Contrary to popular belief, land-ownership rules in Thailand, as they apply to foreigners, are quite straightforward. Foreign individuals and foreign companies are not allowed to own any direct interest in land unless an exception to the general rule applies.

This restriction is disappointing to many foreign investors who ideally would like to own the land occupied by their business premises or their individual home. The above stated general rule is, however, quite clear and allows for only limited exceptions, two of the most common of which are discussed below.

I. CONDOMINIUM OWNERSHIP
Foreign individuals and foreign companies are allowed to hold title to condominium units in buildings that qualify. There are some conditions, however; the most potentially significant are listed below.

Normally what happens when a foreigner wishes to buy a condominium is that on the date scheduled for the transfer of title, the foreign purchaser and seller of the condominium unit meet at the Land Office in the district where the condominium is located. The presiding official will require the parties to produce a number of documents, including evidence of receipt of the purchase price from a source offshore issued by the purchaser’s bank. If the foreign purchaser does not present this document, the official will not approve the transfer of title.

Ratio of foreign ownership
The presiding official at the Land Office will also require the seller of the condominium unit to produce a letter from the condominium juristic person (the body that manages the condominium building) stating the ratio of foreign condominium owners to Thai condominium owners in the building.

The general rule is that foreigners may own no more than 49 percent of the total units in the building at any one time. If the proposed transfer would cause the building to exceed 49 percent foreign ownership, it would violate the above rule, and the official would reject the transfer.

II. LONG-TERM LEASES
Many foreigners avoid the above restrictions associated with owning land by instead leasing the designated land over the long term. This option is generally completely acceptable and the foreigner may be afforded very broad rights to the land during the term of the lease. There are, however, some legal and practical limitations associated with this option.

Foreigners are generally allowed to lease land (outside an industrial estate) for up to 30 years. Foreigners may (depending on the terms of the lease) also own improvements erected on the leased property. However, no matter how broad the rights the foreign tenant has to the land during the lease period, the foreigner does not own any interest in the land. This is a very important distinction.

If the foreign tenant wishes to divest his rights to the land, he will be limited to assigning those rights to the land to a third party assignee (if the terms of the lease permit such assignment) or waiting until the conclusion of the lease term. Because of this, the foreign tenant’s interest in the land is generally regarded as much less marketable than if he owned the land outright.

Also, in order to be enforceable after the initial three-year lease period, all leases of land for a period of longer than three years must be registered with the local Land Office where the land is located. After registration, the lease appears on the land title. If the lease is not registered, the terms of the lease are enforceable for the initial three-year period only.

EXAMPLE: Suppose a foreigner enters into a 30-year lease of a plot of land, but does not register the lease with the local Land Office. The lease would be enforceable by the foreign tenant for the initial three-year period of the lease only.

Registering the lease with the Land Department effectively places prospective third-party purchasers of the land on notice of the tenant’s rights to the land during the period of the lease.

EXAMPLE: Suppose a foreign individual leases land for a period of 30 years and registers the lease with the local Land Office. The owner of the land then sells the land to a third party without mentioning the lease to the purchaser. That purchaser would acquire the land subject to the foreign tenant’s rights for the remainder of the term of the lease. That is because by registering the lease, the foreign tenant placed all future purchasers of the land on notice that any purchase of the land during the lease period would be subject to the current tenant’s rights. — Thailand Investment Review, June 2009