Buying Property in Thailand – Important Information for the Foreign Buyer
Can foreigners own property in Thailand?
Answer – Current Thai law does not allow Foreigners to own land in Thailand but they can own a building on the land or they can own a condominium unit. Only Thai citizens or Thai companies can own land freehold.
Freehold: If you own the property freehold, it means that you own the building and the land it stands on outright, in perpetuity. It is your name on the title deed or chanote as “freeholder”, owning the “title absolute”.
Leasehold: Leasehold means that you have a lease from the freeholder (sometimes called the landlord) to use the land or property for a number of years (up to 30 years).
If a foreigner is interested in purchasing property in Thailand, they have 3 options: either:
1. Leasehold or setting up a Thai limited company to own the property freehold.
Leasing land in Thailand
Leasehold – For stand-alone detached homes, the foreigner will lease the land and is able to transfer the house to their name. A foreigner can legally lease land for up to 30 years. According to Thai law, Section 540 of the Civil and Commercial Code states that the maximum term for an unmovable property lease is 30 years. Any lease agreement for longer than three years must be registered with the Provincial Land Department to be valid.
According to Section 540, at the end of the 30-year term, the lease expires automatically and both parties must register a new 30-year lease. The practice in Thailand is to offer two additional 30 year leases for a total of 90 years through a separate contract often referred to as the “Addendum” or “Memorandum” contract, whereby the Lessor agrees to extend the contract for two additional terms of 30 years each, In this extra contract, there are often other lease rights added which is not included in Section 540 of the Civil and Commercial Code.
In addition to promising to provide the renewal contracts for a total of 90 years, other clauses can include the right to transfer the lease to freehold title if the Thai law changes, and the promise to assign and transfer the lease agreement to heirs if either party dies during the term of the contract. These additional clauses are considered personal contractual promises between the two parties in addition to the normal contract laws for leases covered in Sections 540 and 569 of the Civil and Commercial Code.
Attorneys have highlighted some of the risks to the Lessee in taking possession of the property through the long-term lease method:
1) Death of the Lessor—the possibility that the heirs will not renew the next additional term of the lease
2) The bankruptcy of the Company—in a lease with a company, the risk the property is transferred to the Bankruptcy Court into receivership
3) Death of the Lessee—the possibility the Lessor will not assign and renew the contract with the heirs of the Lessee
4) Sale or transfer of the underlying property- risk the new owner will not renew the additional lease.
Freehold ownership of land through a Thai company
The other alternative is to set up a Thai Limited Company and own land freehold. If you decide this is the best option for you, be aware that as a foreigner, you cannot hold half or more than half of the company’s shares. Therefore the company has to be at least 51% owned by Thai citizens. They can then choose to sign over their company rights to you. Note, that the Thai Immigration office is aware of this kind of procedures and will certainly monitor your business. With the recent restrictions on Thai nominees, the use of taking possession of the property through a Thai company has become more difficult and expensive. A long-term lease in many cases is the preferred method.
2. Condominiums or Apartment units can be purchased freehold by Foreigners (with restrictions – see below)
Buying a condo or apartment as a foreigner
Due to the legal restrictions of land ownership mentioned above, most foreigners choose to simply buy a condominium or apartment in Thailand. However, a foreigner can only purchase a condominium in his/her own name if the % amount for foreign ownership (49%) is not already full.
3. Buying the landed property freehold in your Thai partner’s name (refer to Property Rights between the Foreigner and a Thai)
You could decide to put everything in your Thai partner name and finance 100% of the purchase. This makes it a lot easier but beware that this way could cause you to become “homeless” sometime in the future. You must have full trust in your Thai partner to make this decision. However, even if you do have full (or 99%) trust, there is a system in place that offers good protection to the foreigner as long as you follow the rules of the agreement. This agreement is called a Usufruct agreement or in Thai language “Sidhi-kep-kin”. The usufruct agreement needs to be registered with the land department at the time of the property transfer into your Thai partner’s name. Notice of a usufruct agreement between 2 people is then indicated on the back of the title deed (see pic below). This agreement stops the property being mortgaged, sold or transferred to another owner without permission from both signatories on the Usufruct agreement.
For more information about a Usufruct Agreement please refer to the link below:
Should You Seek CERTIFIED Legal Advice? (ABSOLUTELY!!)
If you are buying property in Thailand then consider doing due diligence on the property and the developer before you sign any agreement. Land fraud and property scams in Thailand could mean the end to your investment so it is always best to obtain the services of a lawyer to check the property first.
The following has to be checked during the due diligence study. Your lawyer would have a full list of what it is that is going to be checked. This is a brief list of the important issues which need to be checked:
Check the Title Deed
This is important. The lawyer needs to check that the title deed on the property does not have a mortgage bond over it and that the seller of the property is the owner of the property. The title deed also needs to be checked to see if it has been used as collateral. This is normally one way of not registering a mortgage bond over the property. There is also the possibility that the title deed might have been stolen.
If the property has been bought off-plan the developer needs to be checked, zoning of the property. Also, the lawyer needs to check that all government regulations have been followed by the developer. This includes the allotment of parking lots, zoning laws, environmental impact assessment, permitting for the build and also that all the plans have been approved by the government. What also needs to be checked are usufructs, superficies and other liens against the property.
The court records need to be checked to see if the owner or developer is in the middle of any litigation or if there are any huge debts which the owner might be battling in the courts. Also, check if there is any litigation against the contractor building the development.
The contract also needs to be checked. In Thailand, any promotional material, letters, and emails which you might have between you and developer need to be attached to the contract. In the event of litigation, these can be used as evidence in the case. The contract needs to have all the usual timelines, quality of materials, dimensions of the property – internal and external and also penalties for late completion of the project and an arbitration procedure.
Law Firms in Hua Hin
FYI – Here are website links to some Law Firms in Hua Hin. Please note, there are other law firms so please search on the internet.
Website: Chavalit & Partners
Website: Hua Hin Legal Services
Website: Kraiwit & Partner
Property Taxes – Go to this link for more information from the Home2go Team. Property Taxes in Thailand (current tax rates below as posted on August 2018)
If in doubt, seek legitimate advice from a certified property lawyer!
Carrying out due diligence before you sign a purchase order makes sense! … from the Home2go Team. 🙂
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