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Legal Usufruct


"Usufruct" represents a significant legal right that can greatly benefit investment in the real estate sector. When properly applied to real estate investments, it opens up opportunities for successful investment ventures.


Under Thai law, "usufruct" refers to the right of an individual to use and reap benefits from someone else's property, potentially without paying rent, offering reciprocal benefits, or even without any compensation. When a property owner registers a usufruct right for someone, that individual gains certain rights under the civil and commercial code, specifically the right to benefit from and rent out the property. The only exception is the right to sell the property, which remains with the owner.


Usufruct rights offer nearly full advantage in real estate transactions, and the benefits include:


1. Facilitating Property Transfers: Usufruct can be used as a condition for transferring property. For example, parents wishing to transfer land to their children while alive, yet concerned about potential sale or neglect, can transfer the property in the children’s names but retain a usufruct right for themselves. This ensures parental benefits from the property.

   

2. Enabling Ownership Alternatives for Foreigners: Instead of transferring property ownership to foreigners, which may be restricted, property owners can register a perpetual usufruct right for the foreign individual, allowing them to hold rights akin to ownership.


3. Tax Planning Tool: Usufruct can serve as a strategy for tax dispersion, reducing tax rates by spreading income, such as high rental income, across family members or others by registering usufruct rights, thus lowering the overall tax burden.


4. Bypassing Transfer Restrictions: In situations where the government restricts the transfer of land titles provided to beneficiaries for a certain period, registering a usufruct can circumvent these restrictions without violating the law.


However, while usufruct registration offers numerous advantages, it also poses risks to the property owner. It's advisable to opt for shorter, potentially renewable registration periods, or terms that allow for easy cancellation, to mitigate these risks.


Usufruct rights can be registered for anyone, but for security reasons, it's recommended to register them for relatives or family members. The termination of usufruct rights occurs under several conditions, such as the cancellation of the usufruct agreement, the destruction of the property ensuring the usufruct, or the death of the usufructuary.

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