subject: Succession Of A Real Estate Lease By Inheritance In Thailand [print this page] As ownership of land is prohibited for foreigners in Thailand real estate in Thailand is often bought by foreigners under a leasehold structure. Lease of real estate in Thailand is governed by the section 'Hire of Property' in the Thailand Civil and Commercial Code and is in principle a personal right. As a personal right a real estate lease in Thailand will in principle not transfer to the heirs of the lessee. This is confirmed by the Thailand Supreme Court Judgment (scj. 1108/ 1994).
If the owner of the property dies the contract of hire is not terminated and remains in force against the heirs of the owner, however, only in so far it concerns true hire of property or lease rights. Other contractual rights in the lease that are not in essence lease rights, like the renewal option, will be lost.
To prevent that the lease agreement is terminated upon death of the lessee and to transfer the remaining term of the lease agreement the lease agreement should have specific clauses granting the right of succession to the heirs of the lessee. The transfer of the lease to the heirs of the lessee requires however registration at the land department and for that reason cooperation of the owner. The heirs have the right to claim such performance directly from the lessor if a 'succession clause' is included in the lease agreement.
It should be noted that a succession clause in the lease agreement under Thai law is a personal contractual promise between the parties to the contract. In principle it will not follow the property when the property is transferred during the lease term. This means that transferee owners (e.g. the heirs of the owner) are not bound by a succession promise made by the previous owner. In this case the succession clause will be unenforceable by the heirs of the lessee upon the death of the lessee.
The Supreme Court of Thailand has in some specific cases gone beyond the normal principles of the law to protect the rights of the lessee and the lessee's heirs if the lessee has made a substantial investment in the improvement of the property or development of the land that in the end of the lease will benefit the owner. In this case the lease will not be automatically terminated and will continue after the death of the lessee and the full contract will automatically transfer for the remaining term to the heirs of the lessee. It is however essential that the contract is drafted according the principles of Supreme Court rulings and the leasehold purchase is structured with freehold ownership over the building.
With regards to succession by inheritance of a leasehold real estate property in Thailand there are generally 3 situations:
1. Nothing is arranged regarding succession and the lease is terminated upon the death of the lessee;
2. A valid succession clause is included in the contract which is enforceable against the original owner party of the agreement;
3. Following the Supreme Court judgments in certain situations the contract for hire or lease goes beyond normal hire of property laws and the contract and its rights will in this case transfer to the heirs.
In a normal lease or hire of property the normal principles of hire of property under the above 1 and 2 apply and in this case it is recommended to have more than 1 person as the lessee in the contract for hire to prevent termination upon the death of 1 of the lessees. In case of No. 3 it is recommended to have the agreement drafted by a legal professional familiar with hire of property laws and who is up to date with the Supreme Court judgment governing lease and hire of property in Thailand.
