What is the difference between buying leasehold and buying freehold property in Thailand?
Most buyers with experience purchasing property in the UK and Europe will be familiar with the concepts of freehold and leasehold property, as well as the characteristics and benefits of each type of tenure. However, for investors wishing to purchase property in Thailand, the situation is slightly different. In this article, we’ll explore the differences between leasehold and freehold tenures in Thailand.
Essentially, buying leasehold in Thailand means that you are purchasing the property for a fixed amount of time and will eventually need to return the property to the original owner. Buying freehold means that you are purchasing the property forever, or until you decide to sell it to someone else.
Based on the above definition, the concept of a leasehold may seem confusing because, if you have to eventually return it, it sounds a lot like renting. The difference here, however, is that as a leasehold owner, you do have complete rights to the property and can pay a mortgage instead of paying a landlord. Because you don’t actually own the property forever, you don’t have to pay the price for the land beneath the property, which means that the capital cost for you as a buyer will be much lower than it would be if you bought a freehold property.
Another great reason to buy a leasehold property specifically in Thailand is that it opens up many doors for you to live exactly where and how you want. As with many countries, there are laws in Thailand that prevent foreigners from buying up all of the land in the country. While there are some loopholes, such as putting a land plot under a new business that you register or marrying a Thai person to have him or her sign the papers, the current legal system only allows foreigners to purchase condominiums freehold, and even there, there are restrictions.
A condo might not satisfy the wants and needs of a foreigner looking to buy property in Thailand, especially for those who want to buy the property to live in it themselves. Thailand has amazing beaches and mountains, and beautiful inexpensive properties all around the country. Those who come from more developed countries with more expensive properties might see Thailand as a land of opportunity, an opportunity to live in their dream home.
Leasehold agreements in Thailand don’t always come as a one-size-fits-all contract. The standard contract length is 30 years, but it can be shorter depending on the agreement between the owner and buyer. The maximum legally allowed time is also 30 years, but this doesn’t imply that you have to give up your dream home after only a few decades. In many cases, the owner will state that the contract will be reviewed at the end of the 30 years with the aim of renewing it, which can be done legally two times. If you want to purchase a beach-side villa to live in for your entire lifetime, you can easily do this by having a total of 90 years on your leasehold. If you don’t wish to live in the property, this is also enough time to rent it out and make a profit.
If you are a foreigner who prefers to own a house and land freehold, you can opt to buy the land freehold through a Thai company. The way it works is that a lawyer or bookkeeper will set up a Thai company with you as the majority shareholder and managing director of the company. Foreigners can own up to 49% of a company, with the remaining 51% shared among at least 2 Thais. A foreigner can still have majority ownership and act as the managing director and sole signatory of the company, which gives the foreigner control over the company.
Many foreigners prefer the company ownership method because they feel that it provides better protection than a land lease and offers actual ownership rights. However, as a company, you will be required to submit annual taxes and prepare balance sheets, which an accountant or bookkeeper must provide for you. This will cost anything from 12,000 to 20,000 THB annually. It is advised not to trade on this company as it will complicate the tax situation if or when you decide to sell the property.