This means lessors need to check their agreements fully comply with the criteria in the Committee on Contracts’ notification.

Making those checks isn’t easy, especially for the commercial terms and conditions. But this article will give you an outline of the major changes and how they could affect your property lease business.

To what extent does the non-compliance affect business operators?

Lessors should ensure that the agreements contain mandatory provisions and do not include any prohibited provisions. Non-compliance will lead to the limit of force and effect of the agreement as well as punishment of imprisonment and a fine of up to Bt100,000 being imposed on the company, directors and responsbile persons in the case of juristic lessors, or directly to the individual lessors/owners.

Specifically, the provisions are different from those specified by law will be interpreted to have the same force and effect as those specified by law and prohibited provisions will not be legally enforceable.

Who does the notification apply to?

Companies or individuals with a residential property lease business that leases or subleases five or more property units to individual tenants. Property types include houses, condominiums, apartments and other units used for residential purposes. It doesn’t include dormitories and hotels. This notification has no retrospective effect, so only agreements made on or after May 1 are affected.

What’s new?

For an agreement to meet the new criteria it must be made in Thai and in duplicate. It also has to include at least the following items:

l Details of the business operator, tenant and the leased property.

l The term of the lease, the start date and the end date.

l The rental rate showing the method used to calculate the rent and payment due date.

l The public utility fee rates, showing the method used to calculate them and the payment due date.

l Service expense rates and any other expenses rates, showing the method used to calculate and the payment due date.

l The security deposit amount.

l Specific obligations of the lessor and the rights of the lessee, eg advance invoices, return of the security deposit, right of lessee to terminate the agreement, conditions of material breach of agreement, and handover of the signed agreement.

l Lessors need to also be aware of the prohibitions, limitations and waivers that need to be covered in the agreement. Some of these are:

l Waiver or limitation of the business operator’s liabilities arising from breach of agreement or tort.

l Limitations to the business operator’s commercial rights, eg to collect advance rent, to change the rental rates, to confiscate prepaid rent or security deposit, to overcharge for utility services, and to receive a contract renewal fee.

l Limitations to the business operator’s rights relating to operations and claiming of compensation, eg to inspect the premises without prior notification, remove and seize the tenant’s property if the tenant fails to pay rent, to terminate the lease without reasonable grounds, oblige the tenant to be liable for normal wear and tear, or damage not attributable to the fault of the tenant.

What do the changes mean for property lease businesses?

The changes may increase risks and decrease profits. From now on, lessors would be right to be more cautious when selecting tenants since their options for dealing with defaulting tenants have been limited. It’s possible the one-month security deposit won’t cover damage by a reckless tenant.

As lessors can no longer collect utility charges exceeding their actual cost this will lead to a decline in profits. Some business operators may decide to increase rent to make up for this shortfall but this will lead to more land and house taxes.

It’s possible that, in the course of business, lessors will notice other indirect impacts of the changes. It’s important to be observant and to keep track of your tenants and profits so that you will not be severely affected by the change of the law.

Contributed by VUNNIPA RUAMRANGSRI, Partner and ANUWAT NGAMPRASERTKUL, direcor, PwC Tax & Legal, Thailand.

SC Asset Corporation Plc announced a total revenue of Bt2.68 billion and Bt259 million in net profit for the first quarter of this year, a rise of 53 per cent and 244 per cent respectively from the same period last year.

“We will continue to strive towards the revenue target of Bt17 billion at the end of this year,” the company chief corporate officer Attapol Sariddipuntawat said recently.

Supalai Plc announced a total revenue of Bt4.65 billion and Bt870 million in net profit in the first quarter of this year, up 22 per cent and 27 per cent respectively from the same period of last year.

The company plans to launch more residential projects this year to drive its business to double digit growth this year, Supalai Plc’s managing director Tritecha Tangmatitham said recently.

Nine of the 11 developers that have announced their first-quarter results reported strong gains in net profit from the first three months of 2017, thanks to a recovery in the market.

Most of the property companies recorded net profit increases in the double digits. Ananda Development Plc trailed the pack with earnings growth of just 3.13 per cent from the same period of last year.

However, faring worse were LPN Development Plc and Sansiri Plc, which saw their net profits drop from the year-earlier quarter.

AP (Thailand) Plc chief executive officer Anupong Asavbhokhin said that the company announced solid growth for the first quarter of 2018, with a result of more than Bt6.5 billion. Net profit for the quarter grew 47 per cent, rising by more than Bt800 million. AP Thailand believes that this healthy performance, coupled with a business plan adjustment to be more assertive in the low-rise sector, is certain to contribute to better-than-projected presales and realised revenues.

Anupong said there are even better growth prospects in store for the market due to a variety of positive factors. He cited the strong purchasing power that the real estate industry can benefit from.

“The overall market outlook is very good, especially in the low-rise sector. We have seen better and better presales and realised revenues for AP’s low-rise products over the last few quarters,” Anupong said.

“So, we have readjusted our business plan by launching several new projects. In 2018, AP will launch the highest number of new projects since its inception.”

The company plans to unveil 43 projects worth Bt64.7 billion, of which 21 are townhouse projects worth Bt18.5 billion, 17 are single detached house projects worth Bt20.8 billion, and five are for condominiums worth Bt25.4 billion, Anupong said.

Origin Property Plc chief executive officer Peerapong Jaroon-Ek shares this optimistic view for the market.

The company announced net profit of Bt488.9 million in the first quarter of this year, soaring 184 per cent from the same period of last year. Most of the units in its condominium projects that had been launched over the past three years were transferred to its customers in that quarter, Peerapong said. The transfers to customers would continue throughout the rest of the year.

“Meanwhile, we also had success on the presales front, with a take of Bt5.09 billion in the first quarter – up 255 per cent from the same period of last year that,” Peerapong said.

“This is thanks to the strong demand in the residential market, enjoying a recovery in line with the improving economy.

“This also will drive our presales to Bt20 billion and total revenue to Bt15 billion by the end of this year.”

Pruksa Holding Plc deputy group chief executive officer Supattra Paopiamsap said the company’s total revenue was Bt8.35 billion, a rise of 3.6 per cent from the year-earlier quarter. The company recorded presales for the three months of Bt12.69 billion, representing 24 per cent of its target of Bt53.74 billion for the year, Supattra said.

“This is thanks to the country’s economy posting strong growth and driving the demand for residential projects, with this recovery seen in the first quarter of this year compared with the same period of last year,” Supattra said.

“The momentum of growth will continue to drive the market in the rest of this year. As a result, the company has confidence the property market this year will grow by up to 5 per cent.

The company’s financial results will maintain growth double-digit growth compared with last year.”

Sansiri Plc reported to the Stock Exchange of Thailand (SET) yesterday that its total revenue of Bt5.27 billion and net profit of Bt252 million in the first quarter marked a drop of 26 per cent and 51 per cent, respectively, from the same period last year.

The developer said its project transfers decreased 29 per cent as its business management revenue dropped 23 per cent for the three months. That had a direct impact on total revenue and net profit, resulting in the declines from the year-earlier period.

LPN Development Plc, in its filing with the SET, said the company’s high marketing expenditure cut into its income growth for the quarter.

Total revenue came in at Bt2.49 billion, representing growth of 1.09 per cent from the same period of last year and its net profit also declined.