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February 25, 2019

Thailand – New Type of Transferable Right to Use Immovable Property

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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:  

For more information on the new Sap-Ing-Sith , or any other property rights in Thailand, please contact Chaiwat Keratisuthisathorn on [email protected] or +66 2056 5507.

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