8 Things to Consider in a Factory and Warehouse Rental Contract in Thailand

 Factory rental and Warehouse rental have become a prominent choice for business people today. Because of the full breadth of properties available, renting provides business operators with flexibility and promptness in changing business environments. It is pivotal to understand the essential factors before engaging in a rental contract. Thus, in this article, we examine these crucial factors before signing a rental factory and warehouse contract.

 We will examine these factors in detail so that, hopefully, you can engage in rental contracts in Thailand with confidence. We outline the eight essential steps that can guide you pore over the rental conditions effectively.

1. Read the lease agreement carefully every page.

Before signing any rental contract, you must always read the complete contents of that contract. According to Thai Law, when parties engage and sign a contract (regardless of understanding of the material), the parties have full responsibilities to act under the contract terms. Moreover, entrepreneurs who wish to rent a factory or warehouse should read the contract in detail and understand the terms of the agreement thoroughly.

In Thailand, the typical rental contracts are 3-year leases. (For any rent over three years, the parties have to register their rental agreement with the Department of Lands and pay the duty stamps for the entire rental period.)  The Thailand rental price is on a monthly rental basis. The landlords should also explicitly state the deposit amounts as well as advance payments required when signing the rental contract.

Besides, if the lease contract is in English, there should always be a Thai-translated version. You have to ensure that the translation is complete and correct; the interpretations of both Thai and English texts are analogous. 

2. Related taxes and other expenses

In Thailand, the withholding tax on factory rentals and warehouse rentals is 5%. Typically, the lessee must withhold 5% of the rent for the Property Tax, which includes factory and warehouse premises (only land plots and buildings for agriculture and residence purposes are exempt from this tax.)  Furthermore, the amount of the withholding tax is calculated from the rental amount.

The rental agreement should precisely state whether the leaser or the lessee is responsible for this tax. This expense is different according to each landlord. Also, you should beware of other costs, such as property insurance, common fees, and additional utility surcharges. For our rental factories and warehouses, the quoted rental price is the final price, and there is no other hidden charge.

If you are interested in taxes related to Thailand's new Property Tax, please read the article: Thailand's New Property Tax and its Implications in the link below:

Also, if you wish to understand more about the taxes involved when renting a factory or warehouse in Thailand, please click on the link read our Article: Taxes related to Thailand Factory and Warehouse Rentals.

3. Check Ownership of the Leased Property

Before signing any rental contracts and, more importantly, before paying the deposit, the lessee has to validate the ownership of the property.  Unfortunately, there are incidents, which the people you are in contact with, are not the actual owners and do not have legal rights to lease the property.  You can ratify the ownership by checkings the land title deeds, construction permits, and the subleased agreements of the intended property. Ideally, the owner should sign and attach these supplementary documentaries to the rental contracts.

4. Scope of responsibility

Typically, a lease agreement for a factory or warehouse should define the duties of the renter and the landlord. For example, an excellent rental contract should unmistakably state whose role is responsible for maintenance issues. Or, the rental agreement should specify what happens when damages occur to the property and its equipment. Moreover, it is vital that you and the owner sort out these issues before finalizing the contract.

5. Project Rules

For properties that are in the projects such as industrial estates and free trade zones, tenants should also study the rules and regulations of those projects.  These projects have their particular decrees. Thus, the rental contract should cover these unique requirements and reflect them in the rental agreement.

6. Check Carefully the Factory or Warehouse Conditions and its Equipment

Before engaging a rental contract, tenants should thoroughly inspect the conditions of the property and its equipment.  All devices inside have to be ready for use. If certain parts require fixing, you should notify the landlord immediately.

Also, you should check the door keys of the property, whether they are correct. It will help if you take photographs of both the interior and exterior of the buildings. Finally, the landlord should provide you a comprehensive list of materials and assets in the factory. This detailed information becomes very practical as future references.

7. Insurance for Rented Property

Insurances for the factory or warehouse is essential, especially for rental properties. Related coverages for rental properties include property insurances, product insurances, and machinery insurances. A proper rental contract should clearly explain what protections the rent offers, and what other guarantees the lessee have to obtain themselves. 

8. Duty Stamps in the Lease Agreement

An often-overlooked-yet-crucial element in any rental contract in Thailand is duty stamps. When the rental contract does not include stamp duties, the agreement is deemed incomplete and thus not legally binding.

Besides, the lease agreement should specify which side pays the stamp duty (the stamp duty rate is 0.1% of the entire rental amount.)  On another important note, the parties have to pay the stamp duty fees within 15 days, after signing the contract, to avoid charges.

Before signing a factory or warehouse rental contract, the tenant should carefully read the terms and conditions. In sum, we have outlined the necessary elements the tenant should thoroughly examine. Some of these imperative factors consist of minimum rental periods, rental prices, deposit amounts, rules and regulations, taxes, insurances, and maintenance roles. A definitive rental contract provides both parties with a clear mutual understanding of their responsibilities, and prevent future confusions. It is wise to spend extra time in formulating the contract. Also, if there is any doubt in the conditions, the lessee should immediately rectify the issue with the lessor.

 We have provided a sample warehouse lease agreement from the website www.thailaws.com. Please follow the link below:

http://bit.ly/2FQw0C7

If you are interested in renting a high-quality factory or warehouse in Thailand, please free to contact us. Our projects are in excellent locations, and we offer free repair services throughout the rental contract. Also, our tenants enjoy free customer-support services that help you navigate through key issues, such as license applications, utility applications, factory modifications, and machine placements.  All of our properties are in high-security projects with 24-hour security guards and CCTV systems. Please follow the link below for more information.

Sources:

http://bit.ly/2FQw0C7

http://bit.ly/39NhoB1