Phuket court rules 'secured' or 'collective' leases are void

[roath]

DON'T WORRY - YOUR PROTECTED LEASE IS STILL SAVE AND VALID

"It may be true that Phuket courts reclassified a validly secured and duly registered lease into a void transfer of legal ownership. Reportedly this has been done without any reference to the anti-nominee rules of the foreigner laws (Land Code, Foreign Business Act), but just by interpreting the Civil and Commercial Code, which does not differentiate between Thai and foreign persons. The fictitious ownership transfer was not declared void, because the investor was a foreigner, but due to the reason this "ownership transfer by mistake" had not been registered as (hidden) sale. It is currently unclear whether the facts in such cases really justify such reclassification, which would be antipodal to civil law legislation and jurisdiction - and whether the courts arguments have been unbiased described reported. Sometimes the wish seems to be father to the thought. It should be clearly noted that it is the general concept of Thailand's lease legislation that any overstepping of legal limitations is carefully reduced by law to a size and scope which is still legal and valid. If a lease agreement is concluded for 31, 90 or 500 years, it would not be deemed to be void from the beginning. Under Section 540, second sentence CCC its enforceability is just limited to the first thirty years. And it will certainly not be reclassified as a (hidden) sale."

Source: http://linkd.in/1JKQ32W

... AND IT IS NO CASE OF SECTION 155 CCC

It is a serious misinterpretation of Section 155 CCC to base a verdict on that piece of legislation. Section 155 CCC refers to circumstances, where the parties create only the wrong impression, a certain contract has been concluded, but in reality they do not agree on such contract. They do not want the contract to have any legal effect, just a apparent legal effect. [A typical example is the sale of estate by an over indebted debtor to his wife, so that the creditor gets discouraged to start legal actions against the apparent penniless debtor. For such scenario the law rules that the sale is void.] However, in our case the parties of the lease agreement did not at all want to create just the appearance of the lease. They wanted and still want a valid lease agreement. Therefore Section 155 CCC is simply not applicable to such case. Source: http://linkd.in/1JKQ32W

Apart from this hype, each and any agreement can be void if the terms of the contract are not seriously agreed. If the lease contains clauses which could obviously not be enforced under Thai laws (above all a duration of 90 years) then its validity might be denied due to lack of graveness. This is just a general legal concept which should not give reason to trumpet about a general crackdown on secured lease structures. To repair such objected investment structure, the lease agreements has to be adjusted, leaving the protection mechanism untouched.

There is a legal difference between "void" and "unenforceable". If a contract is inchoate then it may be unenforceable rather than void which leads to a different effect in law and equity. Likewise a contract may contain illegal clauses which are capable of being struck out but leaving the remainder of the contract valid and enforceable. If the purpose of the contract has an illegal intent then the contract may well be regarded as void ab initio which means it cannot be resusciatated and is basically thrown to the wind with no compensation to the parties. The article is very unclear as to what applies here and there isnt enough detail of the terms of the agreements to establish the possibility of severability. In any event I understand that equitable principles and reliefs are very underdeveloped in Thai law

[hawker9000]

DON'T WORRY - YOUR PROTECTED LEASE IS STILL SAVE AND VALID

"It may be true that Phuket courts reclassified a validly secured and duly registered lease into a void transfer of legal ownership. Reportedly this has been done without any reference to the anti-nominee rules of the foreigner laws (Land Code, Foreign Business Act), but just by interpreting the Civil and Commercial Code, which does not differentiate between Thai and foreign persons. The fictitious ownership transfer was not declared void, because the investor was a foreigner, but due to the reason this "ownership transfer by mistake" had not been registered as (hidden) sale. It is currently unclear whether the facts in such cases really justify such reclassification, which would be antipodal to civil law legislation and jurisdiction - and whether the courts arguments have been unbiased described reported. Sometimes the wish seems to be father to the thought. It should be clearly noted that it is the general concept of Thailand's lease legislation that any overstepping of legal limitations is carefully reduced by law to a size and scope which is still legal and valid. If a lease agreement is concluded for 31, 90 or 500 years, it would not be deemed to be void from the beginning. Under Section 540, second sentence CCC its enforceability is just limited to the first thirty years. And it will certainly not be reclassified as a (hidden) sale."

Source: http://linkd.in/1JKQ32W

... AND IT IS NO CASE OF SECTION 155 CCC

It is a serious misinterpretation of Section 155 CCC to base a verdict on that piece of legislation. Section 155 CCC refers to circumstances, where the parties create only the wrong impression, a certain contract has been concluded, but in reality they do not agree on such contract. They do not want the contract to have any legal effect, just a apparent legal effect. [A typical example is the sale of estate by an over indebted debtor to his wife, so that the creditor gets discouraged to start legal actions against the apparent penniless debtor. For such scenario the law rules that the sale is void.] However, in our case the parties of the lease agreement did not at all want to create just the appearance of the lease. They wanted and still want a valid lease agreement. Therefore Section 155 CCC is simply not applicable to such case. Source: http://linkd.in/1JKQ32W

Apart from this hype, each and any agreement can be void if the terms of the contract are not seriously agreed. If the lease contains clauses which could obviously not be enforced under Thai laws (above all a duration of 90 years) then its validity might be denied due to lack of graveness. This is just a general legal concept which should not give reason to trumpet about a general crackdown on secured lease structures. To repair such objected investment structure, the lease agreements has to be adjusted, leaving the protection mechanism untouched.

There is a legal difference between "void" and "unenforceable". If a contract is inchoate then it may be unenforceable rather than void which leads to a different effect in law and equity. Likewise a contract may contain illegal clauses which are capable of being struck out but leaving the remainder of the contract valid and enforceable. If the purpose of the contract has an illegal intent then the contract may well be regarded as void ab initio which means it cannot be resusciatated and is basically thrown to the wind with no compensation to the parties. The article is very unclear as to what applies here and there isnt enough detail of the terms of the agreements to establish the possibility of severability. In any event I understand that equitable principles and reliefs are very underdeveloped in Thai law

...unless it's a case of foreigner vs. thai national. Then I think the principles are going to prove in most cases fairly "well developed".

[simon43]

I think the most important, underlying concern is if these contracts were an attempt to circumvent the existing Thai law re property ownership by foreigners.

If they are found to be such, (and IMHO, a 30+ 30+ lease contract is such, but that is a layman's opinion), then I see no reason why the whole contract is not thrown out.

It may depend upon whether there were actually 2 contracts - a 30-year lease which is registered with the Land Office, and then a 'private' 30+30+ contract between the buyer and seller. I can't see any Land Office agreeing to sign of a 30+30+ contract.

[bangkoklawyer24]

I think the most important, underlying concern is if these contracts were an attempt to circumvent the existing Thai law re property ownership by foreigners.

If they are found to be such, (and IMHO, a 30+ 30+ lease contract is such, but that is a layman's opinion), then I see no reason why the whole contract is not thrown out.

It may depend upon whether there were actually 2 contracts - a 30-year lease which is registered with the Land Office, and then a 'private' 30+30+ contract between the buyer and seller. I can't see any Land Office agreeing to sign of a 30+30+ contract.

"It should be clearly noted that it is the general concept of Thailand's lease legislation that any overstepping of legal limitations is carefully reduced by law to a size and scope which is still legal and valid. If a lease agreement is concluded for 31, 90 or 500 years, it would not be deemed to be void from the beginning. Under Section 540, second sentence CCC its enforceability is just limited to the first thirty years. And it will certainly not be reclassified as a (hidden) sale."

Source: http://linkd.in/1JKQ32W

[up2you2]

Foreigners have no rights in Thailand, it's very clear. If you were looking for something else, then you are in the wrong country !

Stand corrected.

Foreigners still have the right to go the airport, and get the hell out of here.

[stevenl]

I think the most important, underlying concern is if these contracts were an attempt to circumvent the existing Thai law re property ownership by foreigners.

If they are found to be such, (and IMHO, a 30+ 30+ lease contract is such, but that is a layman's opinion), then I see no reason why the whole contract is not thrown out.

It may depend upon whether there were actually 2 contracts - a 30-year lease which is registered with the Land Office, and then a 'private' 30+30+ contract between the buyer and seller. I can't see any Land Office agreeing to sign of a 30+30+ contract.

"It should be clearly noted that it is the general concept of Thailand's lease legislation that any overstepping of legal limitations is carefully reduced by law to a size and scope which is still legal and valid. If a lease agreement is concluded for 31, 90 or 500 years, it would not be deemed to be void from the beginning. Under Section 540, second sentence CCC its enforceability is just limited to the first thirty years. And it will certainly not be reclassified as a (hidden) sale."

Source: http://linkd.in/1JKQ32W

Apparently the courts don't agree with you.

Please use standard font and colour.

[simon43]

It should be clearly noted that it is the general concept of Thailand's lease legislation that any overstepping of legal limitations is carefully reduced by law to a size and scope which is still legal and valid

Can I suggest that the above law is more relevant for Thai citizens, who also cannot lease land for more than 30 years and for whom a 30+30+ contract is also illegal/unenforceable. (Many Thais rent land, not always buy it).

But when the above law applies to non-Thais, you have the additional law concerning circumventing land ownership laws for foreigners. A Court may consider that a foreigner taking out a 30+30+ land lease contract is akin to trying to circumvent the land ownership laws for foreigners, in which case one would appear to be 'in the poo poo'.

[bangkoklawyer24]

Interesting readers' comments on the Phuket News website

http://www.thephuketnews.com/phuket-court-rules-secured-or-collective-leases-are-void-51183.php

[FBlue72]

Well I've said it before ... You'd have to be a complete and utter moron to buy property in Thailand. Who in their right mind would think about handing over 51% of their assets to what is little more than a nation of thieves?

It's a shame the UK, US and EU countries don't apply the same rules to Thais but of course we understand the importance of foreign investment and we also know that they can't dig it up and take it with them.

The other issue has for many years been pricing; in most cases the property market especially in areas such as Phuket, are so over the top it beggars belief anyone would think they are buying a home / villa or apartment of good investment value.

I honestly cannot understand how anyone could be stupid enough to buy property in Thailand ... there again the Nigerian 419 Scam continues to catch the very stupid and greedy and I can only conclude that the expats who brought property in Thailand fall into both categories.

This is not about foreigners buying but about 30 year leases with totally unenforceable extensions that were touted as perfectly legal. Plenty of foreign " realtors" and " lawyers" ( unlicensed at that as both jobs are restricted to Thai nationals ) would tell you it was ironclad. Indeed even the president of the Phuket Realtor's association was touting these leases not too long ago. Where I'm from lawyers and realtors have to be truthful under pain of having a license yanked. Problem in Thailand is too many foreigners acting in jobs they should not be and too many foreigners not knowing any better because the word on the street is it's Ok TiT gray area etc etc and then every so often the fish get reeled in and if you are on the line, well you're " stupid" which is unkind and unfair to those losing assets.

[FBlue72]

I read it as the worse case is any 90 year lease that starts with the 30 year lease, the entire contract could be voided and even the initial 30 year lease could be void. This sounds possibly like the beginnings of a "nationalization" of Thai properties. See Venezuala and recent company and company asset siezures.

Nope....the law has always said this. Look at some of the property threads that are five, or six years old.

Posters clearly stated that not only was a 30+30+30 year lease not valid, but, it makes the original lease invalid.

At that time, it had never been tested in court. Now it has and suddenly all the Chicken Littles are coming out of the wood-work.

To all those people who say rent, not buy; those of us that bought land and/or houses years ago, have lived rent free for years and have seen capital gains of 500% and up, are laughing up our sleeves at your comments.

Not everyone is lucky enough to have Thai partners they can trust with 51 % ownership or ditto the Thai wife. But hey, both of those methods are also circumventing the laws and you never know when that net will get pulled up.

[KarenBravo]

I read it as the worse case is any 90 year lease that starts with the 30 year lease, the entire contract could be voided and even the initial 30 year lease could be void. This sounds possibly like the beginnings of a "nationalization" of Thai properties. See Venezuala and recent company and company asset siezures.

Nope....the law has always said this. Look at some of the property threads that are five, or six years old.

Posters clearly stated that not only was a 30+30+30 year lease not valid, but, it makes the original lease invalid.

At that time, it had never been tested in court. Now it has and suddenly all the Chicken Littles are coming out of the wood-work.

To all those people who say rent, not buy; those of us that bought land and/or houses years ago, have lived rent free for years and have seen capital gains of 500% and up, are laughing up our sleeves at your comments.

Not everyone is lucky enough to have Thai partners they can trust with 51 % ownership or ditto the Thai wife. But hey, both of those methods are also circumventing the laws and you never know when that net will get pulled up.

Trust doesn't come into it. A thirty year lease from the missus is perfectly legal.

[stevenl]

I read it as the worse case is any 90 year lease that starts with the 30 year lease, the entire contract could be voided and even the initial 30 year lease could be void. This sounds possibly like the beginnings of a "nationalization" of Thai properties. See Venezuala and recent company and company asset siezures.

Nope....the law has always said this. Look at some of the property threads that are five, or six years old.

Posters clearly stated that not only was a 30+30+30 year lease not valid, but, it makes the original lease invalid.

At that time, it had never been tested in court. Now it has and suddenly all the Chicken Littles are coming out of the wood-work.

To all those people who say rent, not buy; those of us that bought land and/or houses years ago, have lived rent free for years and have seen capital gains of 500% and up, are laughing up our sleeves at your comments.

Not everyone is lucky enough to have Thai partners they can trust with 51 % ownership or ditto the Thai wife. But hey, both of those methods are also circumventing the laws and you never know when that net will get pulled up.

Trust doesn't come into it. A thirty year lease from the missus is perfectly legal.

If you were married already when the lease was given you may be mistaken there.

[roath]

If you were married already when the lease was given you may be mistaken there.

Usufruct is better in those circumstances I believe

[KarenBravo]

Usufructs to foreigners are very commonly turned down at Phuket land office. They have no right to, but they just do.

[stevenl]

If you were married already when the lease was given you may be mistaken there.

Usufruct is better in those circumstances I believe

Yes, it is. But we:re going off topic here.

[Old Croc]

Usufructs to foreigners are very commonly turned down at Phuket land office. They have no right to, but they just do.

I had one approved there quite recently.

[hawker9000]

Usufructs to foreigners are very commonly turned down at Phuket land office. They have no right to, but they just do.

I had one approved there quite recently.

'Just exactly that sort of inconsistency, and that kind of arbitrariness, that's so maddening. What to some is "thainess" is to others the epitome of backwardness and "third world".

(Ok, cue the "love-it-or-leave-it" harpies...)

[Old Croc]

Usufructs to foreigners are very commonly turned down at Phuket land office. They have no right to, but they just do.

I had one approved there quite recently.

'Just exactly that sort of inconsistency, and that kind of arbitrariness, that's so maddening. What to some is "thainess" is to others the epitome of backwardness and "third world".

(Ok, cue the "love-it-or-leave-it" harpies...)

I had a number of transactions go through that office in an orderly and timely fashion.

A lot depends on whether you are prepared to do things the "Thai" way or not;

[beenitseenitdoneit]

Usufructs to foreigners are very commonly turned down at Phuket land office. They have no right to, but they just do.

I had one approved there quite recently.

'Just exactly that sort of inconsistency, and that kind of arbitrariness, that's so maddening. What to some is "thainess" is to others the epitome of backwardness and "third world".

(Ok, cue the "love-it-or-leave-it" harpies...)

I had a number of transactions go through that office in an orderly and timely fashion.

A lot depends on whether you are prepared to do things the "Thai" way or not;

More corruption - I hope you are proud of yourself.

I don't know what's worse the Farangs who aid and abet all of this corruption, or the Thais who request it.

Anyway if there should ever be a test case on your successful approval, at least we can all rest assured that it will be declared illegal.

[KarenBravo]

What are you twittering about?

Why do you presume corruption?

Got any proof?

An usafruct is legal and it was issued by the legal issuing authority.

It's turning an applicant down when land-owner and the person that wants one are fine with it.

[arunsakda]

Usufructs to foreigners are very commonly turned down at Phuket land office. They have no right to, but they just do.

I had one approved there quite recently.

How much you pay? Buying property here is pointless. I bought a Condo and fully expect it to be seized eventually. Don't invest more you can afford to lose. I hope now at least I will be afforded the chance to remove my meagre possesions before it is transferred to whoever....

[Old Croc]

I had a number of transactions go through that office in an orderly and timely fashion.

A lot depends on whether you are prepared to do things the "Thai" way or not;

More corruption - I hope you are proud of yourself.

I don't know what's worse the Farangs who aid and abet all of this corruption, or the Thais who request it.

Anyway if there should ever be a test case on your successful approval, at least we can all rest assured that it will be declared illegal.

Ignorant. Assumptive. Libellous.

[Old Croc]

Usufructs to foreigners are very commonly turned down at Phuket land office. They have no right to, but they just do.

I had one approved there quite recently.

How much you pay? Buying property here is pointless. I bought a Condo and fully expect it to be seized eventually. Don't invest more you can afford to lose. I hope now at least I will be afforded the chance to remove my meagre possesions before it is transferred to whoever....

Not pay much. Usufruct cheap, cheap.

lease Phaeng Pai.

[bangkoklawyer24]

THE GREAT PHUKET COURT SWINDLE: Based on recent reports by esteemed Thai lawyers, former press articles that Thai courts do not respect secured lease structures (collective leasehold, protected leasehold) seem to be heavily falsified and misguiding - intentionally as a brash marketing tool or unintentionally by lack of understanding of the laws of Thailand.

SOURCE: http://linkd.in/1JKQ32W

[Genericnic]

As an old retired lawyer, it is interesting to see all the speculation here considering that none seem to have seen the underlying lease documents in order to assess the terms included in them. I would never have advised a client on the validity of a proposed lease without seeing the documentation memorializing it. To do so would have been the grossest of malpractice.

That said, the basic rule in Thailand is that a foreigner (not just farang - yes, there is a difference in meaning) can not own land directly or indirectly (e.g. by nominee). Those who choose to try to circumvent this rule and then complains about problems beings to mind the old saying that "you can't cheat an honest man."

David

[bangkoklawyer24]

Interesting readers' comments on the Phuket News website

http://www.thephuketnews.com/phuket-court-rules-secured-or-collective-leases-are-void-51183.php

Now the Phuket lawyers are wrangling over and tinkering with how to interpret the court decision. Popcorn, anyone?

[TallGuyJohninBKK]

I had a number of transactions go through that office in an orderly and timely fashion.

A lot depends on whether you are prepared to do things the "Thai" way or not;

I have no idea what you did or didn't do at the Phuket land office to get approvals there.

But clearly, the reason others responded to your post above is that saying "prepared to do things the 'Thai' way" pretty much implies you paid tea money or some other compensation to smooth the way.

That's what most folks here would reasonably interpret "doing things the 'Thai' way" to mean.

[stevenl]

I had a number of transactions go through that office in an orderly and timely fashion.

A lot depends on whether you are prepared to do things the "Thai" way or not;

I have no idea what you did or didn't do at the Phuket land office to get approvals there.

But clearly, the reason others responded to your post above is that saying "prepared to do things the 'Thai' way" pretty much implies you paid tea money or some other compensation to smooth the way.

That's what most folks here would reasonably interpret "doing things the 'Thai' way" to mean.

If that is the case that would mean many foreigners don't understand Thailand and how things are done here.

[hawker9000]

I had a number of transactions go through that office in an orderly and timely fashion.

A lot depends on whether you are prepared to do things the "Thai" way or not;

I have no idea what you did or didn't do at the Phuket land office to get approvals there.

But clearly, the reason others responded to your post above is that saying "prepared to do things the 'Thai' way" pretty much implies you paid tea money or some other compensation to smooth the way.

That's what most folks here would reasonably interpret "doing things the 'Thai' way" to mean.

If that is the case that would mean many foreigners don't understand Thailand and how things are done here.

Which is... Please. Enlighten us. 'Seems to me one either does as Johnnie is saying, or one doesn't. Is there something other than "does" or "doesn't"? I'll admit though, he did leave out, "or knows somebody".

[stevenl]

I had a number of transactions go through that office in an orderly and timely fashion.

A lot depends on whether you are prepared to do things the "Thai" way or not;

I have no idea what you did or didn't do at the Phuket land office to get approvals there.

But clearly, the reason others responded to your post above is that saying "prepared to do things the 'Thai' way" pretty much implies you paid tea money or some other compensation to smooth the way.

That's what most folks here would reasonably interpret "doing things the 'Thai' way" to mean.

If that is the case that would mean many foreigners don't understand Thailand and how things are done here.

Which is... Please. Enlighten us. 'Seems to me one either does as Johnnie is saying, or one doesn't. Is there something other than "does" or "doesn't"? I'll admit though, he did leave out, "or knows somebody".

Patience is a virtue, especially when doing things here.

Who is 'us' BTW, can't just speak for yourself? You're making big leaps in your reasoning BTW.