Leasehold vs Freehold

In the real estate world, you’ll often hear the words “leasehold” and “freehold” when it comes down to purchasing a house or condominium in Thailand. In this short article, we will review the differences between these two keywords and explain what they entail.

A leasehold can be defined as the temporary holding right onto a property. In other words, it is a rental agreement, that usually lasts for a long period of time. In Thailand, the maximum duration of a leasehold is 30 years, which can be extended for another 30 years, provided all parties to the contract agree. If the duration of the lease exceeds three years, then it must be registered with the Land Office Department of the province to be deemed valid.

A freehold, on the other hand, represents the full ownership of the real estate asset, whether it is a house, land or condominium. It is important to understand, however, that foreigners in Thailand are not directly able to own land, with a few, rare exceptions, and therefore won’t be able to purchase a house as a freehold investment, without marrying a Thai partner or through an existing Thai limited company.

However, foreigners are now able to purchase freehold condominiums, under certain conditions.

Thanks to the section 19 of the Condominium Act of B.E. 2522, foreigners are allowed to fully own the rights to their condominium, provided that the total amount of foreign ownership in the building does not exceed 49%. The foreigner who wishes to purchase a freehold condominium in Thailand will also have to transfer the funds from abroad, as it needs to be perceived as an outside investment to be valid. Banks can issue certificates that will need to be presented to the developer before signing the contracts.

As a freehold owner, you will be fully responsible for the maintenance costs, often called Common Area Fees, as well as financing the sinking funds of the project, which will be used in case of repairs of the building. However, you will also be able to rent out your property as you see fit, and make some extra money, especially if you decide to own a condo for investment purposes. Leasehold could also be rented out, though the owner would have to agree to a sub-lease agreement as part of the original contract.