Another uniquely Thai property term which foreign buyers must grasp is the concept of usufruct.  Pronounced as yu-ze-frukt, the word is coined from the Latin terms usus et fructus which is literally translated as “use and enjoyment.”  A non-resident buyer, once he understands the concept, would indeed find it useful and profitable.

 

What is usufruct?

Usufruct is a legally-endowed right whereby a person can utilize another person’s property for either enjoyment or profit.  The piece of land or immovable property in question is called a usufruct and the person granted the right of usufruct is called a usufructuary.

 

What are the terms of a usufruct?

A property under usufruct is registered at the Land Office for possession and utilization throughout the life of the usufructuary or for a maximum of 30 years.  When the time period expires, the property is returned to the owner.

 

What are the rights of a usufructuary?

Because the right of usufruct is a legally-endowed right, the foreign buyer has absolute security and total freedom to exploit the property under usufruct.  It is not merely some verbal  agreement of the parties involved but is warranted by no less than the civil code of Thailand. When a foreigner becomes a usufructuary, he has all the freedom to exploit the usufruct knowing that the property owner cannot sell or lease the property to other parties within the agreed period.  If the property is, for instance, a mine or a quarry, the usufructuary can do mining or quarrying without fear of being suddenly ejected from the site as what commonly happens with ordinary lease terms. The usufructuary has the added privilege of renting out the usufruct—and thereby live on rent-- provided that he holds a House Registration Certificate of the said property.  This spells another income-generating option for non-residents.

 

What are the responsibilities of the usufructuary?

The privileges of the usufructuary is tempered with certain obligations as outlined below.

  • The usufructuary is responsible for the maintenance of the usufruct.  This means the property must be kept clean and in good condition.  There should be no major alterations to the property, especially those which would serve to depreciate the value of the property.
  • The usufructuary must also see to it that all taxes, duties and outstanding mortgages are taken care of.
  • It is to the best interest of the usufructuary that any insurance payments began by the owner must be continued.  A fire or accident which destroys the property, for instance, would mean abrupt termination of the usufruct contract—unless the usufructuary fully compensates the owner for the damage.

 

What are the disadvantages of a usufruct?

The right of usufruct terminates either during the thirtieth year (the maximum period) or upon the demise of the usufructuary.  As such, although the right of the usufruct can be transferred to a third party, such transfer is not absolute since the property always returns to the right owner at the termination of the usufruct.  Foreign buyers who want to pass on inheritance to his heirs, for instance, would not find this option viable.

 

The concept of usufruct is thus, in some ways, similar to the European concept of life estate wherein ownership of land is granted for the whole lifetime of the recipient but cannot be inherited by the heirs.