Key Money Is Illegal In Thailand?

[raro]

Some very good advises here. I'd like to add:

- Key money has to be paid by Thais as well. From what I heard its amount reflects the success of the business, so the more then landlord assumes you're making with his premises, the higher the key money.

- Ask for a receipt. If they want to bill it as "services" 3% Withholding tax must be deducted. This is still less than the 5% they have to pay on rent.

- As Quicksilva said, run the figures. Key money vs. relocation costs plus business losses due to days of closure, customers not moving with you etc.

Out of principle, I would move and not pay one Baht to those bastards.

[surayu]

- Key money GAS to be paid by Thais as well.

so do you mean that you just give him a fart as soon as you are asked for the infamous "kee" money?

[enemedin]

Yes it is good. this forum is the only greatful way to understand something more, from other people ,,,, and the comments added to the thread, are just to make it more colorful and put in the real feelings of the moment. monaning and winging a bit ? let it be mate !!

Whether i get off my chest or from somewherelse, you know what they say, " That art Thou "

whatever happen to one ......... is good to know cos might happen to others to.

am sorry if my talking seem to be against thais, its just i did not expect the famous "Land of smile" to be like this.

and anyway i just report what happened to me. i have also met some great thai people, unfortunately have to say not in pattaya, but i did meet them.

My comment was aimed at gardening9966, and NOT you.

You are quite at liberty to both tell people about what happened, and to rant about it, if need be.

But the giving of false hope to you and information about what you can and should do about the situation you find yourself in, is something thats not a clever thing to do.

Like others have said to you on here, just cut your losses as much as you can, move on, and most of all learn how not to repeat the same situation. Or at least know, and play by the rules of the game (both written and UNwritten) before you start to play.

Penkoprod

each thread has someone who simply dont know how to stick to the current topic under discussion, "only"

each thread has someone who likes to throw his angry vomit on other people, in this thread we find that again of course.

tz ok mate, i foud my answer already from those who really helped.

"That art Thou" ... The good that say and do to people always come back to you. "Universal Law" thanks to all of you hwo helped.

[raro]

- Key money GAS to be paid by Thais as well.

so do you mean that you just give him a fart as soon as you are asked for the infamous "kee" money?

you were fast! I discovered the mistake and edited my post not even a minute after posting it...

[torrenova]

The problem is basically threefold. The OP is not experienced and has been caught out. Secondly, he should never have gotten anywhere near the end of the lease before negotiating for an extension and thirdly, when buying the business, he should have negotiated a new contract with the landlord which included options to renew at 3 and 6 years with rent stipulations therein provided for and any key money advised. Quite simply, you do not invest in something which only has a short lifespan.

What can the OP do ? Nothing. Either pay up or leave. It is too late in the day and the landlord knows that. Whatever the landlord does in the future, he is not going to back down now because he sees his position as strong and the OP's as weak. And he is right.

One way out might be payment of this key money to get a very long lease but the LL will not want that as leases over 3 years have to be registered. However, long leases often come with large key money payments. Future rent increases would need to be agreed beforehand, say 10% every 3 years or something. On a typical 3+3+3 lease, I would not want to get to the last 3 years before renegotiating because if I could not negotiate a satisfactory deal, then I would need a long enough lease to sell. I would expect the new owner to negotiate for a new lease anyway.

The fact that the OP was badly advised would go down well in a western court but in Thailand, you would just be throwing good money after bad.

Finally, the OP has to consider that he may not get back any deposit he has on the place as removing all fixtures and fittings is undoubtedly going to cause some cosmetic damage to the building. The OP must refrain from getting sentimental and look at it on a purely net net basis. What are the costs and profits of doing one thing over another.

[ableguy]

I agree that it probably a tax issue with the owner. It is not illegal as far as I am aware as a 'lease premium' or 'goodwill' 'key money' payment is relatively common and has no or little bearing on economic reality. It happens with school entry fees in much the same way here although termed as something else.

Can you be more specific about what the 'business' is? since if you are just renting premises from this party it may be best to just relocate and put a lot more attention in to securing a better deal at a new location.

Whilst this up front payment may be expected at a new site, many landlords are sitting on empty units as Pattaya is awash with these shophouses (mostly derelict) and you can quite easily remove all your fixtures and fittings and transplant them elsewhere.

Threats in Pattaya are to be expected, and take heed as they can be obstructive in many ways (cutting electricity, smashing windows etc) and you will have little or no recourse. Suffice to say that you will not likley ever get your deposit back now or in another 3 years, so factor that in to any decsion you make at this stage.

HI and thank you for reply.

It is a Restaurant on which i have spent 2 mil baht to renew two years ago.

I guess will be best to pay the key money and try to sell the business to someone else, recoverig what is possible.

I told him this morning that i might pay the key money, in the next two or three days, but i will also try to sell the business to someone private and then the new "Buyer, Business owner" will sign a new contract with the thai owner.

This Thai owner, wants to know how much i want to sell it for, and when i told him 2 mil baht, he said to me he will give me 500,000 to get out of of the restaurant.

Very strange, he must have understood that he can sell it for more.

Not strange at all he just wants to bleed you dry and wait for the next helpless farang.

[actiondell4]

You must get some advice of the Russian /Jewish Community.

What would Russians do in this circumstance?

I am Jewish although not Russian.

Ok on the positive side next time you know to put in the contract "no key money".

There is some ways around this ,you need now to start some problems with the landlord.

You need now to fight back.

[anon7867763]

Hi mate

I dont understand how you can be so surprised over the key money " extra pay" - that is how it is - yes off course its a rib off policy in this country . rib foreigners for so much money as possible and dont care of anything, or use of threaths are common.Get money from others without work is standard.After waht I heard -anyone can call themself a laywer without any education but I dont now if its true

I dont really understand why so many are still investing here.. we are not wellcomed - only our money.There are other place we are more wellcomed in this region.

Thias also pay key money - in the shopping centre where my shop is everyone has paid key money to get in and there are only 3 falangs out of about 200.No discrimination there.

Its allways advisable to start negociating the renewal of a contract long before the date comes up and don´t argue about the price , ask nicely so the landlord doesnt loose face.Once you `argue´ he will never come down.When in Thailand do as the Thais and most who have done that have successfull businesses.

[ding]

From all I've read you'll waste time and money going to court in Thailand.

Sorry you're stuck losing fixed improvements, that's a tough lesson to learn I'd bet. Ouch!

I think you'll find a buyer if the location is hot. It's amazing the key money on renewal surprised you. But you're probably a good guy who assumes others are like you. And sounds like the Thai owner is being a Thai owner -who has power over a farang.

Not sure I'd get into a pissing match there (with "help" from any religious group or nationalities) unless you want to really get stuck hard.

How are you advertising it? Are you disclosing terms? I had legal advice to ask certain questions, and when I get defensiveness I stop consideration right there. I can't afford to get hit with a loss like you're facing. All the best luck to you enemedin!

[Kf6vci]

Have you heard of the financial crisis? Which upgrades have you paid for?

I'm an emotional guy and would not do business with that sc*undrel 100% on his terms. And then negotiate a much longer contract with the option to give notice... Not have him repeat this after a few years.

So you think he will re-rent quickly?

Can you afford to store your things and go on a long holiday, then return to play hardball?

This is all too common, greedy and irrational landlords who cannot rent their units. Some have condos vacant for years, but they won't reduce the rent, oh no.

You get what you negotiate!

Chris

[oldsailor35]

your being screwed by this bas***d, why didnt you go to a reutable law firm like mcenzie smyth in pattaya ? too late now for that. he obviously wants to sell it on and get you out, i would tell him that you can sell it on for 2.5 mill and try get him to give you 1 mill to get out rather than giving him the key money and trying to sell it on yourself, the chances of anyone buying it are very slim in the current climate so you can get out now or have another headache for 2-3 yrs then pay more key money by which time this bas***d will probably increase it as he knows you paid up the last time.

Yes indeed; I know it can be sold for at least 2,2 mil baht . I have had some viewing about 9 in two months and all english and russian investors. The owner is aware that it can be sold for that price. Law firm in pattaya you mean can help ? too late now ? not sure when it comes to law in pattaya, thais seem to agree between each others very easily when it comes to deal with farangs.

sorry about that ! not all thais of course are like that, but experience and talkings between mates gets you a bigger pic of whats going on here. This seem to be the only country where the people seem to be joined against the enemy "The Farang" why we became so unwelcomed in this country is still a mistery. have been travelling all over the world, Brazil, cuba, spain, venezuela, Italy, philippines ... and after few months you live there, you seem to mix very well with people, and they forget you are a foreigneier ... people call the german man .. by name, or simply the German man, or call the english man... the english man ... but in this country no matter how kid you can be, am always called the Farang. i choose to live here, so now not much complaining about it, thats life i guess.

Greed, Envy, Jealousy all come to mind.

[oldsailor35]

Have you heard of the financial crisis? Which upgrades have you paid for?

I'm an emotional guy and would not do business with that sc*undrel 100% on his terms. And then negotiate a much longer contract with the option to give notice... Not have him repeat this after a few years.

So you think he will re-rent quickly?

Can you afford to store your things and go on a long holiday, then return to play hardball?

This is all too common, greedy and irrational landlords who cannot rent their units. Some have condos vacant for years, but they won't reduce the rent, oh no.

You get what you negotiate!

Chris

Store everything, go on holiday and when you return to see an empty shop, see what his terms are then ..............what a good idea, best yet !

[actiondell4]

As this topic is over a year old,what did the OP end up doing ?

[bangkokcitylimits]

If the old contract has ended already, and the new one not made yet, there can be a risk that the owner even might not allow you anymore to strip the place. You can expect everything from this idiots.

[JimsKnight]

You must get some advice of the Russian /Jewish Community.

What would Russians do in this circumstance?

I am Jewish although not Russian.

Ok on the positive side next time you know to put in the contract "no key money".

There is some ways around this ,you need now to start some problems with the landlord.

You need now to fight back.

I agree with you.

Is there not a jewish community in Pattaya? I know it's not big but Pattaya seem's to have every other tom, dick and harry so why not a Jew community?

Edited March 14, 2011 by JimsKnight

[JimsKnight]

Hi mate

I dont understand how you can be so surprised over the key money " extra pay" - that is how it is - yes off course its a rib off policy in this country . rib foreigners for so much money as possible and dont care of anything, or use of threaths are common.Get money from others without work is standard.After waht I heard -anyone can call themself a laywer without any education but I dont now if its true

I dont really understand why so many are still investing here.. we are not wellcomed - only our money.There are other place we are more wellcomed in this region.

Thias also pay key money - in the shopping centre where my shop is everyone has paid key money to get in and there are only 3 falangs out of about 200.No discrimination there.

Its allways advisable to start negociating the renewal of a contract long before the date comes up and don´t argue about the price , ask nicely so the landlord doesnt loose face.Once you `argue´ he will never come down.When in Thailand do as the Thais and most who have done that have successfull businesses.

Thais pay a fraction of the key money farangs pay...

[Khun Jean]

Everyone has a choice to pay or not pay. I would never rent anything with keymoney, but then again i don't have the need for a specific location.

No one seems to understand that when you are in Thailand you have to follow the rules and one of those is that landlords can ask whatever they want for their property. It is theirs so they are 100% in control.

Welcome to capitalism. Compared to the west where people who rent have more rights then owners. As a owner of property in the west that has cost me a lot, so i understand the Thai system is actually better. As long as contracts are honoured there is nothing wrong with landlords asking higher prices. As a renter you have to be prepared for it. If you start a business you have to get your moneys worth out of a location within the timeframe of the contract. If that is not possible go for a longer period, find a cheaper location or change your business plan.

I have seen too many that just walk past a shop and think they can just start a restaurant,bar, whatever and make money without first calculating if it is viable.

[4evermaat]

Some very good advises here. I'd like to add:

- Key money has to be paid by Thais as well. From what I heard its amount reflects the success of the business, so the more then landlord assumes you're making with his premises, the higher the key money.

- Ask for a receipt. If they want to bill it as "services" 3% Withholding tax must be deducted. This is still less than the 5% they have to pay on rent.

- As Quicksilva said, run the figures. Key money vs. relocation costs plus business losses due to days of closure, customers not moving with you etc.

Out of principle, I would move and not pay one Baht to those bastards.

The problem is basically threefold. The OP is not experienced and has been caught out. Secondly, he should never have gotten anywhere near the end of the lease before negotiating for an extension and thirdly, when buying the business, he should have negotiated a new contract with the landlord which included options to renew at 3 and 6 years with rent stipulations therein provided for and any key money advised. Quite simply, you do not invest in something which only has a short lifespan.

What can the OP do ? Nothing. Either pay up or leave. It is too late in the day and the landlord knows that. Whatever the landlord does in the future, he is not going to back down now because he sees his position as strong and the OP's as weak. And he is right.

One way out might be payment of this key money to get a very long lease but the LL will not want that as leases over 3 years have to be registered. However, long leases often come with large key money payments. Future rent increases would need to be agreed beforehand, say 10% every 3 years or something. On a typical 3+3+3 lease, I would not want to get to the last 3 years before renegotiating because if I could not negotiate a satisfactory deal, then I would need a long enough lease to sell. I would expect the new owner to negotiate for a new lease anyway.

The fact that the OP was badly advised would go down well in a western court but in Thailand, you would just be throwing good money after bad.

Finally, the OP has to consider that he may not get back any deposit he has on the place as removing all fixtures and fittings is undoubtedly going to cause some cosmetic damage to the building. The OP must refrain from getting sentimental and look at it on a purely net net basis. What are the costs and profits of doing one thing over another.

I think these two posts summarize most of what I was thinking as well. I have found it is much easier to work back in home country or do "portable" freelance work. Attempting to make money with a brick/mortar business here in Thailand seems to be asking for problems. I guess you can only do your best.

[gk10002000]

I fail to understand your complaint..

Your lease is out, correct ?? Now unless it is contractually agreed previously, your new lease can be anything.. It can be a billion baht or a satang.. Its down to the land owner or sub leasee.. Does this surprise you ??

In fact I am stunned hes offering you 500k to leave, most here would just raise the price and have you walk, I guess it must have >500k worth of fixtures and fittings.

This is normal standard biz practice.

He is trying to get money/assets one way or the other. He tried to get a long term lease with new key money ( a joke in my opinon), the renter is hesitating. Landlord may get nothing, current proprieter may leave will all the equipment he put in. Offering 500K he is hoping to get at least a well equipped facility. Now it becomes a poker game. Who has the strongest hand? Key money for a renewal is garbage. As others have said, landlord should charge and bill for more rent so you can claim the business expense.