Thailand, having a reputation for being one of the world’s most visited countries and a popular international tourist hub, is not new to foreigners wanting to settle or retire here for good. And so is acquiring real estate properties as a form of investment or simply a means to buy a new home.
That said, being aware of the country’s land laws is vital and something that foreigners can use to their advantage. Whether you are trying to acquire a new property, be it temporary or permanent, through leasehold or freehold, it’s always wise and practical to weigh the pros and cons before deciding what type of ownership suits you best.
Under Section 86 of the land code act, foreigners may acquire land in Thailand by the provision of a treaty granting them the right to own land. But, only to a certain extent as there are set limitations that may apply. Moreover, to benefit the foreigners’ right to ownership, The Condominium Act was made allowing them the right to own freehold apartments or units in condo developments or use land through a leasehold tenure.
Leasehold vs Freehold Ownership Explained
The most popular and legal options to own a property in Thailand are leasehold and freehold ownership.
Freehold Ownership grants the owner full legal and undisputed rights to the property without any restrictions on its transfer, modifications or construction. Unlike leaseholders who have no ownership rights on land, a freehold owner takes ownership of both the land and the home or standalone building or property.
Below are the Pros of Freehold Ownership in Thailand:
- Foreigners can acquire condominium units in their own names
- Freehold unit is more ideal for resale
- No time limit or restriction in freehold ownership
- Minimal tax costs throughout the property’s lifetime
- The owner has a vote in corporate meetings
Leasehold Ownership, on the other hand, is owning a property, flat, or unit through lease rights. It comprises two parties: the lessor or owner who sells the property and the lessee or tenant to hold the property for a limited time. The process involves the owner giving the property on lease to the lessee with various restrictions to take into consideration.
Things to consider when you invest in a leasehold property,
- Lease period
- Valuation of property
- Transfer clause
- Availability of bank finance
- Approval from state author and other relevant agencies
6 Key Differences
- Lease Period
In leasehold, once the lease expires, there is no guarantee of ownership unless the renewal of lease takes place. Lease period varies from 30 years to 99 years and any lease with a duration less than 90 years will most likely affect the property’s valuation. Also, a lease period of less than 30 years may find it challenging to warrant any bank finance. That’s why the lessee should ensure that the tenure the increase or extension of tenure.
- Maintenance & Costs
The responsibility for maintaining communal areas lies on the freeholder, this may also include repairs to the building’s structure, shared parts of the building or communal infrastructures, and all other related expenses or costs. Meanwhile, for leasehold, the freeholder may require the leaseholder to pay annual costs such as ground rent or contribute to the maintenance and other related fees.
The freedom to do any minor or major upgrades or changes to the property belongs to the freeholder. In the case of leasehold ownership, although the lessee may be granted permission to make the necessary updates in his flat, certain restrictions may apply thus, making it less flexible and extra challenging compared to freehold ownership. A common example is the lessee may need to ask permission or not be allowed to keep pets, depending on the terms written on the agreement.
- Transfer of Property
In leasehold ownership, the lessee may be required to ask permission from the state or other relevant authorities during the transfer of property. Moreover, the transfer of leasehold rights is done through the Power of Attorney. This process is relatively difficult compared to freehold ownership which grants the owner full legal rights to sell, gift, or transfer the property.
- Mortgage Loans
It’s a lot easier for Banks or Financial Institutions to grant mortgage loans to freehold properties than to leasehold ones.
- Cost of Ownership
Leasehold properties are relatively cheaper since the land is arranged via lease while buying a freehold property requires more capital due to significantly higher land prices as land is purchased on a freehold basis.
Leasehold properties are suitable for potential homeowners with budget constraints. Otherwise, freehold ownership is the most ideal due to its flexibility and clarity in ownership. Also, it’s more advantageous to buy freehold properties as a form of investment since the risk is lower compared to leasehold, especially if the lease is not extended.