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Phuket Court Rules Property “Secured Leases” Invalid




PHUKET – In a shock decision by the Phuket Civil Court, backed by the Region 8 Appellate Court, it has been ruled that so-called “secured leases” offered by some real estate developers to allow foreigners to secure a cast-iron 90-year lease are not valid.

The case is now to go to the Supreme Court. If confirms the lower-court opinions, then not only will any renewal term of “secured” leases by foreigners be invalid, but also the current lease terms.

The Phuket News’ legal correspondent, Jerrold Kippen, has revealed that not only has the structure been ruled invalid but the courts’ decision may mean that the original underlying 30-year lease in Phuket, even if registered with the Land Office, is now void – it never existed, leaving the buyer with two handfuls of nothing.

Mr Kippen explained, “as a general rule foreigners cannot own land and apartment units, but it is possible for foreigners to lease them and that is the reason why these are commonly marketed to foreign buyers on a leasehold basis.

“Taking these new decisions into account the ‘secured’ lease not only does little if anything to address the very real insecurity that your long-term lease will not be renewed, but it also could have the disastrous consequence that your current lease could be considered legally void,” Mr Kippen said.

“And according to these courts’ analysis, anyone who has already invested or is considering investing in such a structure is facing the immediate loss of the investment.”

The good news, he said, is that secured leases can be restructured to provide actual long-term lease security legally and without any downside to the developer by securing the pre-paid renewal terms with a mortgage over the land involved.

“It is a simple and straightforward legal structure that provides security for the investor. A current ‘secured’ lease can be restructured into this better and genuinely secure alternative, before it is too late.”

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