Long Term Leases Null & Void

[ozibill 546]

HUKET: -- In a shock decision by the Phuket Civil Court, backed by the Region 8 Appellate Court, it has been ruled that the 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.

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.

“Under Thai law the maximum lease term is 30 years, which may be renewed upon expiration of that term.

“The leases marketed to foreigners typically provide for an initial 30-year term plus two additional successive 30-year renewal terms.

“However, 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.

If other courts confirm these two courts’ opinions, then not only will any renewal term of “Secured” Leases be invalid but also the current lease terms.

“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.

“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.

However, the court decided on its own that the leases – when considered in light of the share-sale-and-purchase agreement for the shares that control the Thai company that owns the developer’s land/apartments – were actually fictitious agreements made to conceal what the parties had actually agreed: to sell and buy the relevant real estate.

“Section 155 of the Civil and Commercial Code of Thailand (CCC) provides that if two parties enter a fictitious agreement in order to conceal their real agreement, the fictitious agreement is void.

“It goes on to state that although the fictitious agreement is void, the hidden agreement that the parties actually made must then be evaluated under the provisions applicable to it,” Mr Kippen explained.

“In this case, the courts ruled that the parties had entered into fictitious lease agreements through the “Secured” Lease structure and had done so in order to hide their actual agreement to sell and buy the properties.”

The court, he said, decided this meant that the leases were void and that the provisions of Section 456 of the CCC applied to the “real” sale and purchase agreements.

Section 456 provides, in pertinent part, that “a sale of immovable property is void unless it is made in writing and registered by the competent official.”

The court then concluded that since these sales were not made in writing nor registered with the competent official, they too were void.

This ruling, by a sole trial court judge, was then appealed to a three-judge appeal court panel. The Appellate Court confirmed the trial court’s decision on the very same factual and legal grounds as the trial court outlined above:

- The “Secured” Leases with their lease-plus-share-sale-purchase agreements were fictitious agreements meant to conceal actual sale-and-purchase agreements for the real estate; thus

- The leases and share-sale-purchase agreements were void; as were

- The actual concealed real estate sale-and-purchase agreements because they were not made in writing or registered with the competent official.

“Taking these new decisions into account the “Secured” Lease not only does little if anything to address the very real insecurity that your long-term lease will not be renewed, but it also could have the disastrous consequence that your current lease could be considered legally void,” Mr Kippen said.

“And according to these courts’ analysis, anyone who has already invested or is considering investing in such a structure is facing the immediate loss of the investment.”

The good news, he said, is that secured leases can be restructured to provide actual long-term lease security legally and without any downside to the developer by securing the pre-paid renewal terms with a mortgage over the land involved.

“It is a simple and straightforward legal structure that provides security for the investor. A current ‘Secured’ Lease can be restructured into this better and genuinely secure alternative, before it is too late.

“As always,” he added, “you should engage competent legal and tax counsel in order to implement this mortgage-based security structure successfully.”

Source: http://www.thephuket...-void-51183.php


-- Phuket News 2015-02-27

 

 

[js007 795]

Is it just a matter of time before all the people "owning" houses via phony corporations find themselves holding the bag?

[Idefix 2,275]

Hi. The company-houses are far less illegal than these renewed leases.

I remember an article of a lawyer a few years back (in Bangkok Post?) about the dangers of these leases. It was not "lawyer speech" only because he illustrated his article with real cases who turned bad.

Even if some legal office says it's "no problem", these "90 years leases" imply to sign blank contracts, to sign documents without date or with dates 30 or 60 years in the future (!) and - the most important - to lie in the registration documents at the Land Office...

The only "shock" in this article is that Phuket seems to notice that facts only now ??

[Fondles 94]

long term (30+30+30) leases have never been legal. good to hear they might be clamping down on them.

[Chang_paarp 253]

Phuket Courts, Business Registration Office (sorry not got the right name) and Land Office often have a crack at different farang devices to own land and businesses.

 

A couple of years ago they had a go at business registrations and the number of new businesses dropped by about 90% for a couple of months. The complaints from the lawyers and accountants caused a change of heart.

 

This might be another ambit attempt to have a go at the dreaded foreigner from owning a bit of Thailand.

[jacko 8,813]

Is it just a matter of time before all the people "owning" houses via phony corporations find themselves holding the bag?

Different issue of course..... but often a fear.

On the OP, I was always under the impression that the renewal of a 30 year lease was an option available at the end of the term and was by no means guaranteed at the start of it.

 

I am not sure I have got my head fully around this 'secured lease' idea yet, but certainly the claim that the underlying initial 30 year lease may now also be deemed to be invalid is a scare for some.

 

This is actually a court decision rather than the regular rumours we see scattered to improve 36m2 condo sales.

Edited February 28, 2015 by jacko

[Greg_B 306]

Very similar to when a Thai "owns" government land and then sells it to another.

 

Then later, the government takes it all back (as they did) and you have nothing left but the paperwork

 

So, you put it in "her" name (wife or GF) and play that risky game...no win situation it seems

[Gary 4,119]

About ten years ago, I was told about a piece of land that was supposedly owned by an old lady who wanted to retire. It was a twelve rai beautiful scenic place. It was surrounded by high rock formations and near a waterfall with only one way in and out. I was assured that none of the land in that area had chanotes and owning that land was no problem. I took my Thai wife to look at it. She talked to the supposed owner and then was ready to go home. She told me that land belonged to the government and did not belong to that old lady and that no way could she sell it. My wife was correct.

 

As far as the 30+30+30 year leases, they were always illegal and were only used by crooked developers to be able to sell these properties for huge prices. A 30 year lease which was legally registered with a land office were all the government recognized. Phony Thai company ownership is also illegal but those properties are safer than the long leases. The reason for that is because the supposed owners have to have an accountant, a lawyer and pay taxes. The government may or may not ever confiscate these properties because of the taxes collected. They do not like to bite the hands that feed them.

 

My wife has 8 different properties and all have chanotes. Rather than hiring a lawyer and trying to protect my investment, They were all put them all in her name. I had to sign documents saying that I had no financial interest in the properties. She would get them anyways if she should decide to throw me out. The only safe way to own a property in Thailand is to buy a condo in your own name BEFORE you are married.

 

Trusting real-estate agents or lawyers is a huge mistake.

[atlas2 4,329]

 

 

My wife has 8 different properties and all have chanotes. Rather than hiring a lawyer and trying to protect my investment, They were all put them all in her name. I had to sign documents saying that I had no financial interest in the properties. She would get them anyways if she should decide to throw me out. The only safe way to own a property in Thailand is to buy a condo in your own name BEFORE you are married.

 

Trusting real-estate agents or lawyers is a huge mistake.

 

 

Absolutely essential.

 

Great advice Gary……….Though I'd add one more person not to trust………Though you sort of covered that too..

[Greg_B 306]

Gary

 

I ran into a deal last year for 2 rai from a German man , as his Thai wife had died...

 

Oh, hell no, sure the price is good, but he never owned the land, how can he sell it...?

 

She is dead...!

[Fondles 94]

Gary

 

I ran into a deal last year for 2 rai from a German man , as his Thai wife had died...

 

Oh, hell no, sure the price is good, but he never owned the land, how can he sell it...?

 

She is dead...!

He inherits the land when the wife passed away, it is signed into his name but he has to sell it within 12 months.

[Idefix 2,275]

The only safe way to own a property in Thailand is to buy a condo in your own name //

That's one way, but not the only one.

- you can own your house, built on a leased land

- you can own house and land, when buying it with a very long term bank loan (if you can get one!). Its possible because technically this land/house is property of the Thai Bank until you finish to pay it. You can't keep it when finished to pay though, so the idea is to make the loan longer than your life expectancy...

- a few other legal ways that I don't know in detail...

[Idefix 2,275]

I ran into a deal last year for 2 rai from a German man , as his Thai wife had died...

Oh, hell no, sure the price is good, but he never owned the land, how can he sell it...?

She is dead...!

Very often when a couple buy a land, it's done to the wife name, name added at the owners list on the chanote. For many years already, Land Office makes the husband sign an additional document (sometimes the last/4th page of the chanote) where he certifies that:

- the money used to buy the land doesn't come from him (of course )

- the buying is made by the married couple

 

As Fondles said above, the husband will then inherit the land if she dies. He will not be able to keep it (land must be Thai owned) but he has a delay to sell it. This delay doesn't seem to be in the law, but people usually say "1 year".

[MeGoDanceNow 4,281]

 

Gary said: Rather than hiring a lawyer and trying to protect my investment, They were all put them all in her name. I had to sign documents saying that I had no financial interest in the properties. She would get them anyways if she should decide to throw me out.

 

 

And this is the heart of the matter. Put assets in Thailand in your wife's name -- they are hers. (Because you trust her.)

Keep other assets overseas. (Trust, but verify.)

Edited February 28, 2015 by MeGoDanceNow

[Gary 4,119]

The condition of putting the property in her name is to never spend more than you can comfortably afford to walk away from.The old saying of never putting all your eggs in one basket is especially applicable here in Thailand. Old farts like me have to safeguard what we have. We can never make a comeback if we are stupid.Thailand is a great place to retire as long as you have money. This is NOT a good place to be if you are broke. I am not wealthy but I am comfortable.

[cbrib 354]

I'm going to take a stab on this here based on my knowledge of the Thai legal system which is far from expert level.The leases have been deemed void because they are a paradox. They give control of the land over to a foreigner which in its own right is illegal. Any thoughts?

[Greg_B 306]

Fondles...

 

Key to this deal....they never owned the land (it was government land)

 

They get paperwork done, but it is a different color (either red or blue, I can't remember)

 

Most Thai's can spot this fake paperwork easily ( a wife is an expert at it)

[Fondles 94]

Greg_B.

 

Your post did not mention the dead wife did not own the land. Next time include all information.

 

Thankyou.

 

Fondles.

[MeGoDanceNow 4,281]

Greg_B.

 

Your post did not mention the dead wife did not own the land. Next time include all information.

 

Thankyou.

 

Fondles.

 

I think Greg is referring to Gary's story here. Selling Brooklyn Bridges to foreign rubes is a major industry in Thailand.

[Gary 4,119]

I have two friends up here who have built homes on land that has no chanote. The land is definitely not legally theirs. They were told that if they build a home on the land that there will be no problems. They are worried and I would be too if I were in their positions. A lot of land like that was given to poor farmers by the government with the condition that it could never be sold and could only be passed on to immediate family members. Many of these farmers have illegally sold the land. Some Hi-So Thais have built huge homes and resorts on this type of land and are being forced to tear them down and restore the land to the original condition.

[Greg_B 306]

Fondles

 

What Gary and myself are trying to point out, is that many people do have paperwork on the land. But it is not the registered deed of ownership.

I assumed you knew of these situations and I will explain it better next time

 

This is very confusing, until you run across the situation and actually see the difference in the paperwork

 

Many think they "own" it and will build homes, farm and make a business out of it. Then the government comes along and takes it back.

The intent has and always will be for the farmers who can't afford to buy their own land. But over the years of corruption , it has become a very big business for local politicians.

 

My wife has a friend who pays each year to have her "fruit plantation" on land in Hua Hin. She is well off and should not be doing this.

She also tried to convince us to invest in government land and my wife refused to even listen to the idea.

 

People do sell it to others and some never check the documents. It's like renting a building and sub-leasing it 3 or 4 times. Then the owner shows up to take it all back and you are left without a thing.

Edited February 28, 2015 by Greg_B

[Idefix 2,275]

What Gary and myself are trying to point out, is that many people do have paperwork on the land. But it is not the registered deed of ownership.

Yes Gary, but usually it's not a problem.

 

The register deed, the chanote "โฉนดที่ดิน" is the safer way.

It looks like that:

and on the back you find the history of owners or people authorised to use this land (usufruct here) :

 

Outside big cities it's very frequent to only have a Nor Sor 3 Gor

It looks nearly the same and contains nearly the same information

 

These are the only 2 documents I would trust to buy a land in Thailand, being Thai or Farang does not change anything on it.

 

There are many other types of deed. I don't know them. The frequent one I saw is about land "given to poor people farming". They can be given to one person (deed finish when he die), to one family (transmit through generations) but can not be sold or even leased (I think). They also often have usage constraints "farming only" meaning "no construction allowed"...

 

 

A few information websites I just found, looking for images:

 

http://thailand-realestate.net/info.html

http://www.samuiforsale.com/knowledge/thailand-land-title-deeds.html

http://www.siam-legal.com/realestate/thailand-title-deeds.php (short

 

An example of usufruct (to guarantee 30 years to a farang husband)

http://retiringinthailand.net/usufruct-legalised-on-chanote/

[Gary 4,119]

I'm certainly not an expert regarding Thai land documents, but, my wife says there are many kinds of land documents. The best one is a red seal chanote. All chanotes are good but the color of the seal is also important. Different color seals place different restrictions on the use of the property. These are similar to zoning rules.

[Fondles 94]

Fondles

 

What Gary and myself are trying to point out, is that many people do have paperwork on the land. But it is not the registered deed of ownership.

I assumed you knew of these situations and I will explain it better next time

 

This is very confusing, until you run across the situation and actually see the difference in the paperwork

 

Many think they "own" it and will build homes, farm and make a business out of it. Then the government comes along and takes it back.

The intent has and always will be for the farmers who can't afford to buy their own land. But over the years of corruption , it has become a very big business for local politicians.

 

My wife has a friend who pays each year to have her "fruit plantation" on land in Hua Hin. She is well off and should not be doing this.

She also tried to convince us to invest in government land and my wife refused to even listen to the idea.

 

People do sell it to others and some never check the documents. It's like renting a building and sub-leasing it 3 or 4 times. Then the owner shows up to take it all back and you are left without a thing.

 

Yes Greg, I understand exactly what you are saying.

 

There was no mention of dodgy ownership in the post I replied to so I read it as Thai wife (legally) owned it but passed away.

Edited March 1, 2015 by Fondles

[ZARIS 20]

way too involved.

 

surely its cheaper to just root bar girls and rent.