Police Colonel Direk Plangdee said the protest was peaceful and there were no arrests, adding that Surayud was not home at that time.
Last week, prosecutors agreed that Surayud was not the rightful owner of the plot of land, which he will have to return to the state.
"This area was meant to be allocated to the landless. What is this if not unlawful privilege?"
Jatuporn Phromphan, UDD protest leader
Tanapit Moonprauk, a spokesman for the attorney-general's office, said prosecutors would not press charges against Surayud because he had not intended to break the law.
Surayud sits on the Privy Council and the UDD says members of this body orchestrated the bloodless military coup that ousted Thaksin in September 2006.
A former army chief, Surayud became interim prime minister one month later and served until elections in December 2007.
Since the coup, supporters and opponents of Thaksin have repeatedly taken to the streets to spar over who has the right to rule the country, sometimes sparking violence.
The UDD, which draws its support largely from the rural poor who helped Thaksin twice win election landslides, accuse Surayud and Thailand's powerful elite of hypocrisy.
"We want to tell the international community that a double standard exists in the country," Jatuporn Phromphan, a protest leader, told the rally.
He said Surayud was able to escape charges "while ordinary people have been sued by the state for trespassing and encroaching on the forest reserve".
"This area was meant to be allocated to the landless. What is this if not unlawful privilege?" added Jatuporn.
The protest by the so-called "red shirts" is seen as a prelude to a bid later this month to bring down the embattled coalition government of Abhisit Vejjajiva, the Thai prime minister.
The UDD has planned a prolonged anti-government rally while the pro-Thaksin Puea Thai party prepares for a censure debate, probably in February, to exploit cracks in Abhisit's coalition.
It comes ahead of a court verdict on whether to confiscate $2.3bn of assets belonging to the Shinawatra family.
Thitinan Pongsudhirak, a Thai political scientist, said it was unlikely Monday's demonstration or rallies later this month would succeed in toppling the government.
He said Abhisit's best hope of easing Thailand's polarising five-year political crisis was to engage with the UDD, which he says cannot succeed "without powerful backers".
"Yes, there is much hypocrisy and double standard. They can protest and cause rumblings, but it is unlikely to derail the government," Thitinan said.
"Right now, it appears the government is winning, but they would be making a mistake if they don't address [UDD] grievances, setting the stage for more frustration and anger."