This is a very specialised post and geared entirely to the expat looking to buy land here and build. For others it might be interesting just to see how things work in Thailand compared to the process back home, wherever that might be.
The reason I have added this subject as a stand alone post is that the information contained within it is absolutely vital for any farang in a relationship with a Thai person who wants to gain security over their investment in some land and a house here. In the majority of situations it is the farang that is making the major if not total financial investment in building a home and while houses are pretty secure in the long term, relationships aren’t!
My land is secured by a usufruct and although I have a wonderful relationship with my Thai wife, this isn’t my first marriage. I rest my case 🙂
The base reason for this type of security is quite simple. Foreigners CANNOT OWN LAND IN THAILAND. There are exceptions but are so extreme that it will never apply to you and me. Land can only be owned by a Thai so when “you” buy a block of land you aren’t. You are buying your Thai partner the land and crossing fingers, hoping to hell, trusting in good luck etc etc that the relationship holds together and you aren’t on the street anytime soon.
Usufruct takes a lot of this worry out of the equation so please read and understand this article and apply it. If your partner doesn’t like the idea tough. If like me you are retired in Thailand the capital you have is probably irreplaceable. This is a once only chance to secure your future so don’t blow it on the excitement of an early romance (if that is what it is) or even a longer term relationship.
I want to enjoy this view of our garden at dusk for the rest of my life.
My strongest advice is when buying land in Thailand you should AT THIS POINT then register your usufruct as well as registering the transfer of title. If you don’t you are offering yourself up to be included on the list of “Disaster in Thailand” stories, and there are plenty of those. In the next village to ours a farang broke up with his Thai partner and then literally bulldozed the house to stop her getting control of it. True story. Extreme I know but he obviously didn’t have a usufruct contract in place!
Building in Thailand – STEP 1 Only buy land with a Chanote title, STEP 2 Register a Usufruct.
Finally I can reassure you that, certainly in my case, the usufruct documentation was simple and very inexpensive to obtain. Registration was super simple at the local land office and the cost marginal. This is a standard option in Thailand not some dodgy set up a Thai company with directors you’ve never met option! It should be standard practice at your land office to register unless you are totally in the sticks.
Let me quickly add that the following words aren’t mine. I have extracted them from an article published by an Australian lawyer based in Chiang Mai called Joe Lynch. He has a range of very useful topics on his Facebook site, which you can find HERE. Joe has given his permission for me to publish this.
Usufructs in Thailand – a trust by any other name
Foreigners are forbidden from owning land in Thailand by the Thai Land Code. There are number of exceptions to this rule (eg: investment of 40 million baht, BOI approval). Notwithstanding the rule against foreign land ownership there are ways in which a foreigner can secure the right to occupy land and/or houses for a significant term or for the foreigner’s life. A Usufruct agreement can secure the right to possess and enjoy a property without being the full owner. And it is entirely legal.
Origins
A Usufruct is a real property or real estate right that originates from Roman law. Under Roman Law a wife had very limited rights to own property and, in particular, real estate owned by her husband. To remove this injustice the right of usufruct was created under Roman law. A usufruct interest gave the wife of a Roman citizen the right to occupy real estate during her lifetime and typically the property would then pass to their children. The concept of a usufruct interest has been adopted under the Thai Civil and Commercial Code.
What Is a Usufruct Agreement?
The word Usufruct comes from the Latin words “usus” (meaning the use or possession of) and “fructus” (meaning fruit). So it can be seen that a Usufruct gives the person holding that interest (called a usufructuary) the right to use and occupy the house and/or land for the term of the Usufruct or for the life of the usufructuary. If you think that sounds like what is called a trust in Western law and your right. The Usufruct is nothing more or less than a limited trust.
Usufruct contracts are governed by sections 1417 to 1428 of the CCCT. A Usufruct is a right granted by the owner(s) of the land/house in favour of a Usufructuary in which this person has the right to possess, use and enjoy the benefits of immovable property (section 1417 CCCT). The Usufructuary also has the right to manage the property (sect 1414 CCCT). It can be on a piece of land, on a house or on both of them.
Besides possession and enjoyment of the property, the Usufructuary has also the legal right to use and derive benefits from the property that belongs to another person, as long as the property is not damaged. “Fruit” should be understood not only in its natural meaning (fruits, livestock, etc) but also its legal meaning (rent, etc.).
Section 148 of TCCCT defines what can be the legal fruits in Thailand: “Legal fruits denote a thing or interest obtained periodically by the owner from another person for the use of the thing; it is calculated and may be acquired day by day or according to a period of time fixed.”
So if you have a Thai wife or girlfriend she can buy a parcel of land and grant to you a usufruct interest in the land for free. You then have the right to enjoy the use of the property. You can require her to leave the property. You can lease the property and receive the rents. A Usufruct can be for a specified term, of up to 30 years or it can be for the life of the usufructuary but terminates on his death. But the term of the life interest is NOT restricted to a 30 years maximum. In addition if you decide to build on this land, it is possible for you be the full owner of the buildings and constructions. A usufruct interest is a very valuable and strong property right.
In Thailand, a Usufruct can be created for a limited time (5 years, 10 years, etc.) or the life of the Usufructuary (see Section 1418 TCCCT). If no time has been fixed, it is presumed that the Usufruct is for the life of the Usufructuary. In such a case, the Usufruct ends at the death of the Usufructuary.
The Usufructuary can Lease the Land/house
A Usufructuary has the right to enjoy, use and possess the land. He/she is acting like the real owner but cannot sell or destroy the property as he/she is NOT the full owner. However, he/she can transfer rights on the land/house to a third party. Even if the Usufruct will end at the death of the Usufructuary (or a fixed period of time), the Usufructuary can lease the land to a third party and this second agreement will NOT end when the Usufructuary dies as determined in Supreme Court ruling 2297/1998: “the lessor does not have to be the owner of the property”. In this way, the Usufructuary can grant a thirty year lease to a third party. In this way, you could pass on your rights to your children or other relatives even after death if the lease was entered into before death. Do not forget that all leases over 3 years must be registered at the Land Office and taxes have to be paid.
Registration
By decision of the Supreme Court of Thailand, all Usufruct agreements must be registered to be valid (Supreme Court decisions 6872/2539). Once registered at the Land Office where the title deed is located, the Usufructuary’s interest will be recorded on the title. After registration, the land/house can only be sold provided the buyer respects this Usufruct. This is why it will be difficult for the owner to sell the land/house after a Usufruct is registered as nobody wants to buy a property in which they could not live. But be aware that Land Offices in Thailand have different rules and requirements. Most Land Offices will ask to see the usufructuary’s passport and visa. A translation of the passport might also be requested. They will also ask the usufructuary to provide his/her father’s and mother’s name. Some Land Offices will only register a usufruct between married couples even though the law does not require the parties to be married.
The land (title deed) must unencumbered in order to register a usufruct. That means a usufruct cannot be registered on land that is mortgaged. The mortgage needs to be discharged or the Usufruct registered after discharge of the mortgage. Bear in mind however that it may not be binding in the meantime against third parties.
Copyright . All rights reserved
Contact Joe for more specific advice at: [email protected]
Specialist Australian Family Lawyer, Consultant Lawyer with Lanna Lawyers in Chiang Mai, Thailand and Lewis and Bollard Migration Lawyers in Sydney, Australia. Experienced in Thai law for expats, surrogacy law in both Australia and Thailand and property law, wills and estates, estate planning and business law in Thailand.
Thanks for reading.
P.S. I am not an expert in Thai law or Usufruct so all I can do is tell you what worked for me. If you want professional advice then please contact Joe.
I must admit that I have not heard of this before thank you for sharing this information Tony
It was news to me too originally. Very easy and cheap to do. After over three years with my wonderful wife the usufruct is filed away and never thought about. Always best to be sure though.
Thanks for providing this info Tony, much appreciated. Similar to what a real estate guy had told me but in different terms. We never know what the future holds!
That’s good to hear. “Expect the best and plan for the worst” is a cliche but in this case the saying applies. Easy to “sell” to ones Thai partner too because they still have final ownership – one day.
Cheers for the feedback. Many don’t bother.
Tony
My dear friend. If it all goes tits up and the family wants you out there. You will be gone. Do not expect investing in Thai Real estate has the certainty you enjoyed in Australia.
I understand that however a usufruct has legal standing in Thailand and it is better than just doing nothing.
I hope you didn’t pay too much for that feeling of security. I wish you luck for your day in court, should that day ever come around. Cheers.
Well no I didn’t – about 3,000 baht from memory. If you have done your research you will find that a usufruct has a useful legal standing in Thailand. I do know that nothing is perfect here as far as “ownership” is concerned but this form of contact does provide some standing. I have no intention of having my day in court mate because I have an incredibly good relationship with my wife and there is no sign that won’t continue. Other farangs have made bad choices through stupidity mostly and I don’t rate myself as one of them. Time will tell.
Sorry, not trying to insult you. If you have an incredible relationship with your with you wife, like most others, then why would you bother? And if that day did come, were you expecting to: a) continue living in a house in a remote village that the locals would regard as occupied by a hostile farang, or: b) be able to sell a farang house to locals who wouldn’t buy it? IE: it’s land value only. I appreciate you’re attempting to shore up your investment in Thailand. There are too many examples where this has not eventuated.
Not insulted but you certainly want to push the issue. No problems.
I try to live my life these days expecting the best and planning for the worst. I think that’s normal and sensible. I don’t expect my house to burn down but I have house insurance! The same analogy applies to my relationship with my wife. A usufruct is the best insurance available in this situation. Just because it isn’t 100% guaranteed doesn’t mean you just ignore the security it does provide does it?
I have two ex-wives so know better than many that what looks good can turn in to a disappointment. BTW you also take the totally negative view on the outcome of a breakup, which seems to be a theme with you. I get on very well with both my ex-wives. One has been to stay with us twice for Christmas, once in Chiang Mai and once here in Isaan with her husband. She recently brought her granddaughter out to see us and spend time on the farm. Gaun and I have stayed at their place in Hong Kong – search for the posts on this blog! If Gaun and I split it doesn’t necessarily follow that the house would be occupied by a “hostile farang” or that locals wouldn’t buy the house. Maybe it would but maybe it wouldn’t.
John you can have all the security title brings in Austalia and still face a loss of your house on divorce and a lot more – super etc. Nothing new is happening here. You get into a relationship and it comes with the good and potentially the bad. I don’t not do things because I only think of the worst things that can happen. Expect the best, plan for the worst. You should give that philosophy a try.
I Appreciate that you’re attempting to use this instrument as a cornerstone for your Plan B. Plan B for most of us in Thailand includes ensuring have have sufficient financial capability to relocate back to our home country, in this case Australia, should living in Thailand become untenable. This may not necessarily be as a result of a marriage breakup. As has been said many times by others, do not invest anymore in Thailand than you are prepared to loose.
It isn’t that an usufruct isn’t technically an attractive option. it’s the outcome in practice when applied in upcountry Thailand where it loses it’s shine. I recognise your optimism. I’m a realist.
I expect the best, plan for the worst, just as you assert that you do. I also do a through walkthrough – give it a reality check. Try it!
Who says I don’t have the financial capacity to relocate back to Australia because I do. I doubt that I would. I would probably head to Europe but the money is there. I completely agree with your assessment of Thailand and not investing everything here. The political situation is never as stable as in Australia, although with the current run of governments there that is arguable!
I am a realist too. Why do you think I am doing the best I can to secure my future using available instruments like a usufruct, insurances and money in the bank?
I am not sure what a walkthrough means. You can spend you life walking through and never stop to enjoy or commit to anything. I am living my reality. I hope you are too.
Screw the haters Tony…enjoy your house..wife and LEO BEERS(best of three)…im about to take this plunge..lease agreement..usufruct..buy in wifes name..or mortage…ill come up with something…its good to see some legal avenues for the thai pleasing farang(lol)..that can save him from at least 5 years on his life…good luck tony…Live the dream!!!
Your comment made my day Louis. The vast majority of people are pretty positive about their experience of Thailand but the haters make the most noise. I have no problems with them because some will have legitimate reasons based on their experience. Others have an unrealistic expectation that just by living in Thailand everything will be rosy. There is good and bad here as everywhere and sometimes by selecting certain scenarios people are more likely to get hit by the bad. All I can do is write about my personal situation, which luckily has been mostly very positive.
All the very best with your set-up here and I hope your land purchase and presumably build at some stage works out the very best for you both.
Thanks again.
Tony
Hi Tony I agree with Louise there are so many doubters on other forums, I feel that at the end of the day it is down to ones gut feeling what is the best course. Incidentally my build is coming along very good! A pity that I cannot send photos to you!
Hi Tony.
I have found your blog very informative and I am so pleased that you have found, enjoyed and reported on so many of the lovely things in Thailand. Nowhere’s perfect but on balance for a farang with a lovely Thai wife this can be a very delightful place. It’s about what suits us as individuals – it suits me and I see that it suits you. Long may it last!
I agree with your pragmatism concerning the above discussion points. In practical terms that’s about the best that you can do.
For the more negative thinkers, I would like to share a personal story in the hope of showing that there is hope.
My farang ex brother in law has been maintained as a special close friend by all the family following his split with my Thai wife’s sister. He had no property here but he still visits, stays with Mum at her house, at our home and is made welcome by all the family. They even offered him some land for a home as a gift.
I have lived in Thailand with my lovely Thai wife for the best part of twenty years. Most of our time together being in her village with her very large family.
With decent people even if the marriage fails it doesn’t have to make ones position in the village untenanable.
However as John has pointed out at some length, the stars do not always align so fortunately. I guess that’s called ‘life’.
At the outset of a relationship it is wise for a farang to look not only at his potential wife but also at her family. If the latters not so rosy, his wife’s opinion on that point is important and he would be prudent to think very carefully.
Thanks for your very balance comment Roger. It is unusual to hear from someone who has been here for so long. The blog for obvious reasons tends to attract us newbies who are looking to expand our knowledge on the ups and downs of living in a new country or planning to do so at some stage.
I am pleased that you have found not only a life partner, in itself a miracle, but an extended family to support and complement the relationship. The story about your ex-brother in law does illustrate that it isn’t all about self interest and money with Thai people. There will be examples of the good and bad as there are in all societies.
Your final words about looking at the potential partner AND their family is a very wise, especially if the future at some point will involve moving to the family village. I have heard stories of the farang literally locking the gates to keep family and other hanger-ons from making themselves at home at any opportunity. Not an ideal situation putting it mildly.
Thank you for your contribution to the good new side of the living in Thailand ledger.
Warm regards.
Tony
When you seperate but you have a use fruct together se can stay also in the house and make your live bad !!!
That’s true John but would you prefer to have no usufruct and be on the street? You could get legal advice if this happened as to the ex-spouse’s right to reside in the house post-separation if a usufruct was in place. I read that the owner ‘cannot interfere with the lawful exercise of a usufructuary’s use and enjoyment of the property’. Her being on the property could affect this right and therefore might be able to be challenged.
But maybe better than being on the street? As always there are no winner is a separation no matter where it takes place. You can equally lose access to your home in any western country so it’s not a Thai only problem.
I hope you aren’t speaking from experience John.
Cheers.
Tony