What Could Go Wrong? When Your Hotel Encroaches on Public Land

Since the Coronavirus pandemic, as the economy and tourism in Thailand have begun to recover, the hotel & hospitality industry has seen new hotels begin to emerge. Whether new investors entering the industry build new hotels or purchase old hotels for renovation, one issue has begun to creep into the industry: public waterways, for which the effects of noncompliance go far beyond what meets the eye.

Issues with unused public waterways have been rising. Problems occur when a hotel operator or landowner is not aware that a hotel or other building is built on a public waterway. This is not due to the land owner’s malicious intent to encroach on a public waterway, canal, or river (collectively, “public waterway”), but because at the time of construction, the relevant canal or river had ceased to exist as a public waterway. This usually occurs when the entity that constructs a hotel is not the same as the hotel owner, often because the hotel was put up for sale and then purchased. This has several legal implications that could stop hotel operations entirely.

This is because a public waterway is considered ‘Land’ pursuant to Section 1¹ of the Land Code of Thailand. The land in question is considered public property, and specifically a domain public of the State pursuant to Section 1304² of the Civil and Commercial Code of Thailand (“CCC”). Land that is public property must be used in accordance with Section 8³ or Section 9⁴ of the Land Code. Based on these two provisions, aside from specific situations in which public land is allowed to be used by the private sector such as mining, public land is not allowed to be used by any private individual, regardless of the condition of that land, and the action of building a structure over a public waterway is considered an encroachment.

While the Building Control Act (B.E. 2522) and its subordinate regulations are meant to ensure that a construction permit is issued in accordance with the law, meaning that the competent local officer is supposed to ensure that the structure adheres to safety regulations and that the construction is not built in conflict with the law, which includes ensuring that the structure is not built in a way that encroaches on public property. This typically is ensured through an “area layout,” which is one of the documents that must be submitted to the competent local officer to obtain a permit. While this is true, it is not always done, especially when the construction permit was issued a long time ago, in an area in which the public waterway has ceased to exist as a public waterway.

We have seen several cases in which a structure was built on land that encroaches on a public waterway even though, in reality, no river or canal can be seen. This poses a problem once the encroachment is discovered by the authorities. Typically, the local officer then will issue an order to cease use of the building in question pursuant to Section 40(2)⁵ of the Building Control Act (B.E. 2522) and since it is construction that cannot be modified, the local officer has no choice but to issue an order to demolish the relevant building, pursuant to Section 42⁶ of the Building Control Act (B.E. 2522).

Not only will an order for cessation of use of a building interrupt hotel operations, but it also will be escalated if a building operated as a hotel is used without a certificate of construction (Form Aor. 5 or Aor.6). The reason is that if the certificate of construction cannot be produced, which theoretically would not be possible since the building in question is built on public land, a hotel license cannot be issued for the building, pursuant to the Ministerial Rule on Type and Requirements for Operation of Hotel Business (B.E. 2551).

While the scenario mentioned in the previous paragraph is rather straightforward, it creates a conundrum when a hotel license already was issued without a certificate of construction and the license currently is up for extension or renewal. The hotel operations then come under a threat of cessation due to a refusal to extend the hotel license, citing the lack of a certificate of construction, or, worse, the hotel license may be revoked entirely due to the lack of a certificate of construction which renders the operator unable to reapply for a new license pursuant to Section 16(8)⁷ of the Hotel Act B.E. 2547. This can occur when a hotel is acquired from a previous owner, either via a property purchase or a corporate acquisition.

This is one important reason why a private entity that wishes to build and operate a hotel, or acquire an existing hotel, should perform thorough due diligence before proceeding. This due diligence should cover all legal issues, including construction and town planning laws and regulations, and licenses to operate, in order to determine whether there are any inherent risks associated with construction noncompliance that could affect the validity of the hotel license.

¹Section 1 para. 2 of the Land Code
“"Land" means general land areas and also includes mountains, streams, swamps, canals, marshes, bays, lakes, islands, and coastal areas.”

²Section 1304 of the CCC
““The domain public of the State includes every kind of State property that is in use for the public interest or reserved for the common benefit, such as

1. waste land and land surrendered, abandoned, or otherwise reverted to the State according to the land law;
2. property for the common use of the people, e.g., shores, water-ways, highways, lakes;
3. property for special use by the State e.g., a fortress or other military buildings, public offices, warships, arms and ammunition.”

³Section 8 of the Land Code
“In the absence of laws providing otherwise, all of the land that is either a public domain or state property shall be under the care of the Director-General, who shall have the power and duty to take any appropriate measures for its protection. This power and duty may be delegated by the Minister to another public body.
The land that is part of the public domain of the State and used in common by the public or used specifically in the interest of the State, or land that is reserved for the use of any public body, may be withdrawn from this status or transferred for other uses, or allocated to the people, in the following cases:

For land used in common by the public, if a public body, state enterprise, or private party has provided land for common use by the public instead, its withdrawal from that status or its transfer shall be made in the form of an Act. If the public has ceased to use the land or the status of that land has changed from being land used in common by the public, and the ownership of that land is not vested in any person in accordance with the provisions of other laws, its withdrawal shall be made in the form of a Royal Decree.
For land used specifically in the interest of the State or land reserved for the use of any public body, if that public body ceases to use that land or no longer needs to reserve it for its own use, when there is a Royal Decree withdrawing that land from such status, the Council of Ministers may assign the public body in charge to make use of or seek benefits from the land. However, if the land is to be transferred to a private party, it shall be done in the form of an Act, and if the land is to be allocated to the people in accordance with this Code or other laws, it shall be done in the form of a Royal Decree.
The Act or the Royal Decree pursuant to paragraph two shall include a map showing the boundaries of the land, as an annex to the relevant Act or Royal Decree.”

⁴Section 9 of the Land Code
“Subject to the laws governing mining and forestry, no person shall occupy, use, or otherwise enter upon state land without possessing a lawful right or receiving permission from an authorized officer. It is prohibited for any person to:

Seize, occupy, or otherwise engage in the clearing or burning of forested areas;
Take any action that results in the destruction or degradation of land, stone, gravel, or sand within areas declared as protected by the Minister in the Government Gazette; or
Undertake any activities that endanger the resources on such land.”

⁵Section 40 (2) of Building Control Act B.E. 2522
“In cases where there is construction, modification, demolition, or movement of a building in violation of the provisions of this Act, or of the Ministerial Regulation or local bylaws issued under this Act, or other relevant laws, the competent local official has the power to take action as follows:

to order the owner or occupier of a building, or the superintendent, operator, employee, or servant of such person, to stop such action;
to prohibit any person from using or entering into any part of the building or the site of such action, and to order that a sign showing the prohibition be provided in a conspicuous place at the building or site, and
to consider issuing an order under section 41 or section 42, as the case may be, within thirty days from the date of the order under (1).”

⁶Section 42 of the Building Control Act B.E. 2522
“If the action under section 40 is not rectifiable, or if the owner of the building fails to comply with the order of the competent local official under section 41, the competent local official shall have power to order the owner or occupier of the building, or the superintendent or operator, to demolish the whole or some part of the building within a period to be determined, but not less than thirty days, in accordance with the rules, procedures, and conditions set forth in the Ministerial Regulation issued under section 8 (11), or local bylaws issued under section 9 or section 10.”

⁷Section 16 (8) of the Hotel Act B.E. 2547
…“An applicant for a licence shall possess qualifications, and not be under prohibitions, as follows:
(8) not having had a license revoked, or having had a license revoked for any cause other than that in (6), and the time that has elapsed is not less than three years… .”

Authors

Thiti HOMJABOK

Partner
Bangkok

Thiti has an extensive record representing clients in various type of real estate development project, i.e. residential, commercial, and manufacturing aspect. His works include, among others, establishment of housing project, condominium, hotel, commercial, factory, industrial estate and REIT. His works also expand to the field of compliance aspect relating to real estate development such as property tax, factory licenses, environmental compliance for real estate development project for residential, commercial and manufacturing site. He has been representing two of the largest retail & wholesale operators in Thailand for its aggressive expansion across country. Moreover, his expertise also includes new business of data center development, energy plant, commercial ports and land acquisition as well.

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Komkrich OONATORNRATANAKUL

Associate
Bangkok

Komkrich has been assisting in various real estate development project including one of the largest whole sell player in the country in expanding its store and presence in Thailand all across the country. With his educational background includes various types of legal knowledge concerning international commercial law, Komkrich has been trusted to assist in the aspect of legal compliance specifically licenses and approvals a mega project initiated by one of the largest energy company in Thailand in developing a Southern region of Thailand to locate several businesses in the specified areas including Electronic Vehicle, natural gas pipeline and electricity generating facility. His experience also includes the legal compliance for factory, land allocation for residential purpose (Housing Project).

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