THAILAND Law and Practice Contributed by: Olaf Duensing, Jerrold Kippen and Weeraya Kippen, Duensing Kippen, Ltd.
Apart from standard lease provisions, the Hire of Immovable Property for Commerce and Industry Act introduces a specific form of commercial lease. The Act defines commercial purposes with regard to leas - ing commercial property. A lease that qualifies under the Act as “commercial” must be: • for a commercial or industrial purpose, as defined by the Act; • for a property located in an area designated by the Act; and • registered. The commercial lease under such Act may have a term of up to 50 years. The maximum term for any other lease, whether residential or not qualifying under the conditions of the Act, is merely 30 years. In addi - tion, a lease under the Act may also be mortgaged as security for a loan. A commercial lease under the Act is automatically inheritable by the tenant’s heir. Finally, a commercial lease may be sublet or transferred with - out the lessor’s prior consent. 6.3 Regulation of Rents or Lease Terms Registration requirements exist in relation to the lease term. Any lease term exceeding three years must be registered with the land department in order to be enforceable for the term exceeding three years. Furthermore, any lease term cannot exceed 30 years (see 6.2 Types of Commercial Leases for exceptions). Other terms are only freely negotiable if the lease is not considered a “residential property leasing busi - ness”, which means a business that leases five or more property units to individual lessees for residen - tial proposes. A residential property leasing business is a controlled business and certain contract terms are required by law. Any violation is subject to a fine and/or imprisonment (see 6.14 Specific Regulations ). 6.4 Typical Terms of a Lease Typically, short-term leases do not exceed a three- year term, in order to avoid the registration require - ment. Land leases are usually for a longer term.
Tenants have specific liabilities to the owner of a property and any relevant provisions of their rental contract. The use of the property is restricted to ordinary pur - poses or those provided for in the rental contract. A tenant is required to take ordinary care of the prop - erty, which includes maintenance and petty repairs, as such care would dictate. If the tenant fails to do so, the tenant may be required by the lessor to comply with such requirements. In the case of non-compliance with such request, the lessor may terminate the lease contract. The tenant is liable for any resulting damage where the tenant fails to advise the lessor of the following facts of which the lessor is unaware: • the rented property is in need of repairs by the les - sor; • a preventative measure is required to protect the property; or • a third party is encroaching on or claiming a right over the property. The frequency of rent payments is dependent on the project. Payments are usually made monthly. It is also not uncommon for the full lease amount to be prepaid, which is usually the case with long-term land leases. 6.5 Rent Variation If the initial lease agreement is silent on this point, the parties are free to negotiate the new lease term and amount. 6.6 Determination of New Rent Variation in the rent will depend on the contractual arrangement between the parties. Additionally, some leases shift the local property tax burden to the lessee. Any changes in the local tax would then affect the financial burden of the lessee. 6.7 Payment of VAT Variation in the rent will depend on the contractual arrangement between the parties.
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