Differentiating Between Leasehold and Freehold Properties

Buying a leasehold property can sometimes stir suspicion amongst property investors. Why part with such a large sum of money to not own outright the land the property sits?

The concept of leasehold properties flourished in London when single dwellings were split into multiple ones to cater to the growing population and to adapt to changing living habits. The original owner kept the freehold of the property and charged the leaseholds an annual fee to rent the space seeing it as a lucrative business venture, although this has become debatable recently.

The advantage of having a detached freeholder is that a single person or management company looks after the upkeep of the building minimising disputes between leaseholders, which can be magnified in cases where there are just a few leaseholders.

The downside is that each year the years on a leasehold property decrease and eventually the leaseholder will have to pay a substantial sum to extend the lease to ensure that their property does not end up in the hands of the freeholder – although cases are rare.

While leaseholds derived from older buildings, the concept can be applied to new builds, including in Thailand. Vertical living means that everyone has to share the land, unlike a standalone house.

Typically condominiums in Thailand are sold on a freehold basis making them attractive to foreigners who are legally allowed to own them unlike land and thus often houses – although some houses are available to buy on a leasehold basis. Freehold condominiums share the freehold giving each owner indefinite ownership rather than for a set number of years as dictated by the lease.

An appointment management company oversees the management of the building and collects the management fee from each unit, the amount of which is calculated by the unit size. However, some condominiums in Thailand are only available on a leasehold basis, which is usually dictated by who owns the land.

The crown owns many prime locations in and around Bangkok’s Lumphini area. Any plot of land developed into a condominium owned by the royal family is not sold, and so units are sold on a leasehold basis.

Leasehold terms are usually for 30 years with two options to renew for 30 years each giving leaseholder security for at least 90 years. Many investors consider this a small price to pay for living in one of Bangkok’s most prestigious neighbourhoods and in an exclusive condominium project.

Despite not having indefinite ownership like a freehold unit, leasehold condominiums are still a safe investment option. They come with clear ownership rights and obligations are outlined with any property purchase in Thailand. Therefore if your heart is set on a property in a particular Bangkok location that is leasehold, there is no reason to be deterred.