Rental contracts

[RandomChances]

I've got one of the larger Thai milk producing companies that want's to rent my farm and am wondering if any of you (william ) have any knowlage of Rental contracts.

They want to rent for 5 years with an option for another 5 (I've said 3) anyway some of the problems are the land is on 2 chanots and we are'nt renting all of it to them. I thought basicaly just copy the chanots and draw in the areas they will have for rent.

How watertight are the "plus" parts and is it usual to put a specified ammount that the rent can be increased ? I control the access way into the farm although they could put a new road in if they wanted

They want to extend the actuall farm buildings so who has mantanance does it need to be in the contract. Can I specify areas of land that they can build on just leave for agricultural use

My bore hole is on the land they want to use but I'll still want to use the water from it. I though mabye put a meter in and state a nominal per unit price for me buying the water (just the electricity ect not the gov rate). They wont go for me metering them but will probably have the mantanince of the pump, in fact they will probably put a bigger one in.

[ADare]

I do not know Thai law so cannot advise on specifics, but some general points you may wish to bear in mind are as follows:-

It is up to you what you want to put into any contract, generally on a commercial deal it is the tennant that will have the duty to maintain the property up to the standard when they first began the occupation. At the end of the rental term you need to have a clause stipulating that property being rented will be brought back upto this standard at the tennants cost.

You will also want to consider insurance, I would suggest that you pay the insurance and recharge this to the tennant.

If there are to be any shared areas, e.g. the road and well, you need to decide who will be responsible for the maintenance and / or what proportion will be paid by either party.

You should also stipulate what can and cannot be done on the land. You do not want them to change thier mind and just use the land for storage of silage for example, or any other activity that my be a detriment to your use of the ajoining land.

You will want a right of entry onto the land so that you can check that they are not breaching any of the terms.

You will want a clause stating that if the tennant leaves their property on the land after the end of the lease, then you are authorised to sell / remove the property.


Andrew

[RandomChances]

^Cheers some good points to think about.

[BLee]

What I understand about the 5 year rent part:

-any lease over 3 years must be registered with Land Office
-the +5 part is only a contractual obligation on a person to person basis. I think they are lost if the owner dies or sells the property
- fixed amount can only work if the amount for the new term is stil fair after 5 years (if you have to go to court to enforce it).
BLee

[dirtydog]

The only way a 5 plus 5 can be enforced is if the lessee can prove they spent loads of dosh on improvements during the first 5 years.

[RandomChances]

The only way a 5 plus 5 can be enforced is if the lessee can prove they spent loads of dosh on improvements during the first 5 years.

They probaly will, they want to build some accomadation, new fencing is going to be a couple of 100 grand, more water tanks, better road ect

[William]

I'm assuming your wife will be signing the agreement as the lessee?

Problem with the 5 + 5 over a 3 year contract is the 5 year contract needs to be registered with the Land Department in order to be enforced (it should be noted that as a contract it is still valid, but you won't be able toenforce it). - Section 538 of the Civil and Commercial Code

The additional 5 year period will likely be enforced as an option - Section 540 of the CCC - but the Supreme Court has held that such an option is a personal promise to pay. As such, if your wife were to sell the property to a third party, while the orginal period in the contract (5 years) would be binding - Section 569 of the CCC - the option would likely not. As a result, they may require an undertaking from your wife that she agree not to sell the place during the first 5 year term.

Insofar as negotiation issues are concerned, keep in mind:

- as the lease will be registered, your sife will be subject to income tax on the rental amounts

- lease of part of a property should not be a problem, just add an annex to the agreement with the area to be rented highlighted. In the agreement, define this as the "rented property", i.e., have a definition section which says "Rented Property" means that property highlighted as the rented property in the annex to this agreement, which shall form an integral part of the agreement (or words to that effect)

- sub-leasing will be an issue. Under the CCC any sub-leasing voids a lease unless the lease explictly allows for such.

- get indemnifications for (a) any building and lanmd tax (I posted an article about this recently in the news section) and (b) any accident, etc. (third party, etc.). You could get insurance and it porbably best you do, but to be frank insurance companies have a way of getting out of things (such as with their exclusions thatyou pay the firs 100,000, etc.), so grab the bull by the horns and go for the indenification

- if you arer worried about the tax aspect, split the contract into a rental and service contract as this will reduce the tax burden.

Apart from that, what others say seems sensible to me. If you want me to have a quick look at it, feel free to bung the contract my way.

~W~

[BLee]

The only way a 5 plus 5 can be enforced is if the lessee can prove they spent loads of dosh on improvements during the first 5 years.

There is one exemption to the rule that any lease over three years must be registered to be enforceable - created by the Supreme Court, called a special reciprocal contract. This is not specified in the Civil and Commercial Code and has limited application. Yes, it has to do with if you spent loads of dosh on improvements, but it not that simple.

[William]

^problem with any special reciprocal contract is that supreme court judgments are not binding and don't have the force of law. So to rely on a supreme court judgment can be slightly foolhardy in LoS *hmmm, maybe we should correct that and say that to rely on the law in LoS may seem a little foolhardy*

[RandomChances]

Thanks Willian, what they would accept is a 5+3 (well thats what we are working on at the moment) at the end of the 5 years could we re-negotiate the fee or do you think it would be better to put something in saying plus x%


I owe you a green but got to spread some love first

[William]

as it is just an option to renew, you could have it that the rentals (or any other term for that matter) on renewal will be re-neotiated. problem is they not likely accept that - as it leaves the question open for discussion. so it'll probably be best to say rentals will increase anually by, say, 5%

One thing I will add, if it is your company renting the land, this becomes much more of an issue with respect to the amortization of the rentals. But if it is a person, it shouldn't be too much of a problem.

On the issue of greens, you must be one tight b'stard as you have not greened me in over a year

[RandomChances]

On the issue of greens, you must be one tight b'stard as you have not greened me in over a year

I must have...surley

[RDN]

On the issue of greens, you must be one tight b'stard as you have not greened me in over a year

I must have...surley

Well, if you're going to be surly about it, I'll green him instead.