Property Purchase in Thailand

Owning a property in Thailand is a dream for most foreigners who wish to have a second home at the same time a real-estate investment in the Kingdom. Whether it’s a condo in Bangkok, a piece of land in Chiang Mai, a villa in Samui, an apartment in Pattaya or a house in Hua Hin, all are but great investments with promising returns in the future, considering the stable and forward-moving property market in Thailand.

Condo Purchase

Buying a condo in Thailand seems to be the most popular real estate transaction among foreigners in the Kingdom. The popularity of this practice may stem from the fact that condominiums are the only properties that foreigners can own free hold or that which can be registered in their own names. However, the purchase of condo in Thailand is never a straightforward procedure as it’s also subject to some limitations as provided by the Condominium Act of Thailand. Foreign buyers have to be aware of the following rules when purchasing a condo in Thailand:

1. Foreign Ownership Quota - In a certain condo development, foreigners are allowed to own 49% of the total units only. The majority of ownership should be with the locals. Developers can lease the units to foreigners who don’t make the foreign ownership quota. A provision can be included in the contract allowing the foreigner to purchase the unit should a foreign ownership slot is finally available.

2. Condo Purchase Finance – Funds to be used to finance condo purchase or any property purchase in Thailand by a foreigner should come from abroad. A Foreign Exchange Transaction Form (FET) which bears the record of the offshore funds transfer is required by the Land Office during the actual property transfer. The foreigner can open a savings account in Thailand to facilitate the wire transfer of the funds or alternatively, he can avail the escrow service assistance provided by some law firms.
   

In the case of a foreigner working and generating an income in Thailand, he may be able to utilize his earnings in the Kingdom to finance his condo purchase provided that he can provide a proof that he is legally working in Thailand (must show a valid visa and a work permit) and that he has been paying the required taxes (simplified income taxes).

3. Use of a standard contract prescribed by the Land Office - The Land Office has started to issue standard contract to Property Developers and sellers in their attempt to further protect the rights of the buyers. However, the contract is too simple and doesn’t contain the necessary and standard provisions that will fully safeguard the interests of the buyer. Fortunately, the Land Office acknowledges contracts drafted by registered law firms or a licensed attorney.
   

Land Purchase

Foreigners are not allowed to own land in Thailand. But, there are certain avenues provided by Thai laws in which a foreigner may be able to acquire land in Thailand.

1. Setting Up a Thai Company – A foreigner can register a Thai company and use this company to purchase land. The company should have existing, genuine Thai shareholders who own the majority of the company shares. Utilizing nominee shareholders is against the law and can jeopardize your business interests in Thailand. In fact, the Land Office, in its effort to curb this prevailing practice has started to require Thai shareholders to present proof of their financial capacity before the transfer of the land into their company. It’s also important to remember that the registered capital of the company should be proportionate to the value of the land to be purchased so as not to raise doubts in the Land Office about the authenticity and capability of your company.
   

2. Marriage to a Thai National – This doesn’t mean that as a foreigner who is married to a Thai, you can already purchase land in your name. The land to be purchased will remain in your Thai spouse’s name. The Land Office will ask you to sign a declaration stating that the funds used for the purchase of property was given to your wife as a gift. This way the land eventually becomes her personal property. To protect your interest in the property in case unpleasant things happen down the road in your marriage, an agreement can be entered into between you and your wife. You would need to consult a reputable lawyer to draft this agreement for you.
   

3. Leasehold agreements – A foreigner may have a 100% interests in the land by entering into a lease agreement with the land lord. The initial lease term is 30 years but a provision can be added in the agreement to allow the foreigner in leasing the land for another 30 years should the initial lease term has been exhausted.
   

4. Investment – A foreigner who invests THB 40 million in Thailand for 5 years is allowed to purchase land in Thailand up to 1 rai for residential purposes.
   

5. Habitation Rights (Usufruct and Superficies) – The right to usufruct can be conferred to a foreign beneficiary called a ‘usufructuary’ by the land owner. The foreigner then would have the right to occupy the land and use it. The right to usufruct ceases upon the demise of the usufructuary and unfortunately, this right cannot be transferred to an heir. The right to superficies, on the other hand, allows the foreign beneficiary to enjoy and make use of everything including structures in the land. This right is transferable as opposed to the usufruct.
   

Purchasing a Property in Thailand: Standard Conveyancing Procedures

The Thai Real Estate market is unregulated so the foreigner who is contemplating on buying a property in Thailand is advised to follow the following procedures in order to protect his real estate investments in the Kingdom.

Due Diligence and Title Search

This procedure has to be observed when purchasing a property in Thailand to verify the authenticity of the seller/owner of the property. If he is indeed a reliable or trusted guy as he claims to be. You wouldn’t want to be embroiled in a legal battle later on as the property you purchased is in fact owned by another person or that the seller ran away with your money. Corollary to this, a Title Search on the property should be conducted to verify the Title Deed and to check for any encumbrances in the property. Various liens such as back taxes and other rules and regulations have to be taken into consideration before decision is made. The deed has to be checked prior to the attestation of the Sale and Purchase Agreement or any payment made. Fake Title Deeds proliferate in the market so the necessity to verify with the Land Office the title deed of the property to be purchased.

Review of Contract or the Deed of Sale

It is advised that you contact a reputable lawyer specializing in Thai property laws to assist you with the procedure especially when it comes to interpreting contracts. A lawyer will be able to explain to you the terms and conditions specified in the Sale and Purchase Agreement. Since, most of the times, all these fancy legal terms are very confusing and really hard to understand. As a norm, the seller usually is the party who drafts the Agreement and it is therefore expected that they would draft the Agreement that serves their benefits. Consulting a lawyer for a legal opinion would be a big help so that you know all the implications and impacts of the terms and conditions of the Agreement, once it has been attested, and in most cases the lawyer would represent their client, which herein is the purchaser, in the negotiation with the seller if they feel that their client has been taken advantage of, and most likely, with an anticipation of reaching a mutual benefit for both parties.

Registration of Property Transfer at the Land Office

As it has been publicly aware of and according to the relevant Laws and Regulations of the Kingdom of Thailand, the conveyance of the ownership over a property can’t be accomplished by a mere handover of the title deed from the seller to the purchaser. The achievement of the conveyance thereof shall be fulfilled once both parties had registered the transfer of ownership at the competent Land Department. Dealing with the registration of the transfer of ownership at the land department personally can be very exhausting and annoying since it takes time, usually almost a day, and there are so many formalities to be followed. To simplify this matter, many purchasers choose to retain a legal company to take care of it as they are very acquainted with all procedures involved. By authorizing the lawyer via POA, the authorized lawyer shall act on the purchaser’s behalf at the Land Department to make sure that the transfer of ownership is done properly.

Three major property related transactions, required to be registered at the Land Department, are, as follows:

1. Sale and Purchase of Property:

The Sale and Purchase of Property is accomplished once the property has been transferred from the seller to the purchaser through a formal registration process at a competent Land Department. This rule applies to all kinds of property; land, house, condominium unit, etc. If not duly registered with the Land Department, all transactions will be nullified and legality of ownership will not be accorded to the buyer despite fulfilling the rest of the conveyancing procedures.

2. Lease of Property:

According to the relevant laws and regulations, the Lease of Property that is longer than a period of 3 years must be registered at the competent Land Department; otherwise, the validity of such unregistered Lease shall be effective for only 3 years. The maximum period of a Lease that can be registered for one time is 30 years. However, after it has reached the thirtieth year, the lease can be renewed for another 30 years and the Lease registration must be, once again, executed at the Land Department.

3. Mortgage of Property:

To secure a loan, the creditor usually asks the debtor to submit a title deed of a property, usually a piece of land, a house or a condominium unit, as a security for that loan. We call it a mortgage. The consequence when a property is under a mortgage is that when the debtor (the mortgager) is unable or refuses to pay back the debt, the secured creditor (the mortgagee) is entitled to sell the mortgaged property and collect the proceeds from the sale of that property, only that which is equivalent to the debt and associated interest, as the reimbursement for the loan. However, in order for the mortgagee to be able to do so, the mortgage must be registered with the land officers at the Land Department. Once the mortgage had been registered, even though the mortgage might later be sold or transferred to the third party; the mortgagee will remain entitled to claim for the reimbursement from that mortgage.

Apart from the said transactions, there are many other transactions that need to be registered at the land department such as: Usufruct, Right of Habitation, Servitude, etc.

Our legal counselors and attorneys who are highly experienced in this area can guide and assist you along the process of dealing with all complications in property related transactions. Please feel free to contact us for additional information or assistance you may require. Our legal consultation is free-of-charge and we are more than happy to assist you.