Key takeaways
Usufruct, superficies, escrow and SPVs each address a different risk, and none is automatically safe. The choice depends on the objective, the holding period, inheritance rights and the restrictions on land ownership by foreigners. Using Thai shareholders as nominees is unlawful.
Introduction
Foreign investors commonly use a 30-year leasehold with a 30+30-year renewal agreement. The weaknesses are that a promise to renew is not automatically protected, and that there is a risk if the owner changes or ceases business. This article compares the alternatives most often discussed, together with their conditions and limitations.
1. Usufruct (right of habitation and enjoyment)
Usufruct under Sections 1417–1428 of the Civil and Commercial Code is a real right that entitles the holder to possess, use and take the benefits of a property. It can be registered for the holder's lifetime or for a fixed term of not more than 30 years.
Strengths
- Once registered, it is a real right and does not end merely because the owner of the property changes.
- Where registered for life, there is no need to worry about renewal.
- The holder may lease the property or collect benefits within the scope permitted by law and the contract.
Limitation: Usufruct ends on the death of the holder and does not pass by inheritance, so it is not a tool for passing property to heirs or for resale.
2. Superficies (right to land surface)
Superficies under Sections 1410–1416 of the Civil and Commercial Code allows the holder to own a building, structure or plantation on another person's land, so ownership of the building is separated from the land.
- It can be registered for a fixed term of not more than 30 years, or for the lifetime of the landowner or the holder.
- It suits houses or villas, where the building can be separated from the land, better than condominium units.
- Transfer and inheritance depend on the registration conditions. A right granted for life ends in accordance with those conditions.
Some structures register several types of right to cover both the building and the land, but they must be designed so that the rights do not overlap or conflict, and you must check that the land office will accept the registration.
3. Escrow for renewals
The weak point of a 30+30+30 leasehold is that renewal is a contractual obligation, not a right that is automatically enforceable. Supreme Court Judgment No. 4655/2023 shows that the courts scrutinise strictly any contract terms that circumvent the 30-year limit. Escrow therefore helps with the money and with compliance with conditions, but it cannot cure the validity of the promise itself.
How it works
- The lessee deposits the renewal fee with a legally authorised escrow agent.
- The agreement specifies the conditions and documents required when the renewal date arrives.
- If the conditions are not met, the money is returned or dealt with as the agreement provides.
The Protection of Interests of Contracting Parties Act 2008 (the Escrow Act) is a voluntary mechanism. Enforcing rights against heirs or transferees must be considered under the law and the contract terms. It should not be assumed that escrow makes the right of renewal certain. Trusts for capital market transactions under the 2007 law are used in specific contexts, and foreign trusts do not resolve the restrictions of Thai land law.
4. SPVs and shareholding structures
An SPV is a special-purpose company that holds assets in order to separate risk from other businesses. The structure is useful for management and asset segregation when the shareholders and the business are genuine.
Legal limits
- Section 97 of the Land Code treats a company as a foreigner for land purposes when foreigners hold more than 49% of its registered capital, or when foreign shareholders make up more than half of the shareholders. Section 98 affects holdings through juristic persons.
- Section 113 of the Land Code penalises holding land on behalf of a foreigner, and Section 96 allows the Director-General to order the disposal of land.
- Section 36 of the Foreign Business Act penalises nominee shareholding in restricted businesses, applying to both the nominee and the foreigner who consents.
There is no lawful nominee: Thai shareholders must genuinely invest and bear real risk. Designing preference shares or voting rights so that a foreigner controls the land, with Thai shareholders acting in name only, carries a high civil and criminal risk. Transferring shares instead of transferring the land should also not be regarded as a way to avoid tax or fees.
Comparison
| Structure | What it addresses | Points to watch |
|---|---|---|
| Usufruct | Lifetime right | Does not pass by inheritance; unsuitable for resale |
| Superficies | Separates ownership of the building from the land | Duration of the right and registration; of limited use for condominium units |
| Leasehold and escrow | Readiness of funds and documents | The promise to renew remains a legal issue |
| SPV | Separates risk and management | Nominees are prohibited and the land restrictions must still be met |
Conclusion
No single structure is best. The choice should start from what the buyer wants, such as lifetime personal use, resale or passing the property to heirs, and then be tested for feasibility against current law. This article is general information. Buyers and developers should consult a lawyer and a tax adviser about their own case before proceeding.