The commercial lease agreement is the lease agreement between the merchant, the craftsman or the industrialist who operates a business and the owner of the premises. The owner of the premises may be an individual or a company. You can use this commercial lease agreement to rent a place such as a restaurant, a bar, a warehouse, a store, an office, a factory for a commercial activity in Thailand. The authorized business activity is limited and is determined exclusively by the commercial lease agreement. Indeed, the activity is freely negotiated between the parties prior to signature. The commercial lease agreement, which sets out the rights and obligations of each party, has the advantage of protecting both the lessor and the lessee, who must carry on his activity and operate his business for a long period.
What activity is authorized by the commercial lease agreement?
This commercial activity, provided for in the lease, must be respected by the Lessee. The Lessee must respect the contractual destination provided for in the commercial lease agreement. The lease may limit or prohibit the exercise of other activities. The tenant must then respect this clause until the end of the lease. The respect of this clause also obliges him to continue the exploitation until the end of the lease. We can distinguish two different types of activities such as but not limited to:
Commercial activities: sale of products: clothes, jewelry, furniture, food, wine, bar, restaurant, etc.
Artisanal activities: bakery, pastry shop, ice cream parlour, hairdresser, flower arrangement, laundry, dry cleaning, beauty care, photographer’s store, carpentry, locksmith, manufacture and repair of objects, furniture, printing, plumber, electrician, removal, technical control, etc.
When the commercial lease agreement contains a clause authorizing all commercial activities, the tenant will carry on all these activities. However, before allowing the tenant to carry on a commercial activity, make sure that the syndic of co-ownership accepts this type of activity (in the case of premises in a building) or that the accepted activity is illegal. In case of doubt, we recommend that you contact us and we will put you in touch with a lawyer.
In any case, we recommend that you delimit the commercial activity from the use of the premises in order to avoid any abusive exploitation of your convictions and a possible future degradation.
What is included in the commercial lease agreement?
The commercial lease agreement is the contract that sets the conditions under which the property in question will be rented between the lessor and the lessee.
With Themis Partner, the commercial lease contract protects you and contains clauses on:
➤ The activity authorized in the premises
➤ The amount of the rent
➤ The duration of the lease
➤ The payment date and late payment penalties
➤ The security deposit
➤ The distribution of charges between the lessor and the lessee
➤ The sub-letting
➤ Damages to the building
➤ The respect of the common parts
➤ Insurance (if necessary)
➤ The limitation of the owner's responsibility
➤ Breach of contract
➤ Force majeure
➤ Applicable law
With Themis Partner, get a model commercial lease agreement that protects you against any breach by either party.
What is the duration of a lease contract in Thailand?
At the time of signing your commercial lease agreement, you must fix a duration with your landlord. The duration of the contract can be freely fixed. In practice, the commercial lease agreement in Thailand is of a minimum duration of 3 years. However, this period can be shortened or extended according to the discussions between the parties. In the absence of a clause to the contrary, the renewal of the commercial lease is not automatic. Thus, in the absence of a renewal clause in the commercial lease agreement, the renewal will result either from the tenant, who can formulate a request for renewal of the lease, or from the landlord, who can propose a notice of termination with an offer of renewal.
Can a commercial lease be terminated?
The tenant is obliged to respect the contractual provisions signed and inserted in the commercial lease agreement. Thus, for any termination during the term of the commercial lease, the tenant must respect the notice period. He must send his wish to terminate by registered letter with acknowledgement of receipt. However, the tenant, by proceeding to a termination of the contract before the end of the lease term, will expose himself to several difficulties:
The notice period
The tenant must respect the notice period indicated in the commercial lease agreement. Generally, this period is 3 months from the date the contract is terminated. Make sure that the landlord receives your request for termination.
Loss of the security deposit
Following the termination of the commercial lease agreement before its term, there is a risk of non-return of the security deposit. Indeed, the failure to respect the duration of the contract will entitle the landlord not to return the deposit that the tenant has paid.
Restoration of the premises
In many commercial lease agreements, the tenant is required to restore the premises to their original condition. Therefore, the tenant will be required to remove any construction or alterations to the premises at its own expense.
Depending on the contractual terms of the commercial lease agreement, additional compensation may be requested by the landlord.
How to renew a commercial lease?
The consequences differ depending on the way the commercial lease was renewed:
New lease following tacit renewal
When a commercial lease is tacitly renewed, it is concluded for an indefinite period. This renewal is not without consequences:
➤ The rent can be de-capped at the end of the twelfth year
➤ The lease can be terminated at any time following a notice given by the lessor or following a request for renewal by the tenant that the lessor refuses
The tenant has the option of requesting the renewal of the commercial lease until the end of the twelfth year. This is a risky situation for the tenant who no longer has a guarantee of presence and risks revising the rent.
New lease after acceptance of the renewal offer
When the Tenant accepts the renewal offer made by the request for leave or the Landlord accepts the Tenant’s request for renewal, the lease has the same conditions as the initial lease. However:
➤ The rent may be revised
➤ And the parties may agree to modify certain conditions
How much is the security deposit for a commercial lease?
In Thailand, the security deposit for a commercial lease is not legally binding but can be freely set by the parties to the contract. It is a sum paid by the tenant to the landlord, whose purpose is to guarantee the good execution of the contract. It must be reimbursed to the tenant when he leaves the premises, provided that he has fulfilled all his contractual obligations. In general, this amount amounts to 2 to 3 months’ rent of the commercial lease
Do I have to make an inventory of fixtures?
It is strongly recommended that an inventory of fixtures be made before the tenant takes possession of the commercial lease. The inventory of fixtures must be done at the time the tenant takes possession of the premises and at the time he returns them. It can be done either amicably with a document listing the goods and their condition at the time of taking possession of the commercial premises, so a document such as the inspection report can be used for your inventory. It is also useful to do the inventory of fixtures before or during the signing of the contract. If the inventory is not done, the tenant is not presumed to have received the premises in good condition, and it will be difficult for the landlord to prove any damage.
Can a commercial lease be sublet?
A tenant can sublet his commercial premises. However, subletting a commercial lease requires the authorization of the landlord. A sublease agreement is a contract by which the tenant who holds the initial commercial lease makes all or part of the premises available to a third party in exchange for financial compensation. However, the subtenant cannot have more rights than the primary tenant, and to this end, the subtenant may have, at most, the same rights as the tenant. Before proceeding with a sublease of your commercial premises, it is imperative to take the following steps:
➤ Obtain the landlord's authorization to proceed with a sublease
➤ Establish a sublease agreement between the tenant and the subtenant
What are the lessor's obligations?
First of all, the commercial landlord must deliver to the tenant a commercial premises in good condition of any kind. Unless the Lessee has signed clauses to this effect in the commercial lease agreement, the Lessor must provide the Lessee with premises in good condition for its commercial activity.
Second, the commercial lessor must ensure that its tenant has “normal” use of the premises. Even in the event of a dispute, it is not advisable to take retaliatory measures, such as cutting off the electricity, water or heating. Thus, any disagreement must be settled in court. This is why a professionally drafted commercial contract is necessary.
Finally, all obligations are usually written into the commercial lease agreement in order to avoid any subsequent dispute with the tenant.
What are the lessee's obligations?
First of all, the tenant must pay the rent and the charges. The tenant must respect the agreement he or she has made with the landlord and pay the rent in full and on time. Non-payment or late payment may result in penalties to be paid by the Tenant if these items have been stipulated in the commercial lease agreement.
Second, the Lessee must use the commercial space according to its purpose/ If the lease states that only one activity may be conducted on the premises, the Lessee must comply with this constraint. If the lease states that the Lessee may engage in more than one activity, the Lessee may engage in more than one activity. If the Lessee wishes to engage in a new business activity not specified in the Commercial Lease Agreement, it is important that the Lessee contact the Lessor for permission before commencing the new business activity.
Third, the tenant has an obligation not to disturb the neighbors. The tenant must lease the premises in a manner that ensures the peace and quiet of the neighbors. This obligation applies in particular in the case of an office lease in a building where the co-ownership regulations will apply to the Tenant, and the Tenant must respect them once it takes possession of the commercial premises.
Finally, the Tenant has the obligation to return the premises in good condition following its lease. In general, a return to the state of the premises on the date of taking possession can be requested if it is explicitly mentioned in the contract.