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Phuket Law: Restrictions eased on short-term rentals

PHUKET: Earlier this year it came to light that most villa or condominium unit owners who are renting out their property on a short-term basis – that is, for periods of less than 30 days – are most likely violating the Hotel Act (2004) if they do so without having received a hotel license.

propertycrimeeconomicsconstruction
By Jerrold Kippen

Sunday 20 November 2016, 01:00PM


The potential punishment for such violation includes significant fines, or imprisonment, or both. (See stories here and here.)

Historically however, obtaining a hotel license for most such owners has been very difficult – if not impossible. A major reason for this is that in order to obtain a hotel license the property must comply with the requirements for certification for use of the property as a hotel under the “BCA” – the Building Control Act (1979).

Tourism is one the most significant contributors to the Thai economy, and many people are tempted to, and currently do, invest in properties to take advantage of this lucrative market without a requisite hotel license.

This has created a tension between the need to enforce the law and the desire to maintain a robust tourism industry and investment market. As we have pointed out previously, one way to accommodate both of these very legitimate and currently competing concerns would be to liberalise restrictions that apply to a variety of such properties. Thus, we are pleased to see that the current government has recently taken one such step.

On August 19, Thailand’s Ministry of Interior Ministerial Regulation Prescribing Descriptions of Other Types of Building Used for a Hotel Business Operation 2016 under the Building Control Act (1979) became effective.

This Ministerial Regulation (“MR”) should make it easier for more property owners to obtain a hotel license.

The MR will remain in effect for five years.

However, it applies only to buildings that existed before it came into force and whose owners desire to use the property as “Hotel” (as defined by the Hotel Act) with either:

(a) rooms only; or

(b) rooms and food service/restaurant facilities.

The three categories of buildings that are eligible for this re-classification are as follows:

Type 1: a building with not more than two floors and not more than 10 rooms;

Type 2: a building that is not a Type 1 building and which does not have more than 20 rooms; and

Type 3: a building that is not a Type 1 building and which does have more than 20 rooms.

The MR liberalizes the various Hotel usage-building requirements under the BCA for these types of buildings. (For example, see table.)

An application to change the usage a building to a hotel under the BCA must be completed within five years from the date the MR came into force.

However, if the building requires structural modification before applying to change its usage to a hotel, that application – or notification under Section 39(bis) of the BCA – must be filed within two years.

It also should be noted that the building must still comply with other BCA regulations regarding hotel usage in force at the time the building was originally constructed (or altered), regarding such matters as the building’s height, setback and parking.

In closing, it should be noted that the MR does not mean that all owners who want to rent their properties on a short-term basis and whose properties do or can comply with the MR will now be able to legally do so.

There are other laws that need to be considered and which may restrict such use – particularly with regard to condominiums, and all the more so with regard to foreigners. Thus, caution and clarity are advisable before taking steps to take advantage of the MR.

That said, the MR is a very welcome step in the right direction for the tourism and real estate investment markets in Thailand.


DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in over 100 other jurisdictions worldwide. Visit them at duensingkippen.com

 

 

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Andy | 21 November 2016 - 15:33:27

I think I must be stupid because I cant quite work out the difference between Type 2 and Type 3
A three floor building cannot have more than 10 rooms but a single or two floor building can have 20 rooms. I am sure this makes sense to someone but not me. Anyone seen any condos with two floors or less or any with less than 20 rooms?

Kurt | 20 November 2016 - 19:05:04

Mhhh, a lot dog wag tail stuff first about property for sale.. ( price reduced for quick sale. ..Owner will look to listen to any offer,..Owner wants any offer, wants to sell quick, etc, etc)
Now the Phuket property rental market is following in this.
Not surprising.

When Thailand start to realize that foreign buyers, renters not feel any affinity with all these thai 'foggy/misty' rul...

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