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Published on March 10, 2008

This could be in the form of a new Foreign Business Act or the introduction of longer leases which can be registered for longer durations. The outcome, only time will tell.

Mayer Brown JSM, a leading law firm, will be monitoring the situation over the coming months.

Uncertainty began to creep into the market as early as June 2006 with the imposition of tighter transfer requirements at various land departments.

The 18 months following the September 2006 coup were especially frustrating. Despite protracted debate, the FBA had not been amended, the law remained the same. However, due to the uncertainties at the time, it was difficult to register companies or transfer land. Government officials were as confused as developers or buyers.

It is surprising therefore that the volume of deals did not dry up entirely.

One segment which continued to grow was Bangkok city condominiums, and many projects that offered international quality sold well.

Another solution on offer was the simple leasehold title. The leasehold structure is recognised as being straightforward, simple and economical. A well-structured leasehold framework makes it possible for a lessee to enjoy the leased property as if he was the property owner, albeit without the right to transfer or dispose of the underlying property. Although the maximum duration for the registration is 30 years, most good developers offer contractual extensions. It is important to note that Supreme Court decisions have ruled that if a lessor promises to grant a renewal after the lease expires, contractually the lessor must renew the lease contract. In order for such promise to be enforceable against the lessor pursuant to the court's decision, all terms of the lease must be agreed upon at the time the promise is given.

Investors who have conducted thorough due diligence regarding their developers can be confident of the extensions.

So, during this period of uncertainty, some developers selling leasehold have prospered. A good example is the Andara on Phuket where phases I and II have been sold out. Even in uncertain times, knowledgeable investors will continue to commit to the Thai market.

Over the next few months, we shall look at different aspects of the property market. If you have any questions or topics you would like us to shed light on, please contact us at www.mayerbrownjsm.com.

The Nation