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February 23, 2018

Thailand: Residential Property Leasing Businesses to Be Subject to Contract Controls

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The Contract Committee of the Consumer Protection Board has issued a new notification under the Consumer Protection Act designating the lease of residential property as a “contract-controlled business.”

The Notification of the Contract Committee Re: The Stipulation of Residential Property Leasing as a Contract-Controlled Business B.E. 2561 (2018) (the “Notification”), published on February 16, 2018, imposes a number of important requirements and restrictions on residential lease contracts that will come into effect on May 1, 2018.

Some of the most significant new requirements under the Notification are detailed below.

  • Residential lease agreements must include a version in Thai and contain certain details required under the Notification.
  • Details of the physical condition of the property and its contents, inspected and acknowledged by the lessee, must be attached to the lease agreement.
  • 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 to ascertain whether or not it is the responsibility of the lessee. If the lessee is found not to have caused such damage, the security deposit must be returned within seven days from the end of the agreement and the business operator retaking possession of the property. The business operator is also responsible for any expenses incurred in returning the security deposit to the lessee. 
  • The lessee has the right to terminate the lease agreement early provided that at least 30 days’ advance written notice is given to the business operator.
  • Any material breach for which the business operator can terminate the agreement must be clearly written in red, bold, or italic font. The business operator can only terminate the agreement if written notice has been given to the lessee to rectify the breach within 30 days of receipt and the lessee fails to do so. 

Clauses with the following effects will be unlawful under the Notification:

  • Waiving or limiting the business operator’s liability for breach of agreement or wrongful acts;
  • Requiring advance rental fees equivalent to more than one-month’s rent;
  • Entitling the business operator to change the rental fees, public utilities fees, service fees, or any other expenses before the end of the agreement;
  • Requiring a security deposit equivalent to more than one-month’s rental fee;
  • Allowing confiscation of the security deposit or advance rental fee;
  • Any stipulation of electricity and water supply fees exceeding the rates specified by the relevant authorities; and
  • Any term allowing the business operator to terminate the agreement early other than for a material breach of the lease agreement by the lessee.

The Notification applies to business operators that lease (or sublease) five units of property or more to individual lessees, for residential purposes, regardless of whether or not the units are in the same building. Property includes any accommodation, house, condominium unit, apartment, or other property leased for residential purposes, excluding dormitories and hotels which are regulated under a separate regime.

Any business operator who fails to meet the above requirements may be subject to imprisonment not exceeding one year and/or a fine not exceeding THB 100,000 (section 57 of the Consumer Protection Act).

These represent only the most significant changes which will affect residential lease contracts in Thailand—a more detailed breakdown is available here.

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