New Contract Controls Introduced For Residential Property Leasing Businesses In Thailand.
Legal News & Analysis - Asia Pacific - Thailand - Construction & Real Estate
21 November, 2019
The Contract Committee of the Consumer Protection Board has announced a number of new controls and lessee protections regarding residential property rental contracts executed from January 29, 2020, onward. These were detailed in the Notification of the Contract Committee Re: The Stipulation of Residential Property Leasing as a Contract-Controlled Business B.E. 2562 (2019), which was published in the Government Gazette on October 31, 2019.
This new notification replaces a similarly named notification issued by the Contract Committee in 2018, which designated residential property leasing as a contract-controlled business and governed any residential lease agreement executed from May 1, 2018, onward.
Any residential lease agreement entered into under the 2018 notification and currently in effect will continue to be in force until the expiration of the agreement, whereas any residential lease agreement executed from January 29, 2020, onward must comply with the Contract Committee’s new notification.
Like the 2018 notification, the new notification defines a “residential property leasing business” as a business that leases (or subleases) five units of property or more to individual lessees, for residential purposes, in exchange for a fee collected by the business operator, regardless of whether the units are in the same building. This includes all types of residential property that is leased for residential purposes, except for dormitories and hotels, which are regulated under a separate regime.
The new notification includes two lists: required terms and prohibited terms. Any business operator who fails to meet the notification requirements may be subject to imprisonment for up to one year, a fine of up to THB 100,000, or both.
Required Terms and Conditions
The following terms must be included in the residential lease. If any residential lease agreement does not contain them, it will be interpreted as including them as implied terms:
- Residential lease agreements must include a version in Thai, wherein the size of the letters must not be less than 2 millimeters, and have no more than 11 letters within 1 inch and must contain the following details:
- Name and address of the business operator and its authorized person;
- Name and address of the lessee;
- Name and location of the property;
- Details of the property’s physical condition, including any items and equipment in the property;
- Term of the lease, specifying its commencement date and expiration date;
- Rental fee rates and due dates for payment;
- Public utility fee rates (e.g., electricity, water supply, telephone) and the due dates for payments and their calculation method;
- Service fee rates (i.e., services that are the business operator’s expenses, relating to the facilities and securities provided for the lease of property, which are not costs relating to the residential lease business), which must be reasonable and at the actual cost paid for the services, and which provide the due dates for payment along with their calculation method; and
- Security deposit and advance rental fee rates.
- Invoices for the fees in items 1.6–1.8 above must be sent to the lessee at least three days before their due dates, and the lessee will have the right to check the information relating to the payments that are shown in the invoices.
- Details of the physical condition of the property and equipment (if any), which have been inspected and acknowledged by the lessee, must be attached to the lease agreement, and a duplicate must be delivered to the lessee.
- The security deposit must be immediately returned to the lessee at the end of the agreement, unless the business operator has to investigate any damage in order to ascertain whether or not it is the responsibility of the lessee. If the lessee is found not to have caused any damage, the security deposit must be returned within seven days from the end of the agreement, and the business operator will re-take possession of the property. The business operator is responsible for any expenses incurred in returning the security deposit to the lessee.
- If the agreement has a prescription period, the lessee has the right to terminate the agreement before expiration, provided the lessee has leased the property for no less than half of the period specified in the agreement. The lessee must provide at least 30 days’ advance written notice to the business operator, and must not be in default in respect to paying the rental fee or other expenses.
- The business operator’s right to terminate the agreement must be written in red or black letters, or in bold or italics, and underlined, or emphasized in other ways that make such terms more pronounced than the other content of the agreement.
- For termination of the agreement according to number 6 above, the business operator must provide at least 30 days’ advance written notice to the lessee. However, only 7 days’ advance notice is required if the cause of termination results from actions of the lessee that directly affect the normal livelihood of the other lessees. No advance notice is required if the lessee does not comply with the law and the regulations relating to public order and good morals.
Prohibited Terms and Conditions
If any of the prohibited terms listed below are included in a residential lease agreement, that agreement will be interpreted as not including them. These include the following:
- Any waiver or limitation of the business operator’s liability from its breach of the agreement or wrongful acts, in respect to the material part, with no sufficient reason provided;
- Any requirement placing the total amount of the advance rental fee and the security deposit above the equivalent of three months’ rent;
- Any term that allows the business operator to change the rental fees, public utilities fees, service fees, or any other expenses before the end of the agreement;
- Any term that allows the business operator to confiscate the security deposit or the advance rental fee without any fault on the part of the lessee;
- Any term that allows the business operator, or its representative, to inspect the building or property without prior notice, unless it is an emergency circumstance that may create damage or have an impact on the business operator or the other lessees if the business operator does not conduct such emergency inspection;
- Any stipulation of electricity and water supply fees that exceed the rates specified by the relevant authorities;
- Any term that allows the business operator to prevent or obstruct the lessee’s access to the property to seize or remove the lessee’s belongings, without exercising the right to terminate the agreement legally;
- Any term that allows the business operator to request any fee or expense for renewing the lease;
- Any term that allows the business operator to terminate the agreement without any material breach of the lease agreement by the lessee;
- Any term that makes the lessee liable for damages incurred due to ordinary wear and tear from the usage of the property’s contents and equipment;
- Any term that makes the lessee liable for damage to the property, contents, and equipment that was not the lessee’s fault, and which occurred during force majeure situations; and
- Any term that makes the lessee liable for defects to the property, contents, and equipment which were incurred due to ordinary wear and tear through usage.
Through this notification, the Contract Committee of the Consumer Protection Board is exercising its power—granted by section 35 bis of the Consumer Protection Act B.E. 2522 (1979)—to ensure that written contracts between certain businesses and their consumers contain the necessary terms and conditions, thus preventing consumers from being unreasonably disadvantaged by unfair contract terms.
For further information, please contact:
Manaswee Wongsuryat, Tilleke & Gibbins