Recently, our attention was drawn to an article in another newspaper which claimed that your lease rights in Thailand would be “buried with you”.
This, it said, was because of the “fact that lease rights basically cannot be passed on to loved ones in the case of the lessee’s death”.
The article claimed that an heir cannot inherit leased land (or for that matter, a villa or a condominium) because Thai law simply does not allow for it.
Frightening, if true. But it is not.
It is well known that ownership of land by foreigners in Thailand is restricted. Thus, a long-term leasehold is often the best option for a foreigner to invest in land.
The article argued that if a lessee dies during the lease term, any heir of such a lessee is not legally entitled to inherit the remaining lease term.
The provisions of the Civil and Commercial Code of Thailand (CCC) that regulate leases in Thailand are silent as to whether or not a lease may be inherited – they do not say it can, nor do they say it cannot.
Thus, we need to look elsewhere, first to the provisions of law that regulate inheritance and then see how they apply to the provisions that regulate leases.
Inheritance or “succession” is regulated by Section 1599ff of the CCC. Section 1599 of the CCC states, “When a person dies, his estate devolves on the heirs.”
Section 1600 of the CCC then goes on to define the “estate” as follows: “Subject to the provisions of this Code, the estate of a deceased includes his properties of every kind, as well as his rights, duties and liabilities, except those which by law or by their nature are purely personal to him.” (Emphasis added.)
The reason for this exception is that rights and duties always implicate the party on the other end of the deceased’s right and duty.
If such a party agreed to grant a right or undertake a duty to the deceased, specifically with the intent of doing so with that particular person alone, that right and duty is “purely personal” and should not be given to or put upon an heir.
Therefore, in order to be inheritable, a lease must not be a “purely personal” right.
If we then turn to how this applies to leases, the law itself does not define a lease (or what the law refers to as a “hire of property”) as a “personal right”.
However, a lease can, in some instances, be interpreted as being “purely personal” by the nature of a given lease transaction.
Lessors surely have an interest in who leases their property. This is why apartment owners, for example, screen their potential lessees before entering into an agreement with them. They want to ensure that the person they choose will handle the property with care.
This is recognized by the law. Section 544 of the CCC provides that: “Unless otherwise provided by the contract of hire, a hirer cannot sublet or transfer his rights in the whole or part of the property hired to a third person.”
Thus, the law assumes that the lessee’s rights are of a purely personal nature to the lessor, that the lessor would not allow such rights to anyone else.
The Article cites a Supreme Court of Thailand case that confirms this understanding of the law (Dika No. 1008/2537 [1994]); and we agree with that understanding.
However, the law also recognises that this starting assumption may not be applicable in every case … “unless otherwise provided by the contract.”
There was no such provision in the lease contract at issue in the Supreme Court case cited above; there was no “otherwise provided” option for the lessee to assign the lease to anyone the lessee wished without further consent from the lessor.
The law allows that a lease agreement can provide otherwise.
By entering into an assignment (“succession clause”, in the case of inheritance) in a lease agreement, the lessor surrenders the protection afforded to him under Section 544 of the CCC, which bars any third party not specifically chosen by the lessor from becoming the new lessee.
The lessor agrees with the lessee that the right that he is providing to the lessee is not a personal right – they “otherwise provide” that the lease is not “purely personal”, that the lessor does not need the law’s presumptive protection to control who possesses the property under the lease.
In other words: With such a provision in the agreement, the parties “un-personalise” a lease and, therefore, make it inheritable.
In closing it should also be noted that:
The Supreme Court of Thailand has specifically agreed with our interpretation of Thai law as detailed above with regard to the inheritability of lease rights (see: Dika [Thai Supreme Court] Ruling no. 100/2531); and so has the Land Department of Thailand for almost 50 years now. The Department’s administrative regulations allow for the registration of transfer of real estate to an heir as the “new” lessee where the lease provides that the lessor and original lessee “otherwise agreed” that the lease would be freely assignable to the lessee’s heir (see: Land Department No: Mor Tor 0608/ Wor 6475: August 15, 1967).
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