THAILAND Trends and Developments Contributed by: Shunsuke Minowa, Yosuke Konno, Poonyisa Sornchangwat and Natthapa Jirathawong, Nagashima Ohno & Tsunematsu
the property’s condition and economic circumstanc - es, making it impractical for the parties to predict the economic value of the leased property”. Based on this purpose, the Supreme Court ruled that (i) the lessor’s promise, included in the initial 30-year lease, to renew the lease for two additional 30-year periods on identical terms and (ii) the lessee’s prepay - ment of rent for these future terms, implying accept - ance of the lessor’s promise to renew the lease, showed an intent to circumvent the 30-year lease term limitation. Consequently, the agreement on the two successive 30-year terms became void. Key takeaways The Supreme Court strictly interprets Section 540 of the CCC. Any agreement that appears to create a lease term exceeding 30 years from the outset be deemed null and void. This interpretation is upheld despite the general principle of freedom of contract under Thai law. The Supreme Court expressed par - ticular concern regarding lease renewals where the terms of the successive renewal periods remained identical to those of the initial term. This suggests that the renewal of a lease may be permitted if the terms and conditions for the successive periods appropri - ately reflect future conditions and circumstances of the leased property, economics, etc. Careful consideration of the provisions of the lease agreement is crucial to ensuring the enforceability and validity of a long-term lease. In light of the above Supreme Court judgment, the parties should struc - ture renewal arrangements in a manner that allows the parties to review and agree on key commercial terms ‒ particularly rent ‒ at the time of renewal in order to reflect prevailing market conditions. This approach helps balance the interests of the parties and reduces the risk of nullification of renewal provisions. Other alternative property rights In addition to a general leasehold, foreign investors may consider other legal mechanisms that enable the use of real property without freehold ownership, such as the following.
Lease under the Lease of Immovable Property for Commercial and Industrial Purposes B.E. 2542 (“Com - mercial and Industrial Lease Act”) A lease under the Commercial and Industrial Lease Act (“50-Year Lease”) is conceptually the same as a general lease under the CCC. However, while a gen - eral lease is limited to a lease term of 30 years, the 50-Year Lease extends the lease term to 50 years, which is renewable for an additional 50-year period. The 50-Year Lease is more complex and is subject to specific statutory limitations and conditions, including the following. • Permitted activities: a 50-Year Lease is permissible for commercial or industrial operations only. • Required documents: a 50-Year Lease requires more documentation, such as an investment pro - ject plan and an approval letter from the relevant authority confirming that the land is within a com - mercial or industrial zone under applicable zoning laws. • Capital requirement: a lease for commercial pur - poses requires the lessee’s capital investment of at least THB20 million. However, for a foreign lessee, a lease for commercial and industrial purposes for an area of more than 100 rai (160,000 square metres) requires the lessee’s capital investment of at least THB100 million. Given these conditions, to date, the 50-Year Lease has been used mainly in a limited number of large- scale projects. Other real property rights such as superficies and usufructs Unlike a leasehold, which is considered a contrac - tual right between the parties, there are other types of rights available under the CCC (ie, real property rights that are created upon registration with a land office and are attached to the property itself). Examples of those real property rights are as follows. • Superficies: under Section 1410 of the CCC, a landowner can grant a person the right to own
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