Issues which Tenants Should Consider Before Entering into a Property Rental Agreement in Thailand

Before a tenant/lessee enters into a property rental agreement (lease agreement) in Thailand with a landlord/lessor they should be mindful of several key matters in order to safeguard their legal interests. This article shall discuss some of the most important issues which lessee’s should consider before signing a lease agreement, including lease registration at the Land Department, lessee & lessor rights and responsibilities under the Civil and Commercial Code (CCC) and what practical steps a lessee can take to better protect their rights.

 

Notification of the Contract Committee Re: The Stipulation of Residential Property Leasing as a Contract-Controlled Business B.E. 2562

In accordance with this Notification, if the lessor of the property runs a “residential property leasing business” which is defined as “a business that leases (or subleases) five units of property or more to individual lessees, for residential purposes, in exchange for a fee collected by the business operator, regardless of whether the units are in the same building”, then the lease agreement should meet the following requirements:

Required Terms and Conditions for the Residential Lease

This Notification stipulates that the residential lease agreement will need to have the following terms and conditions at a minimum, including:

  1. Name and address of the lessee;
  2. Name and address of the business operator (and its authorized person);
  3. The rental fee rate as well as the due dates for payment thereof;
  4. Utility fee rates (power, water etc) and the due dates for payments as well as the method of calculation;
  5. Name and location of the residential property being leased;
  6. Details of the property’s physical condition, including any items and equipment in the leased residential property;
  7. Term of the lease, specifying its starting date and expiration date;
  8. Service fee rates;
  9. Security deposit and advance rental fee rates;
  10. Residential lease agreement must include a Thai language version.

Lessee’s should be aware that if this Notification applies to their Lessor, then if their residential lease agreement does not contain the above minimum requirements then their contract shall be interpreted as including them as implied terms.

Prohibited Terms and Conditions

The Notification also prohibits several types of clauses from the residential lease contract, including:

  1. Any requirement providing that the advance rental fee and security deposit shall be more than the equivalent of three months’ rent;
  2. Any clause that makes the tenant responsible for damage to the leased residential property or its contents that was not caused by the tenant, such as that caused by an event of force majeure;
  3. Any clause that allows the business operator to terminate the residential lease agreement without any material breach of the agreement by the tenant;
  4. Any provision in the contract that permits the business operator to confiscate the lessee’s security deposit or advance rental fee without the lessee having committed any fault;
  5. Any conditions which provides that water supply and electricity fees shall exceed the normal rates specified by the relevant authorities (such as EGAT etc);
  6. Any provision in the agreement that allows the business operator to get any fee or expense for renewing the residential lease agreement;
  7. Any term that provides that the lessee is responsible for problems in the leased property, contents, and equipment that occurs due to normal wear and tear.

Evidence in Writing

In accordance with the CCC, a lease agreement for immovable property (such as a house or condominium) cannot be enforced in the Thai Courts “unless there is some written evidence signed by the party liable”. Hence, in order for a tenant to be able to enforce their legal rights in the Thai courts, they should ensure that the rental arrangement is reflected in a written agreement which is executed by them and the lessor. If the lessor is a company then the lessee should ensure that the lease agreement is signed and sealed (if necessary) by its authorized directors in accordance with their signing authority as stated in the affidavit of company registration, or that the signatory has a valid power of attorney issued by the lessor company’s authorized directors. The writer recommends that the lease agreement also include a copy of each signatories ID for the sake of accurately identifying the parties.

 

Lease Registration

If the lease of residential property shall exceed three years then in accordance with the CCC the agreement is “only enforceable for three years unless it is made in writing and registered by the competent official” which is the Land Department.

 

Term of Lease Agreements & Renewal

The CCC provides that the maximum term of a lease of immovable property is thirty years. If a lease agreement contains a lease term which exceeds this period then it shall be reduced to thirty years. However, it should be noted that Thai law provides that a lease can be renewed but the lease renewal period cannot exceed 30 years from the time of renewal. If a tenant wishes to have right to renew the lease then they should be careful to ensure that the lease agreement provides for this as well as other key factors such as what the key terms shall be for the renewal term and how the lessee can exercise their right to renew and other key conditions.

 

Subletting of the Property

If a lessee wishes to have the right to sublet the property then they need to have this right specifically stated in the lease agreement because the CCC provides that unless this right is in the agreement then the tenant cannot sublet the property in whole or part to a third party.

 

Responsibilities of a Landlord

Before entering into a lease agreement, a lessee should be mindful of the fact that a landlord has the following responsibilities under the Thai CCC.

  • A lessor is required to “deliver the leased property to the tenant in a good state of repair”. Given this, it is a sensible idea for a lessee to take several photos or video footage of the lease premises on the day that the lease premises are handed over so they have clear evidence of the state of the property at this time should this issue ever be later disputed.
  • The landlord is liable for any defects in the leased property which arise during the continuance of the lease contract and as such the landlord must make all the repairs which may become necessary, except those which are by law or custom to be done by the tenant.
  • The lessor is obligated to reimburse to the tenant any necessary and reasonable expenses incurred by them for the preservation of the leased property, except expenses for ordinary maintenance and petty repairs. Hence, if a lessee incurs such expenses in the course of a lease they should keep evidence of the repair/preservation work they undertake as well as any payments they make (i.e. retain receipts) so they can later claim against the landlord. However, before doing anything, it would be sensible for a tenant to inform the lessor to carry out such works rather than doing it first and then potentially having a dispute later arising over costs incurred or work done.
  • The landlord is responsible for any defects in the lease property which impairs its fitness for the intended purpose (i.e. as a residential property). However, the landlord shall not be liable in the following cases:
    • If the lessee knew of the defect at the time of the entering into the lease, or would have known of it if they had exercised such care as might be expected from a person of ordinary prudence; or
    • If the defect was apparent at the time of the delivery, and the lessee accepted the leased property without reservation. If the lessee identified a problem/defect at the beginning of the lease then the writer recommends that they should immediately notify the landlord of their reservation/ objection to the defect by sending a written notice to the landlord along with evidence of the defect/ problem.

 

Rights and Responsibilities of a Tenant

A lessee has the following rights and responsibilities under the Thai CCC.

 

Rights:

  • If a defect in the leased property is not such as would deprive the tenant of the use and benefit of the leased premises, and can be fixed by the lessor, then the tenant must first notify the lessor[1] to make the necessary repairs/ remedial action. However, if the defect is not fixed within a reasonable time (this is subjective and depends on the defect to the remedied), then the tenant may terminate the contract provided the defect is serious enough to justify this course. Practically speaking, if the tenant wishes to terminate the lease using this right then they should send the landlord a written termination notice and keep tangible evidence of the grounds used to justify the termination[2] in case the lease termination is later disputed in court.
  • If the leased property is delivered in a condition that is not suitable for the purpose for which it is leased then the tenant may terminate the contract. Hence, given this right, it is advisable for the lessee to ensure that the lease agreement states that the purpose the rental of the property is for the tenant to reside there as his/her residence.
  • A lessee cannot use the leased property for a purpose other than that which are ordinary and usual, or which has been provided in the contract. Hence, given this, in order to safeguard the rights of a tenant it would be prudent for them to clearly state the purpose of the lease in the agreement such as using it for residential purposes etc.

 

Responsibilities:

  • A lessee is obligated to take as much care of the leased property as a person of ordinary prudence would take of his own property, and to do ordinary maintenance and petty repairs.[3]
  • The tenant is bound to allow the lessor or his agents to inspect the property hired at reasonable times.[4] To ensure that such inspections are convenient for the lessee, it would be sensible for the lease agreement to make provision for such inspections including when such inspections can occur and how much advance notice the tenant requires before an inspection occurs.
  • If the leased property needs urgent repairs during the continuance of the lease contract, and if the lessor wishes to carry out such repairs, then the tenant cannot refuse permission to have such work done, despite the fact that it may cause him inconvenience. However, it should be noted that if such repairs are of such nature as would take unreasonable length of time and thereby cause the property unsuitable for the purpose for which it is let, then the tenant may terminate the contract.
  • A lessee may not make alterations in, or addition to, the leased property without the permission of the lessor. Moreover, if the tenant does so without such permission, then they must, on request of the letter, restore the leased property to its former condition, and the tenant is also liable to the lessor for any loss or damage that may result from such alteration or addition. The writer recommends that if a tenant gets permission to make a change to the leased premises then they should ensure that it is sufficiently clear and made in writing and signed/ executed by the landlord so there is evidence of their agreement to such alteration.
  • If a tenant shall sublease the leased property then according to the CCC they are responsible for any loss or damage caused to the property by the sub-lessee. This same section also provides that the tenant is responsible for any loss or damage caused to the property that is caused by own fault or by the fault of persons living with him/her.

[1] Such notice should be made in writing and ideally sent by registered post to the lessor so there is evidence of sending. Ideally, the notice should also state that the repairs/remedial action should be done within a reasonable period otherwise they will exercise their right to terminate the contract.

[2] Such as pictures or video footage of the problem.

[3] Section 553 of the CCC.

[4] Section 555 of the CCC.

 

Writer: Ryan Crowley – Director and Foreign Services Manager

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 info@dlo.co.th