‘Assignment’ and ‘Novation’ – often used but
frequently misunderstood legal concepts
Duensing Kippen Tax and
“Assignment” and “novation” are lofty sounding legal
terms frequently used by consultants and lawyers. In Phuket these terms are
used especially often in relation to lease agreements. Therefore, it is
important that the legal meaning and effect of novation and assignment are
clearly understood by anyone considering their use and to do this the
starting and ending point must be understanding what they actually mean
under Thai law. However, recently in a Thailand English news publication
assignment and novation were discussed and, unfortunately, inaccurately
described. The concepts of assignment and novation were explained there as
“viable options when it comes to resale of a lease”.
Kippen & Olaf Duensing
In this Article we will explain the legal concept of
assignment and novation and whether these are actually “options” from which
the parties are free to choose.
The term “assignment” is not directly mentioned in the
Civil and Commercial Code of Thailand (CCC). Rather, the CCC, in Book II
Chapter IV, refers to the “Transfer of Claims”. Section 303 CCC states that,
“A claim may be transferred unless its nature does not admit of it”.
Important is to understand that it is a “claim”, or in
common parlance a “right”, that may be transferred in accordance with
Chapter IV. An example of such a claim is the repayment of a loan. The
lender is entitled to “transfer” such claim. An authorization by the
borrower is not legally required to execute this “transfer of claim” in a
legally binding manner; notice to the debtor by a specific creditor is
sufficient (Section 306 CCC).
In a lease relation the parties to a lease agreement have
reciprocal “claims”’ towards each other. The lessor “claims” the lease
payment and the lessee “claims” the provisions of the lease object. Such
claims are basically “transferable”. Please note that Section 544 CCC
restricts the transferability of the right to the property “unless otherwise
provided in the contract”. Thus, it is generally highly advisable for
lessees entering into a long-term lease agreement to receive such transfer
On the other hand, novation is regulated in “Chapter V –
Extinction of Obligation - Part IV of the CCC”. Section 349 CCC
explains that “when the parties concerned have concluded a contract changing
the essential elements of an obligation, such obligation is extinguished by
novation”. Section 350 CCC specifies that “a novation by a change of the
debtor may be effected by a contract between the creditor and the new
debtor, but this cannot be done against the will of the original debtor.”
Taking our example above of a lease agreement, the
following reciprocal obligations exist in a lease relation: the lessor is
obligated to provide the property and the lessee is obligated to make the
lease payments. Therefore, in a lease relationship, the lessee is the debtor
with regard to the lease payments and the lessor is the debtor with regard
to the provision of the lease object. Thus, it is always important to
investigate what obligation, or which debtor of what obligation, will be “novated”.
In a typical “lease sale” example a lessee would “sell”
his lease to a third party. The lessee has the right to “claim” the
provision of the property from the lessor. Such right he will need to
“assign” in accordance with Section 303 ff CCC (Transfer of Claims) to the
third party. However, the lessee is also subject to an “obligation” and a
debtor relating to the lease payments. The parties in a contractual
relationship with typical reciprocal rights and obligations are, therefore,
not free to choose between a novation and an assignment in a typical “sale”
of a lease. Both legal elements are required for the third party to “step
into the shoes” of the initial lessee. Therefore, a novation agreement
between the lessor and the third party with approval of the lessee in
accordance with Section 350 CCC is required.
Based on the foregoing then, what is such a “sale” legally? Answer: it is
an assignment and a novation, not an assignment
or a novation.
DUENSING KIPPEN is a multi-service boutique law
firm specializing in property and corporate/commercial matters and is also
the only such firm in Thailand that compliments its property and
corporate/commercial legal expertise with a core tax law practice. DUENSING
KIPPEN can be reached at: firstname.lastname@example.org or for information, visit
them at: www.dktaxandlaw.com
Pattaya condo market 2011- A big year for new condo construction
Some of Pattaya’s biggest developers set
to launch an influx of new projects in 2011
artist’s render shows the Novana Residence by The Nova Group.
The Eastern Seaboard property sector has suffered in
recent years, due to worldwide recession, political unrest and weakening
world currencies, however Pattaya’s property developers whilst cautious have
continued to launch new projects, and just as importantly have actually gone
ahead and completed them.
Those developers bold enough to show faith in the
property sector have also been rewarded by very positive sales figures.
Apus Condominium launched in January 2009 is fully
complete and nearing 90% sold out, Avenue Residence is also complete and
100% sold out; very positive sales figures are also being reported from
projects such as The Gallery, Porchland and of course we have seen the
completion of Northpoint by Raimon Land, The 6 Star Premier project The Cove
from Petch Property and the ongoing of Major Plc’s Reflection in Jomtien.
This is just a small snapshot of projects either
completed or nearing completion and by no way means an exhaustive list.
Well this trend looks like it will continue in 2011, with
a number of the area’s biggest developers about to launch a number of
At the recent Movers and Shakers Party, Managing Director
of The Nova Group Rony Fineman gave an exclusive to Pattaya Mail TV with the
news that his company will launch 3 new projects, including another City
Low-rise development Novana Residence, a premier 45 Storey 5 Star high-rise
on Wongamat Beach The Palm and The Legend a 34 storey tower on Pratunmak
Hill near the prestigious Royal Cliff Hotel.
Marketing Director for Vareejinda, Jason Payne recently
announced that after the success of Apus Condominium, they had secured land
for a further inner city project as well as two other beachfront sites, of
which full details of these 3 projects will be released early in 2011
Premium Developers Raimon Land will launch Zire Wongamat
in March 2011 with 2 towers of 37 and 54 Storeys respectively, Vistas
Development have just launched The Peak Towers.
Other developers such as Matrix, Iguana and Heights
Holdings who have always been active in Pattaya will continue to bring
quality new projects to the market also in 2011.
So in summary- 2011 looks like being a very big year for
the local real estate sector, again demonstrating the confidence and
resilience that Pattaya seems to offer. (PR Log)
The Cove Condo holds
thank you party
Cove developer predicts sell-out in first quarter
The Cove condominium project under construction on Wong
Amat Beach should be sold out by the end of the first quarter of 2011,
according to its developer.
Chairman of Petch Property Development company, Itthi Chawalitthamrong.
At a Dec. 23 “Thank you” party for buyers at the Naklua
Soi 18/1 property, Petch Property Development Co. Chairman Itthi
Chawalitthamrong said bookings have already surpassed 50 percent and are
expected to hit 100 percent by April.
The 2 billion baht project is spread over 70 rai and 18
floors with the 103 units offering floor space of at least 100 sq. meters.
Prices run from 11 million to 120 million baht. Construction is expected to
be complete within a few months.
With The Cove nearly complete, Itthi said Petch is ready
to launch its next project, a 200-unit development targeted at European,
Scandinavian, Russian, and Thai buyers. Sales will begin in the first
quarter and special promotions on interior decoration will be offered to
Thai buyers, he said.
condominium project at Wong Amat Beach, Pattaya.