Thailand has long been a magnet for foreign investors and lifestyle seekers, with Phuket standing out as one of the most desirable locations for property purchases. However, Thailand’s foreign ownership laws can appear daunting to newcomers, especially when it comes to owning land.

One of the most frequently used legal avenues for foreigners to take possession of a property is through obtaining a leasehold. While leasehold might not be as straightforward as freehold ownership, it remains a perfectly viable and secure option – if handled correctly.

In this article, we explore how foreigners can safely invest in leasehold property in Phuket and across Thailand, how they can protect themselves through robust contracts, and how the structure can be designed for long-term flexibility and security.

What Is Leasehold Ownership?

In Thailand, foreigners are not permitted to own land directly under their own name. It is possible under Thai law, however, for foreigners to lease land for a period of up to 30 years. In addition, on a new build, developers will also often allow for options to renew the lease for further two 30-year periods.

Although this creates a long-term lease structure that can last for up to 90 years, more than adequate for residential or investment purposes, foreigners should note that this may not be guaranteed if they do not choose an honest and reputable developer.

It’s important to understand that while the land is leased, the foreign buyer can legally own any building or structure erected on that land. This legal nuance allows for a powerful combination of security and flexibility, particularly when the lease is correctly drafted.

Why Leasehold Is Common in Phuket

Phuket’s high concentration of foreign buyers has made the leasehold structure especially popular. Many developers, legal advisors, and property agents in Phuket are well-versed in structuring leasehold agreements that are tailored to foreign ownership, ensuring compliance with Thai law while offering significant protection to the lessee.

Additionally, certain upscale villa estates and condominium developments are purposefully designed with leasehold structures to make foreign participation easier, especially when land availability is limited or when freehold options are not legally viable.

The Key to a Safe Leasehold: A Well-Drafted Lease Agreement

Protecting your leasehold investment in Phuket

The most critical element of a secure leasehold arrangement is the lease agreement itself. Too often, foreign buyers sign basic or templated contracts that do not provide sufficient legal protection. To safeguard a leasehold investment, it is important to make sure:

  • It is prepared by a reputable and experienced Thai property lawyer.
  • It is registered at the local Land Office to ensure legal validity.
  • Is inclusive of clauses that protect renewal rights, inheritance rights, and sale conditions.
  • It is structured to provide an option to convert to freehold in the future, should the law allow or should the buyer sell the property to a Thai national or Thai juristic person.

Without the above, buyers may find themselves exposed to unnecessary risk which may lead to problems in the future.

Including an Option to Convert to Freehold

One of the smartest protections a foreign leaseholder can negotiate is a convertibility clause. This clause states that the foreigner has the unequivocal right to convert the leasehold title to a freehold title, should the property ever be sold.  This is because the new buyer may be a Thai national or a Thai-registered company, which is classified as a Thai juristic person.

This option creates future flexibility – essential for resale – and reassures both the initial buyer and any future buyers that the property has the potential to change its title structure. This is particularly attractive to Thai buyers or investors seeking full freehold ownership down the line.

The wording of this clause must be precise and legally sound. Poorly written contracts, or those created without legal expertise, may not be enforceable or may omit critical details, so it’s essential to use a legal team familiar with Thai land and property law.

Ownership of the Building by a Foreigner

A crucial aspect that many foreign buyers overlook is that a foreigner can legally own the structure (building or villa) on leased land. Under Thai law, there is no restriction preventing foreigners from owning the physical property they construct or purchase – only the land on which it stands is restricted.

To formalize ownership of the building, the foreign buyer should:

  • Ensure that the construction permit is in their name (if building from scratch).
  • Keep all receipts and contracts proving they funded the construction.
  • Have their ownership registered with the Land Office, particularly if the building is newly constructed.

This creates a legally recognized distinction between land lease and property ownership, giving the foreigner the ability to sell or transfer their building independent of the land (if permitted by contract), or together with lease rights.

Lease Registration and Legal Formalities

All lease agreements for periods longer than three years must be registered with the Land Department. Without this registration, the lease is not legally binding for its full term and may be considered a standard rental agreement.

At the time of registration, the buyer will pay a registration fee and stamp duty, which are typically shared equally between the lessor (usually a Thai landowner or developer) and the lessee (foreign buyer). Once registered, the lease becomes legally enforceable for the agreed term, if stated clearly in the contract.

Protecting Your Investment Long-Term

In addition to securing a solid contract and registering the lease, there are further steps a foreign buyer can take to protect their leasehold investment:

  1. Power of Attorney and Succession Planning: Ensure the lease includes clauses about succession, inheritance, or assigning the lease to heirs in the event of death. Your lawyer may also advise creating a will in Thailand to solidify these rights.
  2. Nominee Structures Are Illegal: Avoid any arrangements that involve using Thai nationals as ‘nominees’ to hold land on your behalf. These arrangements are illegal and can lead to legal headaches later.
  3. Juristic Ownership: If you set up a Thai company to own the land, it must be a legitimate business operation with majority Thai ownership. Even then, this route comes with risks and requires careful legal oversight to ensure compliance and adherence to all the laws of Thailand.

Conclusion: Leasehold Done Right Can Be a Smart and Secure Investment

Leasehold property ownership in Phuket remains a highly viable option for foreign buyers, provided the lease structure is professionally executed. With a properly worded lease agreement that includes renewal terms, a right to convert to freehold, and the clear separation of land and building ownership, foreigners can enjoy long-term, protected use of property in one of Asia’s most sought-after holiday destinations.

Thai Residential works with some of the most respected lawyers in Phuket to ensure that leasehold agreements are air-tight, bullet proof and 100% legally sound. If considering a leasehold property, we’re here to guide you every step of the way.

If you would like to learn more about the various legal structures available to foreigners, please read our comprehensive Phuket Property Guide.

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