The Contract Committee of the Consumer Protection Board issued a Notification prescribing residential property leasing as a business with controlled contracts. The Notification was published in the Government Gazette on February 16, 2018. As a result, residential lease agreements are considered controlled contracts from May 1, 2018.
First, the Notification defines a “business of leasing residential property” as an activity involving the lease or sublease, for rent, of five or more real estate units, whether located in the same building or not, for residential purposes.
“Real estate unit” is defined as a room, house, condominium, apartment, or other property used for residential purposes by the tenant, excluding dormitories and hotels, which are subject to specific legislation.
A “business operator” means a person conducting the business of leasing residential property to a tenant.
The lease agreement must, in any case, be made in Thai, with specific requirements even for font size. The contract may be bilingual, but the Thai version is mandatory.
The Notification sets out mandatory clauses for every lease agreement:
a) name and address of the business operator and its authorized representative;
b) name and address of the tenant;
c) name and location of the property;
d) detailed description of the property condition, including an inventory of items and equipment;
e) lease term, including commencement date and duration;
f) rental amount and payment terms;
g) utility rates and payment deadlines;
h) service fees, within reasonable limits and based on actual costs incurred;
i) other fees and expenses (if any), within reasonable limits and based on actual costs incurred;
j) amount of the security deposit.
The business operator must issue an invoice for rent payment no later than 7 days before the due date. The tenant has the right to verify all amounts stated in the invoice.
The business operator is required to prepare an annex to the agreement describing the condition of the property and the equipment inside, confirmed by both parties.
Upon termination of the lease, the business operator must immediately return the deposit to the tenant, unless there is damage caused by the tenant, which must be assessed and deducted from the deposit. If no damage is caused, the deposit must be returned within 7 days from the termination date, in a manner convenient for the tenant.
The tenant has the right to terminate the lease unilaterally by providing written notice at least 30 days in advance.
The grounds (breaches) allowing the landlord to terminate the agreement must be clearly highlighted (e.g., in bold). In such cases, the business operator must notify the tenant in writing, requesting remedy of the breach or termination of the agreement within 30 days if the breach is not cured.
The lease agreement must be prepared in two identical copies, one for each party.
The following terms are prohibited in lease agreements:
- Clauses limiting the liability of the business operator
- Advance rent payment exceeding one month
- The right of the business operator to unilaterally change rent, utility rates, or other charges
- A security deposit exceeding one month’s rent
- The right to confiscate the deposit or advance payment
- The right to inspect the property without prior notice to the tenant
- Charging electricity or water at rates exceeding those set by relevant authorities
- Restricting tenant access to the property or removing tenant belongings for non-payment
- Charging fees for lease renewal
- Termination of the lease without tenant breach
- Requiring the tenant to pay for normal wear and tear
- Requiring the tenant to pay for damage not caused by them (force majeure)
If a lease agreement does not include mandatory provisions or includes prohibited ones, the provisions of the Notification shall prevail.
Failure of the business operator to comply with the Notification may result in penalties of up to 1 year imprisonment and/or a fine of up to 100,000 Baht.
The practical application of the Notification will become clear only after its entry into force on May 1, 2018. At present, many provisions still require clarification.
As the Notification is based on the Consumer Protection Act, it applies only to landlords operating as legal entities or individual entrepreneurs (Thai nationals). Private individuals renting out their own property are not subject to these rules and may enter into agreements in any form.
Based on the Notification, leasing up to 5 units by an individual is not considered a business activity. Once a fifth unit is involved, the activity must be registered as a business.
The situation remains unclear where a property is managed by a real estate agency or under a guaranteed rental agreement.
We will provide updates as more information becomes available.
Author: Alexandra Agapitova.
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