Considerations When Buying A Condominium Under A Lease ...

Considerations When Buying A Condominium Under A Lease Agreement

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Home Page > Finance > Real Estate > Considerations When Buying A Condominium Under A Lease Agreement

Considerations When Buying A Condominium Under A Lease Agreement

Posted: Jun 07, 2012 |Comments: 0

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Voting Rights

The voting rights associated with ownership of the condominium remains with the owner of the unit and not transferred to the leasehold purchaser, unless it is particularly arranged otherwise. The developer with the voting right of the leasehold units control the condominium matters such as meetings, management concerns, and maintenance fees, and other matters that are of interest to him. In a condominium, there is a democratic voting system and the sale of leasehold condos could interfere with this system.

Selling and assigning a leasehold condo

The primary right of the leasehold purchaser of a condominium is a personal right of possession of the unit for a term that is specified. During the lease term, the leasehold purchaser does not have any right to sell or assign the condo apartment that was leased (assignment of lease is a three party agreement between: owner, the current tenant, and new tenant/lessee). The right to transfer ownership or to acknowledge assignment of the lease to another person and have it formally registered with the Thailand Land Department lies only on the registered owner/developer. Also, the option of sub-rent by the lessee is only allowed upon agreement with the condo owner in the condominium lease contract, otherwise, it is prohibited under (section 544). The leasehold purchaser?s rights primarily relate to the possession of the condo only for the registered term.

The inheritance of a leasehold condo

In Thailand, a foreign freehold owner can transfer a condominium by inheritance to another foreigner. As a contract right and under the hire of property and Thai contract law, lease in Thailand becomes terminated upon the lessee?s death (as confirmed by the Thailand Supreme Court). As a contract right of the lessee in Thailand, lease is terminated upon the death of the lessee. With this, a lease agreement or right of possession of the condo will not automatically transferred to the lessee?s heirs. For transfer to be valid, a succession clause must be included in the lease agreement, however, it is not fully guaranteed. Under Thai law, transfer of ownership does not terminate the responsibility to pay for the rent of the condominium ? it is only terminated upon the death of the lessee.

Contract term of the lease

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In Thailand, real estate lease agreements must not exceed 30 years. Pursuant to section 540 Civil and the Commercial Code, any term that is longer will be reduced to 30 years. Under the Thai ?contract law, pre-signed consecutive contracts, Pre-agreed renewals, and even registered contracts that suggest a longer term, are not enforceable by legal action because it is in conflict with section 540 Civil and Commercial Code. Although it is possible to lay out such terms with the general freedom of contract between parties, having such terms in writing does not correspond to future enforceability.?

Content of Condominium lease contract

By law, the sale of a freehold condominium in a development is a government contract controlled business. This means that compliance with the minimum standards and consumer protection laws applies in terms of the content of the condo sale contracts.? The selling of the same units to foreigners in the project leasehold is primarily written to induce sales and is not contract controlled, often including terms that are unenforceable in practice in the Thai hire of property laws ? e.g.a contract that promises to renew lease upon its expiration 30 years after signing. Take a look at the standard wording that relates to lease renewal in clause 4, especially the nicely written 4.5 of the downloadable sample condominium lease agreement, but in practice not enforceable as a contract under the Thai hire of property laws.

The additional property tax burden of the lessee

In Thailand, leasehold condominiums are subject to a rental tax rate of 12.5% over the actual yearly lease price or annual assessed lease price, whichever is higher, as opposed to owner occupied freehold properties. This is an additional financial burden for the leasehold buyer of a condominium per year, in addition to the lessee?s responsibility towards the normal condo fees, as this is always passed on to the lessee based on the lease agreement ? see the standard wording of the sample condominium lease agreement in clause 7.5.

Conveyancing tax and fees applies to the transfer of ownership of a condominium. A lease registration fee of 1.1% of the total lease price upon purchase of a condominium also applies under a lease agreement. Income generated from the lease is taxed as personal or corporate income tax.

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