Usufruct in Thailand
Usufruct gives the right to use and obtain limited control of another man’s immovable property
Foreigners being forbidden to own land in Thailand are finding ways and means to be able to access and possess land legally. The most common mode of possession and control used is undertaking a lease agreement. However, there is another mode although not as popular but equally efficient. This option is undertaking a Usufruct Agreement.
An immovable property may be subjected to a usufruct by virtue of which another person is entitled to the possession, use and enjoyment of the property. In a Usufruct Agreement, the parties involved are the owner of the land, called the naked owner because he is stripped of his right over the property except the disposition thereof and the party granted to utilize the property, called the usufructuary.
To create a real right on the interest over the property it is mandated to be registered at the Relevant Land Office. By registering the usufruct agreement the public is notified of the usufruct burden on the land. Therefore it is enforceable against any third parties interested to interfere in the possession and control over the subject land such as a prospective buyer. Upon registration of the usufruct at the relevant land department, the right of the usufruct is incorporated in the Title Deed. If the property is to be subsequently sold, the buyer has to be ready to respect the usufruct attached to the property.
The basic feature of usufructs is that the usufructuary has the right to enjoy, use and possess the land. He is essentially acting like the owner but without the right to sell the same. He has the obligation to take good care of the property as if it is his own. He shall be made liable for the destruction or depreciation in value of the property unless he proves that the damage was not caused by him. However, he is not obliged to recompense for the depreciation of the property caused by the normal wear and tear of the property. It is the obligation of the usufructuary within the duration of the usufruct to shoulder the expenses incurred for the management of the property including the payment of taxes and government duties as well as the interest payable on debts charged upon it.
Another essential characteristic of a usufruct is that unless otherwise provided by the parties, the usufructuary may transfer his rights over the land to a third party. This means that the usufructuary has the right to lease the property further within the period the usufruct is enforced. However, the naked owner has the right to object to any unlawful or unreasonable use of the property. After the expiration of the term of the usufruct, the property is reverted back the owner.
Bear in mind however that not all land in Thailand can be subjected to a usufruct. This will depend on the kind of Title Deed the land is classified. This is why an interested party must consult a lawyer before agreeing into engaging into this kind of agreement. Other than that contracts such as this are drafted according to the personal circumstances of the parties involved. The rights of the parties must be duly recognized and upheld in law
USUFRUCT LAWS IN THAILAND
The right of usufruct transfers possession, use and enjoyment of an immovable property from the owner to the usufructuary. Usufruct can only be registered over properly titled immovable property and is established by agreement with the owner and registration at the local land office. The contract or memorandum for usufruct is the legal document that states and confirms the formal agreement between the owner and the usufructuary (the person granted the right of usufruct).
A few facts about usufruct in Thailand
- The usufructuary does not obtain the title to the property, nor can he sell or consume the property;
- The usufructuary must take as much care of the property as a person of ordinary prudence would take of his own property;
- The usufructuary is NOT allowed to transfer the right of usufruct, but he is allowed transfer the exercise of his right under the usufruct to another person contrary to the right of habitation (the person granted a right of habitation cannot transfer the exercise of his rights);
- The usufruct does not prevent sale of the property by the owner, but sale of the property does not terminate the usufruct nor the rights of the usufructuary. Usufruct is not a contract right but a real (property) right and as a real right usufruct is a burden on the property itself (any new owner automatically takes the property subject to/ including the right right of usufruct);
- The usufruct is not transferable by inheritance (i.e. the usufruct is automatically terminated upon the usufructuary’s death (but not the owner’s death));
- The usufruct is governed by the sections 1417 to 1428 Civil and Commercial Code (see law translation below)
Term of the usufruct
The right of usufruct can be created for a period of time up to 30 years or for the life of a person or persons. If the right of usufruct is granted to a juristic person the period cannnot exceed 30 years.
If a usufruct is created for a period of time the usufruct remains depending on the life of the person (or persons) granted the right of usufruct. If the owner of a property grants to B the right of usufruct for a period of 30 years and B dies after 20 years the usufruct will be terminated after 20 years and the property will return to the owner. The right of usufruct distinguishes itself in this matter from for example the right of supericies (which is an inheritable right if registered for a period of time).
Renting out the property under usufruct
Unless restricted in the contract of usufruct the usufructuary is allowed to rent out the property without the consent of the real owner and keep the rent. In essence usufruct includes the right to register a rental exceeding 3 years with the Land Department (lease registration is required for the enforceability of a lease agreement by the tenant). In case of a foreign national as the usufructuary Land Offices will not allow registration of such lease as foreigners are not allowed to control or manage land in Thailand under the land laws of Thailand and also cannot obtain this right under the right of usufruct. The Land Registry does not accept a foreigner as ‘landlord’ in the lease, therefore local Land Offices make again a distinction between the rights of foreigners and Thais. In practice a foreign usufructuary can only rent out the property under usufruct for periods not exceeding 3 years at the time.
However, if a valid rental or lease has been established the lease/ rental is not terminated together with the end of the usufruct (Scj 2297/2541), i.e. by ruling of the highest court inThailand.
Payment or consideration for the usufruct
A right of usufruct can be granted with or without consideration or payment. The exchange of value for the right of usufruct is not an essential element of a usufruct contract. Usufruct must be registered with the local land office and registration fees are 1% and 0,1% stamp duty over the total consideration, or if the usufruct is granted without the exchange of value (money) the registration will cost less than 100 THB per plot.