Is the renewal option in a land lease valid?

I have a renewable land lease agreement in Thailand. I read that the renewal option in the contract is not guaranteed. Why would a renewal option not work when this option is included as a provision in the lease agreement and as such registered with the land office?
Asked 5 years ago
Martine

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Lease term in Thailand and lease renewal option right

Pursuant to Thai lease laws, section 540, 'a lease cannot exceed thirty years, if it is made for a longer term, such term shall be reduced to thirty years'. The lease term can also not be made longer through renewal options. A lease can be renewed after 30 years, and again for a term of max 30 years, but this will be a new lease. There is under Thai tenancy or lease laws no guaranteed right for lease renewal when the first lease term expires. The reason for this is that a renewal option is not a lease right protected by section 569 (this is following jurisprudence and Thai Supreme Court rulings on section 569 of the civil and commercial code), and therefore it is not attached to the land, lease or property but to the parties as a contract promise. In fact, legally it does not make much difference if this option is written in the lease registered at the land department or in a separate contract between the land freeholder and leaseholder. As a mere personal contract promise between the parties to the contract to do something in 30 years time it holds as an option to extent the lease beyond 30 years under current lease laws little value.

Related

Does transfer of ownership of the land affect my lease rights?

Transfer of ownership of the property does not break the lease agreement (section 569), but only rights and obligations in the lease agreement which are under Thai law considered by nature true rent of property rights transfer pursuant to section 569 to the new owner. Some provisions in the lease agreement, such as the common lease renewal option but also the lease succession clause, are not considered true lease rights protected by section 569 and therefore in principle only enforceable by legal action against the original lessor. Death of the owner or transfer of ownership of the leased property could lead to the lessee ending up with a lease contract that is only partly enforceable against the new owner. For some promises in the lease contract the new owner could be legally considered a third party therefore some parts of the lease arrangement would not be legally binding upon him (as a third party).

Does a lease in Thailand end when the lessee (tenant) dies?

A lease in Thailand is not a property right (meaning in essence attached to the property as for example a right of superficies) but a personal contract right (in essence attached to lessee). The general rule is therefore that the lease/ tenancy ends when the lessee/ tenant dies. It can only be assigned as a contract to the lessee's heirs but this must be included in the lease. Otherwise the owner can take back the property and re-let it as the lease/ tenancy is terminated by the death of the lessee/ tenant. Succession of the lease is under current rent of property laws not a legal right given to the lessee's heirs, such right must be included in the lease agreement as a contract option. However, such option is not considered a true lease right but a contract promise (not protected by section 569 civil code) and therefore, again, in principle only enforceable by legal action against the original lessor.

See also

Answered 5 years ago
Consultant

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