Short term leasing in condominium: Getting it right

Short-term condominium leasing made national headlines earlier this month when court rulings were handed down to a condominium unit owner in Hua Hin. Two of many questions arise: Why is it illegal to rent out condominium units on a short term basis? Why has Thailand made condominium unit short-term leasing illegal?

A straight-forward answer to the first question would be that the Thai law does not allow owners of condominiums to rent out their units for anything less than 30 days, without a hotel operating license. 

An answer to the second question is no less simple: hotels offer short term leasing as they have the correct operating licenses and have also complied with all regulatory construction and safety guidelines required by law; and condominiums have been constructed and registered as residential properties under a shared ownership/juristic entity and subsequently sold as such.

The enforcement of the law in some cases had been a little slow to implement but now it is obviously speeding up, with the aforementioned court rulings that also draw closer attention from condominium juristic persons and co-owners.

To prevent co-owners from putting up units for rent on a short term basis within a condominium which does not have a hotel license, owner committees and juristic managers have implemented various strategies, from signage in lobbies stating 'this is not a hotel' to notices to co-owners suspected of providing short term rentals. Rules and regulations have been reviewed amended to underline that rental practices should not be against the law.

Whilst owner committees and juristic managers advising co-owners within the condominium of the leasing restrictions have satisfied their responsibility, they may also engage a qualified legal advisor to advise of other practical steps that could be taken and how to implement these steps without repercussion falling back to the co-owner committee or juristic manager. This will also include legal advice on how to handle a situation where a co-owner within a condominium breaks the law, given the fact that owner committees or juristic persons are not government officers.

Getting it right from the beginning

Developers of new condominiums or residential projects can apply for the correct operating licenses and residential permits before they begin to construct the property that way it can be sold with the full knowledge of what the property is to the end user. It would also have to adhere to the necessary construction and design regulations to be able to obtain the correct licenses. Again if any developers are not sure about the correct process then they should be seeking the advice of qualified and referenced legal advisers.

In some of the resort locations across Thailand some condominiums have applied to obtain a hotel operating license and during this process there has been an amnesty on those properties. Again various requirements are needed to be fulfilled and the authorities involved will make assessments on those properties before granting any license. It is interesting to keep an eye on this space to see what happens in these circumstances, though some properties have already been successful.

Again developers who are not sure about their own legal position should ask for help from professionals out there that can assist.

Author: Dexter Norville is a director at property consulting firm JLL. For more insight, readers can contact him by email: Dexter.Norville@ap.jll.com or visit www.jll.co.th