The new Sap-Ing-Sith Act enacted on Royal Thai Government Gazette on 30 April 2019 will be effective on this 27 October 2019 with regulatory details and procedures coming up.
Sap-Ing-Sith was designed to eliminate restrictions about the rental law or lease in Thailand with three significant restrictions. Firstly, the restrictions imposed by the rental law according to the Thai Commercial and Civil Code such as a contract of hire of an immovable property is exclusive for each person so it is non-transferable unless the landlord’s consent is received to sub-lease, transfer of hire, renovate or modify. Secondly, another law applicable to lease, is the Lease of Immovable Property for Commercial and Industrial Purpose Act, which is not widely adopted by the public as there are only six entities that have registered the lease according to this Act. Lastly, the validity and extent of enforceability of a special lease contract (a reciprocal agreement with greater right than a conventional lease) for which it can be transferred to a tenant’s successor without registration but cannot be subleased without the landlord’s consent, still heavily relies on judicial discretions on a case-by-case basis.
Therefore, by applying the concept of both common law countries (i.e., the United Kingdom) and civil law countries (i.e., France and Germany) in relation to leasehold, the parties to the contract will derive the right of utilising the property rather than leasing, but their rights do not fall under ownership (freehold) of the property. The Ministry of Finance came up with the Sap-Ing-Sith Act. Sap-Ing-Sith will facilitate investors to invest in immovable properties with the elimination of the current rental law’s restrictions and create the “new asset class” providing more rights to the right holder to utilise the property.
The highlight points to note for the Sap-Ing-Sith are:
Sap-Ing-Sith holder’s rights
Obligation according to Law
Restrictions on the immovable property owner’s (“the Owner’s”) Rights
Establishment of Sap-Ing-Sith
There are two circumstances to establish an immovable property to fall under the Sap-Ing-Sith.
Briefly, the immovable property owner always has to be the first Sap-Ing-Sith holder.
The Sap-Ing-Sith Act allows the parties to agree differently from the prescribed conditions and the highest extension period of the Sap-Ing-Sith Agreement is at 30 years with no required minimum period.
A property that can be registered under the Sap-Ing-Sith and must be an immovable property with a document of rights that certify ownership explicitly. There are three types of the immovable property that can be registered, which are:
Therefore, a certificate of utilisation, e.g. Nor Sor 3, Nor Sor 3 Gor, cannot be registered under the Sap-Ing-Sith. In addition, the registration of the Sap-Ing-Sith must not contravene with any other regulations such as the Town Planning Law and Ratchaphatsadu Land Law. For example, a land owned by a government sector such as railway stations can be registered under the Sap-Ing-Sith, unless there are conflicts to related regulations like Ratchaphatsadu Land Law to construct community malls for increasing locals’ income and it is a way to boost up local economic conditions.
The extinguishment of the Sap-Ing-Sith Agreement can only occur by the registration at the Department of Lands or the agreed term has extinct. If there is a breach of contract such as missing monthly payment, the property owner can enforce the agreement to repossess the property, however, such enforcement will not be valid against a truthful third-party who had registered the property and truthfully paid for consideration of Sap-Ing-Sith prior to such enforcement. Therefore, it is likely that mutual termination between all parties must be agreed or else the extinguishment registration will not materialised.
To conclude, the Sap-Ing-Sith is an alternative option for business or investors to make a long-term investment in properties, which can be utilised almost in an equivalent of purchasing the properties. It is a cost-reduction and can be used as business security to acquire more capitals, it can be sub-leased, modified and renovated with no owner’s consent required.
This alert is for general information only and is not a substitute for legal advice.