Usufructs in Thailand

Usufructs in Thailand. In Thailand, property ownership is heavily regulated, particularly for foreigners. While freehold land ownership remains largely restricted to Thai nationals, usufruct agreements offer a legal mechanism for foreigners and investors to enjoy long-term property use without direct ownership.

A usufruct (สิทธิเก็บกิน) is a right granted by a landowner to another party, allowing them to use, possess, and benefit from the property while the ownership remains with the original owner. This right is particularly attractive for foreigners seeking an alternative to leasehold agreements, as usufructs can be granted for a lifetime and provide stronger legal security than a lease.

This article explores the legal framework, rights, limitations, registration requirements, taxation, and key considerations involved in usufruct agreements in Thailand.

1. What is a Usufruct?

A usufruct is a legal right that allows an individual (usufructuary) to use and benefit from another person’s immovable property while the ownership remains with the original owner (naked owner). The usufructuary does not own the land but has the right to use it and enjoy its benefits, including renting it out.

Usufructs are governed by Sections 1417 to 1428 of the Thai Civil and Commercial Code (TCCC).

Key Features of a Usufruct in Thailand:

✔ Right to Use and Possess: The usufructuary can live on, rent out, or farm the land.
✔ Right to Generate Income: The usufructuary can lease or sublease the property.
✔ Duration: Can be granted for a set period or for the lifetime of the usufructuary (most common for foreigners).
✔ Cannot Be Inherited: The usufruct terminates upon death, and the land reverts to the original owner or their heirs.

2. Legal Aspects of Usufructs in Thailand

2.1 Usufruct Duration

• A usufruct can be granted for a fixed term (e.g., 30 years) or for the lifetime of the usufructuary.

• If granted to a juristic person (e.g., a company), it is limited to 30 years.

• If granted to an individual, it lasts until the person’s death.

2.2 Registration Requirement

• A usufruct must be registered at the Land Office to be legally enforceable.

• The agreement is recorded on the back of the property title deed (Chanote).

• Unregistered usufructs are not enforceable beyond three years under Thai law.

2.3 Rights of the Usufructuary

Under Thai law, the usufructuary has the right to:
✔ Possess and Use the Property – Live in the house, cultivate land, or use it for business.
✔ Generate Income – Rent the property out or use it for profit.
✔ Transfer the Usufruct – The usufructuary can rent the property to a third party, even though the usufruct itself is not transferable.

2.4 Obligations of the Usufructuary

✔ Maintain the Property – Responsible for regular maintenance and repairs.
✔ Pay Property-Related Expenses – Utility bills, general upkeep, and government property taxes (if applicable).
✔ Return the Property in Good Condition – At the end of the usufruct term, the land or house must be returned to the naked owner in usable condition.

3. Usufruct vs. Leasehold: Key Differences

Which is Better?

• Usufructs are stronger than leaseholds for those wanting a lifetime right to use property.

• Leaseholds are preferred for longer-term commercial arrangements, where renewal options are structured.

4. Taxation and Fees Related to Usufructs

Key Tax Considerations:

• If the usufructuary rents out the property, income tax must be paid on rental income.

• Unlike leaseholds, usufructs do not require annual rental payments, making them more cost-effective for long-term use.

5. Risks and Limitations of Usufructs in Thailand

While usufructs provide strong legal rights, they also come with potential risks:

❌ 1. Usufruct Terminates on Death

✅ Solution: If the objective is long-term control, investors should consider alternative structures such as setting up a Thai company.

❌ 2. Cannot Sell or Inherit the Usufruct

✅ Solution: A usufruct cannot be inherited, so a lease agreement in parallel may be used for succession planning.

❌ 3. Landowner May Try to Cancel the Usufruct

✅ Solution: Ensure the usufruct is properly registered at the Land Office to prevent disputes.

❌ 4. Property Owner’s Financial or Legal Issues

✅ Solution: If the landowner sells the property, the usufruct remains intact and transfers to the new owner.

6. How to Register a Usufruct in Thailand

Step-by-Step Process:

✔ Step 1: Draft the usufruct agreement (preferably with legal assistance).
✔ Step 2: Both parties visit the local Land Office with the property title deed.
✔ Step 3: Pay the registration fees and taxes.
✔ Step 4: The usufruct is recorded on the back of the Chanote title deed.
✔ Step 5: Obtain the official Land Office receipt and copies of the registered document.

The registration process is straightforward but must be handled correctly to ensure legal protection.

7. Conclusion: Is a Usufruct a Good Option in Thailand?

Usufructs are one of the strongest legal tools available to foreigners seeking long-term property rights in Thailand. Unlike leaseholds, usufructs can last for a lifetime and allow the usufructuary to live in, rent out, or benefit financially from the property.

✔ Advantages of Usufructs:

• Lifetime usage rights (stronger than leasehold).

• Right to generate income from the property.

• No recurring lease payments.

• Registered usufructs remain valid even if the property is sold.

❌ Disadvantages:

• Terminates upon death (not inheritable).

• Cannot be sold or transferred to others.

• Legal disputes may arise if not properly structured.

For retirees, long-term residents, or investors, usufructs provide an excellent legal alternative to leaseholds, offering a secure way to live in and control Thai property without ownership.