Short Answer
Not necessarily.
A clause saying the tenant “may renew,” has a “right to renew,” or receives first priority can sound stronger than it really is if the parties still have to negotiate a material term such as rent.
Thai Supreme Court decisions have treated renewal wording that leaves rent entirely to later agreement as an opportunity to negotiate rather than an enforceable new lease.
The more important continued occupation is, the less the tenant should rely on the label “option.”
A useful renewal clause should answer:
who can exercise → by when → for what term → at what rent or under what objective formula → what happens if the parties disagree
Why This Matters
Tenants often invest heavily in fit-out, machinery or location-specific infrastructure because they expect to remain beyond the first term.
A lease may say:
“The tenant has an option to renew for a further term, with rent to be mutually agreed.”
Commercially that sounds like site security. Legally, the most important economic term may still be unresolved. Even an uplift cap or good-faith negotiation clause can leave uncertainty without an objective way to fix the actual rent.
Typical Scenario
A business signs a five-year lease and invests heavily in the premises.
The lease says the tenant can renew for another five years if it gives notice, but the renewal rent must be agreed with the landlord.
Near expiry, the landlord proposes a much higher rent.
The tenant asks:
“We exercised the option on time. Can the landlord still refuse unless we accept its price?”
That depends on what the clause actually promises.
Practical Analysis
01Distinguish an option from a right to negotiate.
The title of the clause is not decisive.
If essential renewal terms are fixed or objectively ascertainable, the tenant is in a stronger position. If rent still depends on fresh agreement, the clause may amount only to an opportunity or preference to negotiate.
02Thai case law is cautious where rent remains open.
Supreme Court Judgments Nos. 661–662/2511 and 294/2515 considered lease clauses allowing further occupation while leaving rent to later agreement.
The Court treated them as opportunities to renew once rent was agreed, rather than binding renewals at an unspecified rent.
Judgment No. 569/2525 similarly treated wording requiring a new lease with rent and duration still to be agreed as not amounting to a binding promise to lease.
03Section 366 reinforces the importance of unresolved essential terms.
Civil and Commercial Code section 366 provides that where an essential matter remains unsettled, the parties may not yet have a concluded contract in cases of doubt.
A renewal mechanism that postpones the core economic bargain therefore creates avoidable uncertainty.
04A cap is useful but may not be enough.
Suppose the clause says rent will be negotiated in good faith but cannot increase by more than a stated percentage.
That narrows the range, but it may still not identify the exact rent if the parties disagree.
A formula, index, fixed uplift or expert determination gives more certainty.
05Exercise mechanics still matter.
Even a well-drafted option can fail if the tenant misses the notice deadline or does not comply with conditions attached to renewal.
The clause should specify notice, deadline, delivery method and any conditions such as absence of material default.
06Registration must be considered separately.
For immovable property, section 538 requires registration for a lease to be enforceable beyond three years.
A contractual renewal promise and a registered renewed lease are not automatically the same legal step.
What We Usually Look At
We review the wording of the renewal right, notice deadline, further term, rent formula, service or common-area charges, default conditions, dispute-resolution mechanism, registration requirements, tenant investment and the commercial consequence if renewal fails.
Common Traps
Typical mistakes are calling a negotiation clause an “option,” relying on a rent cap without a final-setting mechanism, exercising late, assuming good-faith wording guarantees a price and budgeting long-term investment as though the additional term were already secured.
Practical Next Step
Score the renewal clause against five questions:
exercise right fixed? → term fixed? → rent objectively determinable? → dispute mechanism? → registration path?
If rent still ends with “to be mutually agreed,” treat the additional term as commercially uncertain until the mechanism is improved.
Legal Sources
- Civil and Commercial Code, sections 366 and 538, and section 540 where the maximum term of an immovable-property lease is relevant.
- Supreme Court Judgments Nos. 661–662/2511, on renewal wording leaving rent to future agreement.
- Supreme Court Judgment No. 294/2515, where a further lease did not arise because the parties could not agree the future rent.
- Supreme Court Judgment No. 569/2525, on wording requiring a new lease where rent and duration remained for future agreement.
General legal information only. Please seek advice on your specific facts. Laws and regulatory practice may change.