In Thailand, there are 2 forms of real estate registration: Freehold and Leasehold. In this article, we will compare these forms according to several criteria, as well as analyze their pros and cons of each.
Set of rights
Freehold is a property right that includes the rights of possession, use and disposal.
Leasehold - a lease limited to a period of not more than 30 years. The contract provides the rights of possession and use, but not of disposal.
Tenure
Freehold is an unconditional and perpetual right of ownership.
Leasehold is limited to 30 years.
Document confirming the right to the object
When registering real estate in Freehold, the owner receives a certificate of ownership - Chanot. This document is issued by the Land Department of Thailand - a government agency authorized to register real estate transactions.
When registering real estate in Leasehold, the rights and obligations are governed by the lease agreement. Like any contract with a term of more than 3 years, it must be registered with the Land Department.
Sale, inheritance, donation of an object
The owner of real estate registered in Freehold has an unlimited right to dispose of the property. At the same time, he has the opportunity to mortgage his object.
The owner of the Leasehold does not have the right to dispose of the property. However, he may transfer the lease rights to a third party before the end of the 30 year period. Two scenarios are possible:
- The new owner of the Leasehold concludes an agreement for the remaining 30 years (for example, if you owned an apartment for 5 years out of 30 and decided to transfer the Leasehold rights to a third party, then for the new owner the Leasehold period will be 25 years);
- The new owner of the Leasehold renews the contract with the owner-developer for a full term of 30 years.
Inheritance of rights under the lease is possible only if it is provided for by the contract.
Real estate value
As a rule, the cost of property in Freehold is 5-10% higher than the cost of Leasehold.
Taxes and fees
The total tax when registering real estate as a property (Freehold) is 6.8%, when it comes to buying from a developer, then this is no more than 2% of the property value.
Taxes and fees when registering a Leasehold are about 1.1% (of the rental price for the entire leasehold period).
Payment method
When registering real estate in Freehold, it is necessary to confirm the foreign origin of funds for the purchase. Payment is made by international bank transfer. In turn, the bank in Thailand issues a certificate of receipt of Tor Tor 3 funds. This document is the very confirmation.
When registering a Leasehold, there is no requirement for the foreign origin of funds for a transaction, therefore, payment can be made in any convenient way - in cash or by bank transfer. However, even for Leasehold, some offices of the Land Department require confirmation of the foreign origin of funds.
Providing information on the availability of real estate abroad
Since Freehold is a property, Citizens of the Russian Federation must provide information about real estate abroad to the tax office. With regards to Leasehold, Citizens of the Russian Federation do not have to report to the tax office on the lease agreements they have concluded abroad.
Possibility to vote at the shareholders' meeting
Freehold owners have the right to take part in voting at meetings in the condominium. Leasehold owners do not have such a right.
Possibility to rent out
Freehold owners have the right to rent out their property without restrictions. If the apartment is purchased in a condominium without a hotel license, the rental period is from 30 days.
The owner of the Leasehold can rent out the apartment only if it is stipulated by the contract.
We summarize: Registration of real estate in Freehold guarantees an unconditional and perpetual right of ownership.
Registration of real estate in Leasehold is beneficial for short-term investment in order to generate income, since the cost and tax are lower, which allows you to minimize costs, increase profitability from the object and shorten the payback period.
