The ruling, which effectively renders unenforceable contractual clauses promising automatic lease extensions (see story here), has exposed the vulnerability of foreign property investments. For many, a 30-year lease was the closest approximation to ownership in a nation where foreign land acquisition is heavily restricted. Now, the rug has been pulled from under their feet.
The crux of the anxiety lies in the question of misrepresentation. Were properties sold under false pretences? While seasoned expats understood the inherent risks, many were reassured by developers’ promises of seamless renewals, often presented as a near-certainty. The court’s decision now casts a shadow over these assurances, raising the uncomfortable possibility that some property companies may have capitalised on legal grey areas.
While reputable developers, often those with established track records and international backing, are likely to honour existing agreements, the ruling exposes the fragility of the market. Smaller providers, facing financial pressures or shifting business models, could see an opportunity in reclaiming properties and reselling them, albeit at a depreciated value reflecting the remaining lease term.
The potential for such scenarios is causing widespread unease. What happens if a developer’s business strategy changes? Many rely on foreign loans, and fluctuations in the baht, economic downturns or even a change in management could lead to a reassessment of their portfolios. Accountants might advise that expiring leases within a decade could significantly improve a company’s balance sheet, enabling further borrowing for new developments. This could lead to a wave of resales or rentals, disrupting the market and leaving leaseholders in limbo.
The uncertainty is palpable. Whispers of class-action lawsuits against developers are already circulating, with property ‘owners’ claiming they were misled about the guaranteed 90-year lease. Developers, facing potential legal battles and reputational damage, must be feeling the heat. Or, perhaps, some are calculating the potential profits from reselling soon-to-expire leases.
The Thai government, meanwhile, finds itself in a precarious position. While the ruling reflects the existing legal framework, the political ramifications are significant. Any move to amend the law to accommodate foreign lease renewals would likely face fierce opposition from a nationalist-leaning electorate. The sentiment that ‘Thailand is for Thais’ remains a powerful force, and any perceived concessions to foreigners could be an electoral liability.
This political reality leaves expats in a difficult position. The government is under immense pressure to uphold the legal status quo, regardless of the economic consequences. The ruling has exposed the inherent risks of foreign property investment in Thailand, and the expat community is left grappling with the fallout.
The situation underscores the need for greater transparency and due diligence in property transactions. Expats must seek independent legal advice and understand the limitations of lease agreements.
Simon Causton is a long-time Phuket resident, founder of Citadel Phuket and author of ‘The Phuket Periodical’ newsletter. X (Twitter): @SimonCauston