Thailand’s New Residential Leasing Law and Relocation Impact
Posted by: Covan Tai, Supply Chain Manager and Danniella Ng, Client Services Manager
Thailand is well known for great food, beautiful beaches, many temples, and much more. At an area of 198,000 square miles, with over 69 million people, Thailand is the 51st largest country, and 21st largest in terms of population, in the world.
A survey in 2017 by InterNations, the world’s largest network for people who live and work abroad, rated Thailand 7th on the list of 17 countries where expatriates live the happiest lives, while the World Bank Group’s Doing Business report in 2017 ranks Thailand 26th place among 190 economies in the ease of doing business for small and medium enterprises. It is no wonder that Thailand is affectionately known as “The Land of Smiles.”
With Thailand a popular destination for employers and expatriates alike, and coupled with a buoyant economy, Thailand’s property market looks set to return to optimism.
Residential Property Leasing Regulation Changes
The Contract Committee of the Consumer Protection Board published an announcement on the Government Gazette deeming residential property leasing as a contract-controlled business. This regulation was released effective 1st May 2018 with the intention of providing additional protection to individual tenants.
Business operators (landlords) that lease five units of property or more to individual tenants for residential purposes, regardless whether or not the units are in the same building, must comply with the new regulation (note: this is not applicable to tenancy agreements made before May 1st 2018, and any adjustments needed are to be done during lease renewal). The new regulation is not applicable if the lessee is a company (i.e., corporate lease).
Some of the significant requirements under the new regulation are:
- 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 not found 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. This is a big change from the current timeline of one to two months for the refund of the security deposit.
- Clauses with the following effects will be unlawful under the regulation:
- 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 for reasons other than a material breach of the lease agreement by the lessee.
What Do Relocation Managers Need to Know
While the new regulation may tilt the personal lease friendly housing market in Thailand to be more receptive to corporate leases, there has been no further details on how the Thai government will enforce this regulation systemically to check and determine whether an individual landlord owns five, or more, units of rental properties.
It is also understood that many corporate landlords have raised their concerns and are holding discussions with the Consumer Protection Agency to dispute the new regulations. We will continue to keep watch on the developments and update you accordingly if the situation changes.