Automatic Renewal of a Lease in Thailand: Supreme Court Ruling in Case No. 4655/2566

Last updated on March 4, 2025

In the recent Supreme Court Case No. 4655/2566, the court invalidated ‘automatic’ 30-year lease renewals. It emphasizes that any pre-agreed automatic renewal of a lease beyond the statutory 30-year limit is unenforceable under Thai law. Understanding the implications of automatic renewal of a lease is crucial for lessors and lessees alike.

This ruling shows that both landlords and tenants need to talk and complete lease renewals when the original lease ends. Relying on automatic renewal clauses is no longer a good option. It is important for parties to actively manage renewals. This helps ensure their leasing agreements continue smoothly. This is a significant change for foreigners in Thailand using a lease for renting a property. Lawyers will have to be very creative to make a renewal enforceable but it is not totally forbidden. 540 do mention that a renewal is possible.

As lease agreements change, automatic renewals should be handled carefully. This encourages parties to negotiate on time instead of depending on possibly invalid clauses. We recommend reading our article about “reciprocal agreements” under Thai law. These agreements are valid and could be a solution.

Here’s a summary and translation of this decision in English. Do note that this is only for information purposes.

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Supreme Court Judgment No. 4655/2566

Mrs. S. Plaintiff
Mr. R. Defendant
Civil and Commercial Code, Section 540

Legal Issue Addressed by the Supreme Court

It is important to understand that automatic lease renewal helps protect tenant rights, especially during legal issues.

The Supreme Court addressed a legal dispute concerning a lease agreement between the plaintiff (Mrs. S.) and the defendant (Mr. R.). The main issue was if the plaintiff could evict the defendant and seek damages after a 30-year lease ended. This was especially important because of a claimed agreement to extend the lease for two more 30-year periods, making a total of 90 years.

The court looked at whether the lease extension clauses were valid under Section 540 of the Thai Civil and Commercial Code. This section states:

• Paragraph 1: “For immovable property, it is prohibited to lease for a period exceeding thirty years. If a contract is made for a longer period, it shall be reduced to thirty years.”
• Paragraph 2: “Furthermore, upon the expiration of the lease period, the contract may be renewed, but it must not exceed thirty years from the date of renewal.”

This rule limits leases of property to a maximum of 30 years. This is to protect people from unexpected changes in property value or the economy over time.

Factual Background

• Ownership and Initial Lease: The plaintiff owns land under Certificates of Utilization (N.S.3 Kor.) Nos. 1691 and 1692, and a house originally numbered 75/25 (later changed to 159/3). On May 10, 1990, the plaintiff and defendant signed a lease for the land and house. The lease was for 30 years and the total rent was 1,500,000 Baht. The lease was registered on May 21, 1990, effective from May 22, 1990, and the plaintiff received the 1,500,000 Baht from the defendant.
• Additional Constructions: The defendant constructed a parking building and house No. 159/8 on the land under Certificate No. 1692.
• Extension Agreement: The lease agreement included a promise (in clause 3) that, upon expiration of the initial 30-year term, the plaintiff would allow the defendant to lease the land for two additional periods of 30 years each if the defendant wished to continue. On the same day as the initial agreement, a separate document stipulated that the defendant would pay 600,000 Baht in advance for these two additional 30-year periods (totaling 2,700,000 Baht, including the initial 1,500,000 Baht). Evidence, including a signed receipt and detailed testimony about a money transfer from Germany to Switzerland, confirmed that the plaintiff received this full amount.
• Post-Expiration Dispute: After the lease expired on May 22, 2020, the plaintiff demanded that the defendant vacate the property and demolish the constructions. The defendant refused, claiming the extension agreement entitled him to remain for an additional 60 years.

Legal Reasoning

The Supreme Court found that:

1. Intent to Circumvent the Law: The arrangement—where the initial 30-year lease and the promise of two additional 30-year extensions were agreed upon simultaneously, with rent for all 90 years paid upfront—demonstrated a clear intent by both parties to bypass Section 540’s 30-year limit. The lack of new rental rates or conditions for the extensions, despite the long timeframe, further supported this conclusion. Typically, land conditions and economic circumstances change over 30 years, yet the parties maintained the original terms, effectively creating a 90-year lease.
2. Void Extension Clauses: The court ruled that the clauses promising two additional 30-year periods were void because their purpose explicitly violated Section 540. A lease exceeding 30 years is not permitted, and pre-agreeing to extensions with advance payment does not circumvent this restriction.
3. Not a Personal Right: The defendant argued that the extension promise constituted a personal right enforceable between the parties. The court rejected this, stating that interpreting it as such would undermine the mandatory nature of Section 540 and render its protective purpose ineffective.
4. Expiration of Lease: Since the extension clauses were void, the lease legally ended after the initial 30 years on May 22, 2020. The defendant’s continued occupation after this date, despite the plaintiff’s notice to vacate, constituted a tort (wrongful act) against the plaintiff.

Damages Assessment

The court determined that the defendant’s refusal to vacate entitled the plaintiff to damages. Given the land’s current value and economic conditions, the court found 30,000 Baht per month to be fair. This amount starts from June 12, 2020, the day after the lawsuit was filed. It will continue until the defendant leaves and removes all their belongings.

Procedural History

• Plaintiff’s Claim: The plaintiff wants to evict the defendant. They also want the removal of the defendant’s buildings, like house No. 159/8 and the parking building. The plaintiff seeks the restoration of land and house No. 159/3. They are asking for damages of 120,000 Baht each month from the filing date until the defendant leaves.
• Defendant’s Counterclaim: The defendant asked to dismiss the plaintiff’s case. They also want to enforce a 30-year lease renewal. This lease would start on May 22, 2020, at 20,000 Baht per year, totaling 600,000 Baht. The defendant claims they made a prepayment.
• The Court of First Instance dismissed the plaintiff’s claim. It ordered the plaintiff to register a 30-year lease renewal for the defendant starting on May 22, 2020.
• Court of Appeal Region 8: The court reversed the decision. It ordered eviction, removal of constructions, and restoration of the property. The court also awarded damages of 50,000 Baht per month starting June 12, 2020, and dismissed the counterclaim.
• Supreme Court: Affirmed the eviction and dismissal of the counterclaim but adjusted the damages to 30,000 Baht per month.

Final Judgment

The Supreme Court ruled:

• The defendant and his entourage must vacate the land under Certificates of Utilization (N.S.3 Kor.) Nos. 1691 and 1692, and house No. 159/3, and deliver the property to the plaintiff in good condition.
• The defendant must demolish house No. 159/8, the parking building, and any other constructions on the land. If the defendant fails to do so, the plaintiff may demolish them at the defendant’s expense.
• The defendant is prohibited from interfering with the plaintiff’s land and house.
• The defendant must pay the plaintiff 30,000 Baht each month. This payment starts the day after the lawsuit was filed, which was June 12, 2020. The payments will continue until all properties are removed and the land and house are empty.
• The defendant’s counterclaim is dismissed.
• Court fees for the plaintiff’s claim and the defendant’s counterclaim in the Supreme Court are waived.
• The judgment of the Court of Appeal Region 8 is otherwise affirmed.

Practitioners in the field should understand how automatic lease renewal affects property rights and responsibilities under Thai law.

Judges:

• Thira Benjaratsamiroj
• Narong Prachumart
• Wayuree Wattanaworalak

Lower Courts:

As the court deliberated on the validity of the automatic renewal of a lease, the consequences of ignoring legal guidelines became evident.

• Phuket Provincial Court: Mr. Chaiyawat Boonruangsak
• Court of Appeal Region 8: Mr. Suttipong Watcharin

Source: Office of the Assistant Judges of the Supreme Court

In summary, the automatic renewal of a lease should be approached with diligence and a comprehensive understanding of the law.

• Supreme Court of Thailand search database