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Industrial Property - Example lease/purchase terms
TYPICAL LEASE AND SALE TERMS FOR INDUSTRIAL LAND AND UNITS
1. Leasing Practice
Lease Term
Leases are normally for three-year terms. Any lease with a term longer than three years must be registered at the Land Department. There is a registration fee of 1% of the total amount payable under the lease. This must be paid on registration of the lease. The tenant normally pays this.
Leases In Thailand, leases for industrial property are normally in English. However, if a lease must be registered at the Land Department, then there will need to be a Thai version of the lease.
Rental
Rental for industrial property is quoted in Thai Baht on a square metre basis per month. Rents are normally paid monthly in advance. The normal practice is a security deposit equivalent to 3 months’ rental and 1 month’s rent in advance on the signing of the lease agreement.
Typically, the rental is exclusive of management fee, government taxes and rates, lease agreements, and service agreement.
Deposit
A deposit equivalent to three months’ gross rental is normally payable on signature of the lease agreement.
Other Expenses
Additional charges vary from landlord to landlord but these could include:
Industrial Estates and Park Management Fees
If the building is situated on an industrial estate or park, then there will be a management fee payable to the estate manager for the upkeep of roads and infrastructure.
Property Insurance
This is negotiable but is usually the tenant’s responsibility.
Repairs
Normally the landlord will be responsible for the day-to-day upkeep of the property.
Household Tax
This is a local property tax and amounts to 12.5% of the rental payable.
2. Selling Practice
Most vendors prefer to sell their industrial land, warehouse or factory on an “as is, where is” basis.
Sales are quoted in Thai Baht.
The normal practice is to divide the transaction into 3 payments of:
10% on date of signing the Memorandum of Understanding (MOU) or Offer Letter (subject to the company receiving IEAT permission to buy land and/or BOI-approval). In the unlikely event that the company does not receive approval, the deposit is refunded.
20% on the date of signing the contract, and
the balance on the date of transfer of ownership.
- Company owned properties: 3 critical taxes;
Transfer fee
Specific business tax, and
Withholding tax
- Individual owned properties: 3 critical taxes;
Transfer fee
Either specific business tax or stamp duty, and
Income tax (withholding tax)
Most vendors will be responsible for the special business tax and withholding tax, while the transfer fee can be shared by both vendor and purchaser (negotiable).
