Usufruct in Thailand. In Thailand, usufruct provides foreigners and others with a legal right to use and benefit from another’s property, typically land, without owning it. Governed by the Thai Civil and Commercial Code, a usufruct is a flexible tool commonly used in property agreements to secure long-term use rights for individuals who cannot directly own Thai land.

1. Definition and Scope of Usufruct

A usufruct grants the usufructuary (the holder of usufruct rights) the right to use, occupy, and enjoy the property and any income derived from it for a specific period or the holder’s lifetime. However, it does not convey ownership, meaning the legal title of the property remains with the landowner (the "naked owner").

Key rights include:

• Use of Property: The usufructuary can live on the property, rent it out, or use it for agricultural or commercial purposes.
• Income Generation: Usufructuary can earn income from the property, such as rental income, without transferring ownership.

2. Duration and Types of Usufructs

Under Thai law, a usufruct can last up to 30 years if it has a fixed term. If it is not fixed, it lasts for the lifetime of the usufructuary. The usufruct may not be transferred through inheritance, as it is terminated upon the usufructuary’s death unless otherwise stated for certain corporate entities.

There are generally two types of usufructs:

• Fixed-Term Usufruct: Usufruct granted for a specified number of years (up to 30 years), often used in commercial leases.
• Lifetime Usufruct: Ends with the death of the usufructuary, commonly used for long-term personal or family arrangements.

3. Rights and Obligations of the Usufructuary

The usufructuary has significant rights but is also subject to specific obligations:

Rights:

• Possession and Use: The usufructuary can fully occupy and use the property, making improvements or developing it as needed.
• Sublease or Rent: The usufructuary can sublease the property, allowing them to earn rental income from tenants.

Obligations:

• Maintenance: The usufructuary is responsible for the property’s upkeep, ensuring it is maintained in good condition.
• Respect for Original Ownership: The usufructuary cannot alter the property’s fundamental structure without the owner’s permission.
• End-of-Term Responsibility: At the end of the usufruct term, the usufructuary must return the property in its original condition.

4. Creating and Registering a Usufruct

To establish a usufruct, a formal written agreement is required, and both parties must register the usufruct at the Land Department for it to be legally enforceable. This process involves:

• Drafting the Usufruct Agreement: Outlining the rights, term, obligations, and any specific terms agreed upon by both parties.
• Registration with the Land Department: The usufruct agreement is signed and officially registered in the property’s title deed. The registration fee is nominal, typically a small percentage of the property value.
• Issuance of Land Title Notation: Once registered, the usufruct right is noted on the title deed, making it legally binding and protecting the usufructuary's rights.

5. Benefits and Limitations of Usufruct

Benefits

• Security for Foreigners: Since foreigners cannot own land in Thailand directly, usufructs provide a legal means of long-term access to land.
• Income Opportunities: The right to rent or sublease property allows the usufructuary to generate income without owning it.
• Protection of Rights: Registered usufructs protect the usufructuary’s rights from third parties, even if the property is sold or transferred.

Limitations

• No Ownership: Usufruct grants rights to use and enjoy the property but does not confer ownership or transfer rights upon death.
• Termination on Death: A lifetime usufruct expires upon the usufructuary’s death, which limits its value for inheritance planning.
• Maintenance Obligation: The usufructuary must bear the cost of maintaining the property and cannot significantly alter it without the owner’s consent.

6. Alternative Property Use Rights for Foreigners

In addition to usufructs, foreigners interested in accessing Thai property for long-term use have other options, such as:

• Leasehold: Allows up to 30 years of property use, renewable up to 90 years, commonly used in real estate for residential and commercial purposes.
• Superficies: Grants the right to own buildings or structures on another’s land, often used to separate land and building ownership.
• Habitation: A more limited right than usufruct, giving only residential use without rental income generation.

Conclusion

Usufructs in Thailand are a valuable tool for foreigners and investors looking for long-term property use without ownership. With rights to use, lease, and manage properties, usufructs provide flexibility within Thailand’s legal framework. Proper registration, a clear agreement, and understanding the obligations are crucial to maximizing the benefits of usufructs while respecting Thai property laws. Working with local legal counsel can ensure that a usufruct agreement meets legal standards, providing lasting protection and utility for the usufructuary.