Understanding key-money
Key Money as part of a rental or lease in Thailand
Key Money as part of a rental or lease in Thailand
if you do not understand key money in Thailand this could lead to a foreseeable argument with the landlord when the lease ends or must be renewed. If you look at the term key money it is used differently in different parts of the world.
Sometimes key money means:
- money paid to an existing tenant who assigns a lease to a new tenant where the rent is below market value;
- a bribe to a landlord;
- security deposits.
In Thailand key money also sometimes simply means part of the overall lease or rental, often used in the price for commercial property. Say in case of a three year lease of a commercial building with a annual rent of 150,000 Thai baht the non-refundable key money could be something between 100,000 to 500,000 Thai baht depending on the arrangement with the landlord. The actual rental the landlord is taxed on is below the market value and part of the rental is just called key money. Therefore key money is asked again when the lease is renewed.
If you take over an existing rental and think it is a low rental price this could be because it not includes the under the table paid key money.
Key Money in Thailand
Key-money in Thailand can usually be explained as part payment of the total lease price upfront to the landlord for a lower monthly rental during the term of the lease, and also as non-taxable income for the lessor.
There is no fixed rule for key money or how key money is calculated and in fact it is simply part of the overall lease price negotiation. As there is no fixed definition of key-money in Thailand it is important to make sure with the landlord (if key money is paid), if it is part of the lease or rental price or security deposit and if it has to be paid again when the rental or lease is renewed. You do not want to negotiate what the key-money is paid for when your lease ends and you have to renew your lease or you expect your key money back!
Key money could be asked as part of the rental but not always. Some foreigners with 3 year rentals end up visiting a lawyer simply because they feel themselves screwed by the landlord because of key money, but in fact it's their ignorance of the term 'key money' in Thailand.
