Under a conventional lease structure, the tenant obtains a pretty vulnerable legal position. He is no property owner, his use rights are limited to 30 years, and through this rent period, he is the first to suffer under various aspects at the whim of the landlord.
This unsatisfying situation makes the so-called leasehold structure a shabby alternative for a risk-averse foreign investor.
Therefore, when the lessee accepts to enter into a long-term lease agreement instead of obtaining full legal ownership, it is in his crucial interest to enhance his legal position by additional means – as good as it gets.
Such enhancements are called secured lease structures or – imprecisely – collective leasehold or protected leasehold.
The obvious need for a secured lease
In Thailand‘s property industry practice, protected leases or secured lease structures are typically used to provide the tenant with protection in the case of four events:
- The termination of the lease agreement for an important reason, which is allowed under Thai legislation and easily misused by the landlord especially when the contract is fully prepaid.
- The return of the property to the legal owner after 30 years, because the extension or renewal for additional 30 year periods is not at all guarantee.
- The transfer of the property investment to the tenant’s heirs or successors, which requires the amicable consent and active cooperation of the landlord.
- Each other case that requires a change, modification or flexibility in the restructuring of the…