Usufruct Rights on Real Estate Properties in Thailand
By definition, usufruct contract pertains to the conformity and the right to use or occupy another man’s real property for a term up to thirty (30) years. However, if the person dies before the 30th year, the contract is dissolved.
Frequently, a usufruct is granted to a family member such as a foreign spouse to secure the foreign spouse’s right over the property in the event of death of the Thai spouse or the owner.
The right of usufruct transmits possession, use and enjoyment of an immovable property from the owner to the usufructuary. It can only be registered over appropriately titled immovable property and is instituted by agreement with the owner and registration at the local land office. The contract or memorandum for usufruct is the authorized document that states and confirms the formal concurrence between the owner and the usufructuary.
Usufructuary refers to the holder of the usufruct right. So long as he/she is alive, the right of usufruct in the real property will also subsist. With that, after his or her death the real estate property regresses back to the owner.
Obligations of Usufructuary
A usufructuary is not allowed to put up for sale the real estate property because usufruct right remains with the registered owner of the property. He or she has the obligation to preserve the property and take standard care of the property. If the usufructuary fails to perform this requirement and the property depreciates, the owner has the right to terminate the right of usufruct.
Moreover, the usufrutuary is accountable for loss of value or destruction of the property unless he or she can prove that damages are not caused by his/her fault. In certain circumstances, the formation of a usufruct could be an effective opportunity to protect a foreign spouse during his/her marriage in Thailand and upon death of his or her Thai spouse. However, in some cases, a usufruct could be not the best alternative.
Provisions in Thailand Civil and Commercial Code – Usufruct (Title VII)
Usufruct rights in Thailand are governed by Sections 1417 to 1428 of Thailand Civil and Commercial Code under Usufruct chapter of Title VII. The following are some of the provisions which oversee the usufruct rights.
- Section 1423 of this Code states that “The owner may object to any unlawful or unreasonable use of the property. If the owner proves that his rights are in peril, he may demand security from the usufructuary, except in the case of donor who has reserved to himself the usufruct of the property given. If the usufructuary fails to give security within a reasonable time fixed for the purpose, or if, in spite of the owner’s objection he continues to make use of the property unlawfully or unreasonably, the Court may appoint a Receiver to manage the property in his stead. Upon security being given the Court may release the Receiver so appointed.”
- Section 1427 provides: “If required by the owner, the usufructuary is bound to ensure the property against loss for the benefit of the owner; and if the property is already insures he is bound to renew such insurance when due. He must pay the premiums of the insurance for the duration of his usufruct.
- Section 1428 of Civil and Commercial Code further states that “No action by the owner against the usurfruatuary or his transferee in connection with the usufruct or vice versa may be entered later than one year after the usufruct comes to an end. But in an action by the owner who could not have known of the end of the usufruct, the prescription of one year shall run from the time when he knew or ought to have known of it.”
Usufruct in Thailand: Limitations/Restrictions and Period Terms
A. Limitations on Right of Usufruct in Thailand
- The usufrutuary or the person granted with right of usufruct is not permitted to transfer this right; however, he or she is permitted to transfer the exercise of his or her right under the usufruct to another person. Moreover, the person granted with right of habitation cannot transfer the exercise of his or her rights.
- The usufruct is not transferrable by inheritance.
- The usufructuary does not obtain the title to the property, nor can he sell or consume the property.
B. Term of the Usufruct
The right of usufruct in Thailand can be done for a period of time up to thirty (30) years or for the life of person or persons. As mentioned earlier, a usufruct is dependent on the life of the person or persons granted with this right.
In any case that A (the owner of the property) gives to B the right of usufruct for that said period of thirty (30) years and B dies after twenty (20) years, then the usufruct will be terminated after twenty (20) years and the property will automatically be returned to the owner.
Leasing the Property under Usufruct
Except for a clear restrictions stipulated in the contract of usufruct, the usufructuary is permitted to lease out the property without the consent of the real owner and keep the lease. The power to register the contract for hire exceeding three (3) years with the land department can be included in the usufruct.
If a valid rental or lease has been established, the hire of property is not automatically terminated together with the end of the usufruct.
Foreign Nationals as Usufructuary
In situation that a foreign national is the usufructuary, land offices in Thailand will not permit registration of the contract for hire for under the Thailand Land Code Act. Foreigners are not allowed to manage land and can also not obtain this right under a usufruct. In practice, foreign usufructuary can only rent out the property under usufruct for periods not exceeding three (3) years at the time.
By nature, usufruct can be granted with or without consideration. It must be registered at the local land office. With the total consideration, 1% and 0 are to be paid as registration fees and 1% stamp duty. If the usufruct is granted without the exchange of value or money, the registration will cost less than 100 THB per plot.