Usufruct in Thailand. Usufruct is a legal concept in Thailand that allows an individual (the usufructuary) to use and benefit from another person’s property for a specified period, while ownership remains with the original owner (the naked owner). It is commonly used in situations where a foreigner wishes to control or benefit from land, as foreign ownership of land is restricted in Thailand. Usufructs are governed under the Civil and Commercial Code of Thailand and can be established for up to the lifetime of the usufructuary or a set number of years.
1. What is Usufruct?
A usufruct grants the usufructuary the right to possess, use, and benefit from property, but not to sell or transfer ownership. It provides significant rights similar to that of an owner, except the usufructuary does not own the property outright. The usufruct can apply to both land and buildings and is particularly useful for foreigners who are prohibited from owning land in Thailand but wish to control or utilize it.
- Usufructuary’s Rights: The usufructuary can live on the land, rent it out, farm it, or otherwise enjoy the benefits of the property.
- Naked Owner’s Rights: The owner retains ownership but cannot use or benefit from the property during the usufruct period unless otherwise agreed.
2. Legal Basis and Duration of a Usufruct
A usufruct is governed by Section 1417 to 1428 of the Thai Civil and Commercial Code. The usufruct can be created for a specific period or for the lifetime of the usufructuary. Usufructs for a set number of years are typically granted for up to 30 years, but if no time period is specified, it lasts for the life of the usufructuary.
- Duration: Usufructs can be granted for up to 30 years or for the life of the usufructuary.
- Termination: The usufruct terminates upon the death of the usufructuary if it is granted for life or upon the completion of the agreed period.
3. How is a Usufruct Created?
To create a valid usufruct in Thailand, the following steps are required:
a) Written Agreement
The usufruct must be established through a written contract between the owner and the usufructuary. This agreement outlines the rights and obligations of both parties.
b) Registration at the Land Department
A usufruct must be registered with the Land Department to be legally enforceable. The registration is recorded on the land title deed (Chanote), ensuring that the usufructuary’s rights are publicly acknowledged.
c) Costs and Fees
There is a nominal fee for registering a usufruct, which is based on the value of the property. Typically, this cost is shared between the owner and the usufructuary.
4. Rights and Obligations of the Usufructuary
The usufructuary has the right to use the property in any legal manner, including living on it, leasing it, or generating income from it. However, the usufructuary also has specific obligations:
- Maintenance: The usufructuary is responsible for the general upkeep and maintenance of the property during the usufruct period.
- No Alteration: The usufructuary must not significantly alter the property without the consent of the owner.
- Taxes: The usufructuary is generally required to pay property taxes and any other related costs during the usufruct period.
5. Benefits and Limitations of Usufruct for Foreigners
a) Benefits
A usufruct provides a foreigner with substantial control over property in Thailand without violating the country’s restrictions on foreign land ownership. It also offers a long-term right to use the property, and the ability to earn income by renting it out.
- Control Without Ownership: Foreigners can legally use and profit from the land without owning it.
- Security: A usufruct registered with the Land Department is legally binding and protects the usufructuary’s rights.
b) Limitations
Despite offering control, a usufruct does not confer ownership, and it terminates upon the death of the usufructuary unless otherwise specified. Additionally, the usufructuary cannot sell or mortgage the land, and it must be maintained in its original condition.
- No Ownership: The usufructuary cannot transfer the land to heirs unless other legal mechanisms, such as a lease, are in place.
- Maintenance Obligations: The usufructuary must maintain the property and is responsible for any associated costs.
6. Termination of a Usufruct
A usufruct may be terminated in the following ways:
- Death: If the usufruct is granted for life, it terminates upon the usufructuary’s death.
- Completion of Term: For usufructs with a fixed term (e.g., 30 years), the agreement ends when the term expires.
- Agreement Termination: The usufruct can be terminated early if both parties agree, or if the usufructuary fails to meet their obligations, such as maintaining the property.
7. Comparison of Usufruct with Other Land Rights
a) Leasehold
A lease gives the tenant the right to use the land for a specific period (up to 30 years for foreigners), but unlike usufruct, it typically does not allow the tenant to profit from the property without permission. Usufruct offers more flexibility and security in terms of rights to income from the land.
b) Superficies
A superficies allows the holder to own structures on the land, but not the land itself, whereas a usufruct focuses on the right to use and benefit from both the land and its structures.
Conclusion
The usufruct is a valuable legal tool for foreigners in Thailand who want to control and benefit from property without owning it. It provides long-term security, income potential, and flexibility, but it also comes with maintenance responsibilities and terminates upon death or at the end of the agreed period. For foreign investors or expatriates, a usufruct represents one of the few ways to gain significant rights to land while staying within the legal framework of Thailand’s property laws.