Thailand New Type Of Transferable Right To Use Immovable Property.
Legal News & Analysis - Asia Pacific - Thailand - Construction & Real Estate
26 February, 2019
On February 8, 2019, Thailand’s National Legislative Assembly passed a new draft of the Sap-Ing-Sith Act, designed to eliminate certain restrictions and limitations for the ordinary lease of immovable property under the Civil and Commercial Code, and the lease of commercial and industrial real estate under the relevant governing laws. The law is expected to encourage the use of rights attached to immovable property which is transferrable and can be used as security/collateral to promote and support Thailand’s economic growth, as well as to boost the property market.
Sap-Ing-Sith literally means the right to use an immovable property as specified under the Act. Although similar to leasehold rights in some respects, Sap-Ing-Sith rights are legally distinct from leases, and there are several key differences between Sap-Ing-Sith rights and regular leasehold rights (see the table below for a comparison of the two).
The categories of immovable property over which Sap-Ing-Sith rights can be created are limited to land with a valid land title deed (Chanote), buildings constructed on land with a Chanote, and condominium units as defined in the Condominium Act. Only the owner of the immovable property can create a Sap-Ing-Sith in favor of another person (the Sap-Ing-Sith Holder), and the maximum Sap-Ing-Sith period is 30 years. Sap-Ing-Sith must be made in writing and registered with the relevant land office, which will issue a Sap-Ing-Sith certificate.
A plot of land subject to a registered Sap-Ing-Sith cannot be subdivided into plots or consolidated into a single plot.
The parties to a Sap-Ing-Sith will have the following rights and obligations:
- Rights and obligations of the owner of immovable property subject to a Sap-Ing-Sith
- Cannot create any other right attached to the property without written consent from the Sap-Ing-Sith holder.
- Retains the right to transfer ownership of the property, or use it as security by mortgage or business collateral. If immovable property has already been mortgaged or placed as business collateral, written consent from the mortgagee or the business collateral receiver is required to create a Sap-Ing-Sith.
- Cannot terminate the Sap-Ing-Sith before the expiration of the Sap-Ing-Sith period if termination will affect the right of a third party who has, for value and in good faith, acquired and registered his/her right.
- Retains ownership of the immovable property, has the right to follow and recover the property from any person not entitled to seize it, and has the right to prevent any unlawful interference with it.
Rights and obligations of a Sap-Ing-Sith holder
- Has the right to use the immovable property according to the details contained in the certificate issued by the competent official, and such use of the property shall be in accordance with the laws.
- Can transfer the Sap-Ing-Sith to another person (including by inheritance), and use it as security for a mortgage.
- Liable for the immovable property as if it were the owner, excluding the right to follow and recover the property from any person not entitled to seize it and the right to prevent any unlawful interference with it (which the owner’s retains). However, the Sap-Ing-Sith holder is obliged to immediately inform the owner in case of any disturbance to its peaceful possession that may warrant the owner to protect it.
- Has the right to make alterations or additions to the immovable property without the owner’s consent. Any alterations or any additional buildings newly made or constructed on the property by the Sap-Ing-Sith holder belong to the Sap-Ing-Sith holder for the duration of the Sap-Ing-Sith, after which they revert to the owner unless otherwise agreed between the parties. In the case of a condominium unit, any alteration or addition made to the condominium unit shall still belong to the owner of the condominium unit.
- Must return the immovable property to the owner at the expiration of the Sap-Ing-Sith period, in “as-is” condition, unless otherwise agreed between the parties.
The draft is now pending endorsement by the monarch. Once endorsed, it will be published in the Government Gazette, then come into force 180 days later. Ministerial regulations regulating the procedure for creating a Sap-Ing-Sith, issuance of certificates, and government fees, are expected to be issued within 90 days of the effective date of the Act.
Sap-Ing-Sith vs Lease of Property
The material differences between the new Sap-Ing-Sith and leases are as follows:
Please click on the table to enlarge.
For further information, please contact:
Chaiwat Keratisuthisathorn, Tilleke & Gibbins