The Thai Land Code stipulates that – apart from a few exemptions – foreigners are not permitted to own land in Thailand. Many foreigners seeking to buy immovable property in Thailand, therefore, chose legal structures like leasehold, usufruct, or ownership of the property by a Thai company, to mitigate the restrictions. However, these legal structures have weaknesses and, if not set up properly, may even involve legal risks. To encourage foreigners to invest in property in Thailand, the Thai National Legislative Assembly on February 8th, 2019, passed the Sap-Ing-Sith Act. The Sap-Ing-Sith Act was published in the Royal Gazette on April 26th, 2019 and will come into effect on October 27th, 2019. The new law is aiming to encourage foreigners to invest in immovable property to boost the economy in Thailand. Requirements, as well as the rights and obligations of the Sap-Ing-Sith, are as follows:
Definition of Sap-Ing-Sith
The Sap-Ing-Sith grants its holder the right to use an immovable property and can be established on land with a valid Chanote (Land title deed), buildings placed on land plots held under a valid Chanote and condominium units as defined in the Condominium Act. It is possible to register a Sap-Ing-Sith for a period of up to 30 years. The Sap-Ing-Sith has to be made in writing and registered at the competent land office.
Registration of a Sap-Ing-Sith
After the parties reached an agreement, the registration of the Sap-Ing-Sith at the Land Department takes place in two stages; first, the Property-Owner has to register a Sap-Ing-Sith for the property. After registration of the Sap-Ing-Sith, the transfer to the other party has to be registered. The registration fee is 20,000 THB. If the land plot where Sap-Ing-Sith should be registered is subject to a mortgage, consent from the mortgage holder is required. After registration, the Sap-Ing-Sith holder will receive a certificate of the Sap-Ing-Sith from the Land Office, which he can use to prove his right. The Land Office will also keep a copy of this certificate.
Rights and duties in relation to the Sap-Ing-Sith
There are several rights and obligations in relation to the Sap-Ing-Sith, which are surpassing the rights of a standard leasehold. The most significant rights and duties are shown as follows:
Rights of the Sap-Ing-Sith holder:
- Use the property as shown on the details of the certificate issued by the land office;
- Transfer the Sap-Ing-Sith to a third party without the owner’s consent;
- Use the Sap-Ing-Sith as security for a mortgage (not registered);
- The Sap-Ing-Sith is inheritable under statutory inheritance law; and
- Make alterations/additions to the property without the owner’s consent.
Duties of the Sap-Ing-Sith holder:
- Has to return the property in an “as is” condition at the end of the period unless otherwise agreed; and
- Liable for the property like an owner. Exception: the right to follow and recover the property from a third party that is not entitled to possess the land, and the right to prevent unlawful interferences from the property.
Rights of the Property-owner:
- To transfer the ownership;
- Use the property as security for a mortgage; and
- Use the property security according to the Business Collateral Act B.E. 2558.
The execution of all rights mentioned above requires written consent by the Sap-Ing-Sith holder.
Obligations of the Property-owner:
- Can’t create other rights on a property with a Sap-Ing-Sith without consent from the Sap-Ing-Sith Holder;
- Can’t terminate the Sap-Ing-Sith before the expiration period if a right of a third party is affected.
As foreigners will be permitted to hold a Sap-Ing-Sith, it might become an interesting alternative to other legal structures that allow foreigners to possess land in Thailand. Also, when keeping in mind the advantages of the Sap-Ing-Sith, like the possibility to mortgage it, and the right to sell the Sap-Ing-Sith without consent of the owner, there are many scenarios where a Sap-Ing-Sith can be very useful. The Sap-Ing-Sith is not a game-changer, as the maximum period is still 30 years and thus the same duration as a normal leasehold. And most other rights that the Sap-Ing-Sith grants could also be granted with a standard leasehold agreement. But still, the Sap-Ing-Sith Act shows the ongoing liberalization of the Thai property market, which will certainly be welcomed by foreign investors. We expect that most foreign property buyers will likely prefer the new Sap-Ing-Sith over the traditional registered lease.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.