Usufruct

Usufruct in Thailand Law is found in the Thailand Civil and Commercial Code,  section 1417. Usufruct is a right which allows the original owner to retain ownership in the real estate. The right allows the usufruct holder the ability to enter the property and to occupy the property. Use of the assets that are a product of the land for the term of the usufruct has both pros and cons.

The advantage is that there is no requirement under the Thailand law for a payment for the transfer of the usufruct right. Usufruct is available for the life term of the holder of the usufruct right. A holder of the Usufruct right is allowed to lease or rent out the land and receive a payment for the occupation of the land pursuant to the rental agreement.

A disadvantage of the usufruct is that the holder of the usufruct is not the lawful owner of the real estate. Additionally, a usufruct is not transferable in the estate of the usufruct holder who has died. The owner of the land is able to grant more than one usufruct on the same land. Therefore, the usufruct is not necessarily exclusive to a single usufruct holder.

The specific law prohibiting the owner from granting an additional usufruct after the first, and the granting of such a second usufruct, is up to the discretion of the Land Department official to whom the application is made. The characteristic of a usufruct is in its being able to be registered for the life term of the holder of the usufruct. This is in contrast to a normal lease agreement which has as its maximum term 30 years. A potentially longer time period may be important for foreign persons seeking to reside in Thailand.

The law generally prohibits foreigners from owning land, yet it is possible for foreigners to become holders of usufruct in Thailand. Foreigners are able to acquire usufruct, although the usufruct structure is not a true real estate ownership right.

Although the Thai law does not necessarily prohibit usufruct for foreigners, the final decision to grant a usufruct is up to the discretion of the Land Department official.

An important consideration for a foreigner involved as well as the Land Department official is whether the usufruct is being used to circumvent the law forbidding the transfer of real estate ownership for non-Thai citizens. Usufruct, pursuant to the language of the Thai law, is primarily intended for various commercial enterprises, such as agriculture, mining, and stone collection.

According to Thai law, the right to reside on property pursuant to a usufruct is not expressly stated. However, this right is generally assumed to be included within the right to a usufruct within the right to occupy.

The types of activities that are expressly referred to in the Thai law include obtaining the fruits of the land, mining, forestry and masonry. What is important to note is that all of these occupations are expressly prohibited to foreigners pursuant to the Foreign Business Act B.E. 2542 (A.D. 1999)

Accordingly, since a foreigner would not be allowed to participate in these business activities, the only remaining activity would be the right to occupy. The right to occupy would include the right to reside on the property. Nevertheless, if a foreigner is to use a usufruct for solely the right to occupy or reside on the property, and not for the expressed commercial activities as stated by the Thai law, it is conceivable that the Land Department official may decide that the usufruct is being used to circumvent the law and advise that the foreigner should register a right of  habitation, which is a separate right, rather than the usufruct.