type and location.
What should be included in a rental agreement?
A rental agreement in Thailand should include the following important elements:
- Names of the landlord and tenant: The full names of both parties should be clearly stated in the agreement.
- Property details: The rental agreement should clearly state the address and details of the property being rented, including the size, number of rooms, and any amenities included.
- Rental term: The agreement should specify the length of the rental period, including the start and end dates.
- Rental amount: The rental agreement should state the amount of rent to be paid, including any additional charges such as maintenance fees or utilities.
- Payment schedule: The rental agreement should specify the payment schedule, including the due date and payment method.
- Security deposit: The agreement should state the amount of the security deposit required, the conditions under which the deposit will be returned, and the timeline for the return of the deposit.
- Maintenance and repairs: The rental agreement should specify who is responsible for the maintenance and repairs of the property, including any costs associated with these tasks.
- Termination of the lease: The agreement should outline the conditions under which the lease can be terminated, including any notice periods required.
- Restrictions and rules: The rental agreement should specify any restrictions or rules tenants must follow, such as restrictions on pets or smoking.
- Signatures: The rental agreement should be signed by both the landlord and the tenant to indicate that they have read and agreed to the terms and conditions of the agreement.
It is important to note that the above list is not exhaustive, and additional terms may be included in a rental agreement depending on the specific circumstances of the rental.
The following legal considerations should also be taken into account for rental agreements:
- it is important to have a written rental or lease agreement to ensure it is enforceable by legal action. Verbal agreements are generally not enforceable.
- Rental or lease agreements for up to three years can be written in another language and do not need to be registered with the land department. However, a Thai script version must be registered with the land department for agreements exceeding three years. It is also important to note that lease agreements can only be registered over the titled property with a legally issued title deed.
- Registered leaseholds cannot exceed 30 years. While the term may be renewed, renewal options are not guaranteed and are personal to the parties involved, not binding or enforceable by any third parties.
- Sub-leasing is only possible if agreed upon in the lease agreement, and assigning leasehold interest to another person requires permission and cooperation from the owner.
- Under Thai lease (rental/tenancy) laws, a property lease is automatically terminated upon the lessee’s death but not upon the owner’s death (as per section 569).
- For registered leases exceeding three years, a lease registration fee will be collected at 1% of the total rental throughout the lease term. Stamp duty will be collected at 0.1% based on the total rental throughout the lease term.
- Subleasing, rental, or lease income is subject to personal income tax in Thailand.
How long can a rental agreement be?
In Thailand, the lease term for real estate properties can be fixed or periodic. Typically, a lease will be for a year and renewed before expiry. The maximum term for a rental is a 30-year lease term. As per Section 540 of the Civil and Commercial Code, the duration of a rental agreement cannot exceed 30 years. If a lease agreement is made for a more extended period, it will automatically be reduced to 30 years. It is also possible for the lease term to be renewed before expiration.
Please note that to ensure the enforceability of a lease (tenancy rental) agreement in Thailand for more than three years, it must be registered with the local land office. Additionally, it is recommended that the lease contract be registered with the Thailand Land Department within three years of signing and beginning of the tenancy. It is essential to do so to avoid the lessee losing their right to bring a lease dispute to a court of law.
Upon registration of the lease agreement, the lease registration fees and stamp duty are due, totaling 1.1% of the overall lease price for the entire term. Furthermore, the income generated from the lease, also known as rental income, is subject to personal income tax and must be paid to the Revenue Department by the owner.
Can you renew a lease in Thailand?
In Thailand, lease renewal is not automatic, and parties must take action to renew the lease toward the end of the initial term. Renewal periods can be up to 30 years, and the renewal’s success will depend on the careful drafting of the clause regarding the intention to renew.
While the agreed term in the lease is considered a real right of the lessee under Thai law and Supreme Court rulings, an option to renew the lease is considered a contract option or obligation that must be enforced in the future. It is advisable to consult with a lawyer regarding renewal clauses to ensure the best possible outcome.
Do you have to pay tax on leases in Thailand?
If you are leasing a property in Thailand, it is important to understand the tax implications involved. While leaseholders typically do not have to pay taxes on their rental agreements, property owners may be subject to taxes in certain situations.
For instance, if your lease is registered and exceeds three years, you will be required to pay a lease registration fee, which is calculated at 1% of the total rental throughout the lease term. Additionally, stamp duty will be collected at 0.1% based on the total rental throughout the lease term.
It’s also important to note that any income earned from subleasing, renting out, or leasing the property is subject to personal income tax in Thailand. Therefore, property owners who earn income from leasing their property must declare this income and pay taxes accordingly.
How can Belaws help?
If you have a question about lease agreements in Thailand, please speak directly with one of our experts.
This article is for information purposes only and does not constitute legal advice.
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Frequently asked questions
What are the 4 types of lease agreements?
The four types of lease agreements are fixed-term lease, periodic lease, automatic renewal lease, and security deposit lease.
What is Thailand’s new lease law?
Thailand’s new lease law, the Lease of Immovable Property for Commercial and Industrial Purposes Act, came into effect in 2019. The law aims to promote investment in the country and provides greater flexibility and protection for tenants and landlords.
How does leasehold work in Thailand?
Leasehold in Thailand is when a person leases a property for a specific period of time, usually up to 30 years, from the owner of the land. The lessee has the right to use and occupy the land during the lease term but does not own the land.
What is the rule of lease agreement?
The rule of a lease agreement is to outline the terms and conditions agreed upon by the landlord and the tenant for the rental of a property. This includes details such as the rental amount, payment schedule, security deposit, maintenance and repairs, and termination of the lease.
What is the difference between tenancy agreement and lease agreement?
A tenancy agreement is typically used for short-term rentals, while a lease agreement is for long-term rentals. A tenancy agreement is often used for residential properties, while a lease agreement can be used for both residential and commercial properties.
What are the 3 main types of lease?
The three main types of lease are finance lease, operating lease, and hire purchase lease.
How long is leasehold in Thailand?
Leasehold in Thailand is usually for a maximum period of 30 years. However, the lease can be renewed before expiration with the agreement of both parties.
How do I evict a tenant in Thailand?
Evicting a tenant in Thailand can be a lengthy legal process. Landlords must follow the legal procedures outlined in the Civil and Commercial Code and obtain a court order before evicting a tenant.
How can I break my lease in Thailand?
Breaking a lease in Thailand can result in legal consequences and financial penalties. Tenants must follow the termination conditions outlined in the lease agreement, such as providing notice and paying any penalties or damages. It is advisable to seek legal advice before breaking a lease.
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