Bangkok is a major expat hub due to its multitude of business and career opportunities. However this also makes the international community of residents living in the city extremely transient and temporary.

Many of the working professionals are on project or assignment based employment contracts while others have recently been transferred or relocated (From overseas).

Many of these individuals face uncertainty in regards to their employment and residency status therefore they require Lease Agreements of a flexible nature.

Bangkok being a competitive rental market, rather than turn down a potentially reliable tenant able to pay a suitable rental rate, as a Landlord you could consider inserting a “Diplomatic Clause/ Break Clause” within the Lease Agreement.

So what is a Diplomatic Clause?

Very simply, it is a clause allowing the Tenant to end their Rental Agreement early without the risk of losing their security deposit, provided adequate notice is provided (Usually 1 Month). While this may seem terribly disadvantageous for the owner of the property, there are two ways to ensure the Landlord can reap maximum benefits while maintaining a level of flexibility and fairness:

1. Minimum Rental Period

Well drafted Break Clauses, ensure that the potential Tenant guarantees an absolute minimum rental term. Therefore eliminating the risk of a short unprofitable lease term (I.e. 1 Month, 2 Month, etc…). Fresh Property tends to negotiate a term half of the full rental period. (I.e. 6 Months for a 1 Year Contract)

2. Reason and Proof of Lease Termination

A fair Diplomatic Clause, could state “reasons and supporting materials” required to trigger the termination of the Lease by the Tenant. In most cases Break Clauses are requested due to professional uncertainty; therefore a fair and efficient Break Clause would be to require the tenant to provide an official company letter stating that the individual has been transferred/ relocated or dismissed from his employment.

A discussion of Diplomatic Clauses would be incomplete without some example template clauses. Here are two examples:

“Lessee may terminate this Agreement after six (6) months from the execution of this Agreement (which, for the avoidance of doubt, shall be 1st October 20XX), should the Lessee be compelled to leave Bangkok due to unforeseeable circumstances beyond the control of the Lessee. In such event, the Lessee shall give at least thirty (30) days’ termination notice in writing to the Lessor.”

Or

“After 6 Months, should the Lessee be compelled to leave Bangkok due to unforeseen circumstances beyond the control of the Lessee before termination of the lease agreement, this lease agreement shall immediately be null and void. The remaining security deposit shall be refunded to the lessee after settling the costs including Utilities and other expenses. The lessee shall inform the Lessor with a written notice of such termination one month in advance. A copy of notification under the circumstances from the Lessee’s authority should be provided.”

In both examples a minimum rental term is guaranteed (6 Months) by the Lessee. It is important to note that they both ensure 1 Month notice is provided to the Landlord (To allow the property owner to start marketing before move-out).

Finally in the second example a small section stipulates that “circumstances” of the Lessee ending the Rental Agreement early should be provided. This can be edited based on requirements. (Ex. Request a specific company letter of transfer)

By remaining flexible to accepting “Diplomatic Clauses”, landlords are opening the potential rental market for their Condos. Thus maximizing rental yields and reducing vacant property periods!