Overview of the Entitlement over Immovable Property Act B.E. 2562 (2019)

Overview of the Entitlement over Immovable Property Act B.E. 2562 (2019)

The Entitlement over Immovable Property Act B.E.2562 (2019) (the “Act”) was enacted on 30 April 2019. This legislation, which became effective on 27 October 2019 has created a new category of property rights in Thailand for the purpose of enhancing and developing investment in immovable property. This article shall examine this Act including how to initially register such rights, the rights that are granted to the holder (of the rights), rights retained by the owner of the asset and what type of immovable property can have such rights registered.

Rights over the Immovable Property Asset

The Act permits the legal owner of certain types of immovable property (as detailed below) to establish and register a transferrable right over their asset (the “Asset”) for a maximum period of thirty (30) years, the rights given are similar to ownership but subject to certain rights, obligations and restrictions which are detailed below. The owner of the Asset must initially register such rights (the “Rights”) over the Asset in their own name (they become the initial “Holder of the Rights”) and thereafter they may register the transfer of such Rights with another person who then becomes Holder of the Rights. Following registration of the Right over the Asset, the Holder of the Rights can take advantage of rights over the Asset which are similar to those enjoyed by the actual owner of the Asset for the agreed term (up to 30 years). Furthermore, the law provides that the Rights over the Asset (once registered), can be:
     a. Pledged as security;
     b. Assigned to a third party with compensation or without compensation; and
     c. Transferred through descent i.e. transferred to an heir in case of the death of the Holder of the Right.

Registration of the Rights of the Holder

The Rights over the Asset are created when they are registered by the owner of the Asset at the Land Office which has jurisdiction over the relevant immovable property. In order to register this right, the owner must present the relevant title deed (Chanote or Nor Sor 4) or a condominium title deed at the Land Department and pay an official fee of 20,000 baht per registration. Upon the registration being completed, the Land Department officer will issue two (2) copies of the certificate of rights over the Asset, one copy will be retained by the Land Department in its files whilst the other copy is given to the first Holder of Rights who is the owner of the Asset at the time of registration of the Rights.
It is worth noting that if the owner’s Asset is already subject to a mortgage or is already being used as collateral (under other laws such as the Business Security Act B.E. 2558), then before they register their rights over the Asset at the Land Department the owner must obtain the written consent from the mortgagee i.e. bank or lender.

Transfer of the Registered Rights

After the certificate evidencing registration of the Rights of the Asset is duly issued by the Land Department, the owner can then enter into an agreement with another party to transfer these Rights to them for an agreed period of time which must not exceed the maximum period under the registration (up to 30 years from registration date). In order to effect a transfer of the Rights over the Asset, this transfer must be made in writing and duly registered with the relevant Land Department office and shall involve the payment of an official fee calculated as follows:
     • For the transfer of rights over Assets with capital value, the transfer shall be subject to a transfer fee of 2% of the capital value of the asset as declared by the applicant;
     • For the transfer of rights over assets without capital value, the transfer shall be subject to a transfer fee of 1,000 baht per registration.

The transfer of Rights over the Asset is advantageous to foreigners (non-Thai) because they can be the transferee and the Holder of the Rights over Assets such as land.

Types of Immovable Assets Which Can Have Rights Registered Over Them

The Act provides that Rights over leasehold asset can only be created over the following types of immovable property in Thailand:
     1. Bare or unutilized plots of land;
     2. Utilized land which contains structure(s) or fixture(s) such as a building etc; or
     3. Condominium units in a condominium building that is registered under the Condominium Act.

Rights of the Holder of the Rights

The Act gives the Holder of the Rights certain rights including:
     1. The right to assign their Rights to a third party, however to accomplish this, it must be done through a written agreement;
     2. The right to transfer, assign or sub-let such Rights over the Asset without needing to obtain the prior consent of the owner;
     3. The ability to use their Rights as collateral to financial institutions for the purpose of securing a mortgage or collateral under Thailand’s Business Security Act. In the case of a mortgage over the Rights, this shall attract a registration fee of 1% of the capital value of rights over the Asset to be pledged.
     4. The right to alter, modify and build on the immovable property Asset together with the right to keep ownership over such alterations, modification and construction for the term under which the transfer of Rights to the Holder of the Rights are valid; and
     5. The Holder of the Right has the right to bequeath the Rights to an heir, in such case the heir shall take up the Rights for the remaining period under the term or until terminated as the case may be.

Protections for Holder of the Rights

Once the owner of the leasehold Asset creates the Rights and transfers it to another party, the owner is not permitted to register other real estate rights over the Asset without first obtaining the written consent from the third party who is the Holder of the Rights.

Rights of the Owner of the Asset

Despite the registration of the Rights and their transfer from an owner to a third party (Holder of the Right), the Owner still retains various rights over the immovable Asset, including:
     1. The right to dispose of (sell) or mortgage the Asset or use the Asset as collateral;
     2. The right to commence legal action with respect to the recovery of possession over the Asset in case of unlawful possession by other parties where the Holder of the Rights promptly notifies the owner for them to take action thereon.

Termination & Expiry of the Rights

The Rights over the leasehold Asset shall terminate in the following cases:
     1. At the end of the registered term (maximum of 30 years from registration date at Land Department);
     2. Upon the default and termination by a Party to an agreement relating to the rights over the leasehold Asset. However, if the termination is done by the owner then they can only terminate such agreement to the extent that it does not affect the rights of a genuine third party who has already paid consideration and registered their rights.
     3. Upon the expiry of the agreement between the owner of the Asset and the Holder of the Rights.

In order to register the cancellation of rights over leasehold asset at the Land Department it is necessary to pay a de-registration fee of 20,000 baht per application.

Upon termination or expiry of the agreement between an owner and the Holder of the Rights, then possession of the Asset shall be returned to the owner in the condition it is in at the time of returning unless the owner and the Holder of the Right agree otherwise. Moreover, in relation to any structures, alterations or modifications which have been made by the Holder of Rights on the Asset during their occupation of the Asset (such as a house or building), the ownership of these will pass to the owner unless otherwise agreed between the parties.

Agreement Covering the Transfer of Rights over the Asset

To minimize the chance of conflict arising between the owner and the Holder of the Rights, the writer recommends that the agreement covering the transfer of Rights over the Asset should cover a range matters including the following key points:
     1. The required condition of the Asset when it is to be returned to the owner at the end of the term;
     2. The term of the transfer of the Rights;
     3. The rights and obligations of each party including what happens to any structures, alterations or modifications built upon the Asset upon the expiry or termination of the transfer of Rights.

Dharmniti Law Office Co., Ltd.
2/2 Bhakdi Building 2nd Floor, Witthayu Road, Lumphini, Pathumwan, Bangkok 10330
Tel: (66) 2680 9777 Fax: (66) 2680 9711
Email: ryan@dlo.co.th or chalapunj@dlo.co.th