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What is Leasehold and Freehold

What is freehold and lishold?

Recently, in 2020, real estate laws in Thailand have undergone major changes. The procedure for the acquisition of apartments, condominiums, houses and villas by foreign buyers has been greatly simplified. However, land still cannot be owned by non-Thai residents.
A foreigner can get full ownership of the land (freehold) only if he registers the land for legal, and at least 51% of his shares will be owned by a co-founder with Thai citizenship. In this case, it is necessary to obtain additional documents, such as copies of the permission to establish a company, an agreement to establish a joint venture, a company registration certificate and a complete list of shareholders of a legal entity.
Non-Thais can only acquire freehold rights when it comes to real estate, such as buildings or apartments, while the land must be leased (lishold) for up to 90 years.
Negotiations are underway that wealthy foreign buyers will be able to obtain permission to register land as personal property in Bangkok and Pattaya from 2023 - this bill was introduced in 2022.

Foreigners are allowed to buy property in apartment complexes, but the amount of residential space transferred to the property is limited to 49%. The remaining 51% can be acquired by foreign entities through leasehold rights.

Renting is often the preferred option for investors. It is cheaper (up to 10%), brings more profit and lower taxes than if they were owners. In addition, leaseholders do not receive any restrictions on their property and are free to sell, donate, lease their property.

 

Freehold

Freehold - simply put, this is a contract for the sale of real estate.
Up to four co-owners can be added to this agreement. These can be, for example, family members or partners. If several people are involved in the transaction, it is necessary that their passports be certified and translated.

In addition, at the time of signing the contract, it is necessary to identify potential heirs; if this is done later, there will be additional costs for a lawyer and amendments (in the amount of 50-100 thousand baht / $ 1.5-3 thousand).

Upon completion of the contract, the seller will issue an invoice for the full value of the property minus the deposit made before signing the contract.

Freehold advantages:

  • unlimited and perpetual possession;
  • absolute freedom to dispose (sell, donate, bequeath, etc.);
  • opportunity to participate in condominium meetings.

Disadvantages of freehold:

  • the need to acquire funds from foreign sources (more on this later);
  • usually more expensive than apartments under the "foreign quota", by about 10%;
  • freehold property is registered and subject to taxation;
  • with freehold, the costs of registering real estate are usually several percent higher;
  • foreign buyers do not have the opportunity to register a land plot under freehold.
     

Leasehold

lishold is a way of owning real estate with a limited duration.
Leasehold is, in fact, a long-term lease agreement. In this case, the landlord (owner) grants the tenant (foreigner) all the powers to use the property - he can live in it, build on it, reconstruct or modify it, resell it, donate it or bequeath it to someone else, sublease it.
While it is possible to extend the treaty for thirty years beyond the original term, this is not guaranteed.

 

Chanot is a document that confirms these rights and describes all the conditions associated with the agreement.

Leasehold advantages:

As a rule, leasehold apartments are cheaper than freehold apartments by 5–10%;
payment for leasehold can be made in cash or by credit card, there is no need for international sources of funds;
associated fees and charges for registration and registration of leasehold will cost approximately 1.1%, which is significantly lower than freehold;
by purchasing real estate through leasehold, you, in fact, fix the rent in advance for the next 30 years;
you have substantial rights to the property, such as permanent residence, interior/landscape modifications, construction of structures on the land (if applicable), subletting or selling this leasehold to third parties, and even inheritance;
when selling to another person, no real estate sales tax will be charged, since you are not considered the owner of the property;
Flaws:
  • the risk that your original 30-year term may not be renewed after expiration;
  • constant contact with the landlord is required during the entire rental period;
  • the possibility of a change of ownership, which may create inconvenience for you;
  • no voting rights at condominium meetings.