Buying a Property

Any nationality may buy property as condominium in their own name and with full ownership. Investment in a condominium is governed by the Condominium Law B.E. 2522. There are no nationality restrictions. Foreign nationals have the same rights as Thai nationals. Thus, a foreigner can buy a freehold apartment provided three conditions are met: the apartment must be part of a condominium. No more than 49% of the living space in the residence must be owned by foreigners. All funds must be transferred in foreign currency and from abroad.

Prior to 1992, the Condominium Law did not allow a foreigner to buy property as an apartment. It was only available to Thai nationals. It was not until the Condominium Act was amended in 1992 that a foreigner could own a freehold apartment. However, buy property as a condominium by foreigners is limited to a quota of foreigners. According to the law, the land on which the condominium is built must be majority owned by Thais, with the total area of the title deeds issued to foreigners not exceeding 49% of the size of the building. This is the “foreigner quota”. Thus, there is a limit to foreign ownership of the condominium. Thus, the remaining 51% of the condominium property must be owned by Thai individuals or companies. Foreign persons can only have the right to rent the 51% but will never be owners.

Among the requirements to become a condominium owner, financing is a key issue. It is not possible to get a loan in Thailand. In principle, it is very difficult to obtain a loan from Thai banks when the applicant is a foreigner. The Condominium Act requires that the financing be transferred in foreign currency and from abroad.

As a buyer, it is essential to pay attention to each clause of the sale and buy property contract. It is therefore recommended that you hire a lawyer to prepare the terms and conditions of the sales contract and protect your rights as a buyer.

A due-diligence is a set of verifications that an investor carries out because of a transaction. In the case of buy property, it is necessary to verify the real existence of the property. Its surface area, the rights granted to it, any restrictions, the building permit and, above all, the integrity of the title deed. The title deed is also called “Chanote”. It is registered with the Land Department. It is essential to make sure that you are buying the property from the real owner of the apartment, i.e. the person whose name is on the title deed. Otherwise, the property will remain the property of the person listed on the Chanote. Due diligence is an essential step in order to have certainty about your investment and to secure possible risks.

To summarize the due diligence, it allows to make a documentary inventory of fixtures, to realize a thorough visit of the premises with a detailed photo report, a technical study on the possible defects and nonconformities, a thermal and environmental study. Administrative research is also possible to validate the feasibility of the project and the other urban planning rules.

The due diligence is an important step to secure the purchase of a property. It is generally necessary to mandate lawyers to perform the due diligence on behalf of the buyer.

Many Thai and foreign investors buy property units in condominium projects for investment and housing purposes. However, some buyers encounter problems with condominium developers who have not completed their projects as promised due to lack of financial support, contractor problems or other external financial problems. In some cases, the developer is not fulfilling its obligations under the sales contract.

A sales contract, also known as a sale and purchase agreement (SPA), is a legally binding contract that sets out the terms and conditions agreed upon between the buyer and seller of a property. It is the primary legal document in any sales process. In essence, it defines the elements of the agreement, includes several important protections for all parties involved and provides the legal framework for the completion of the sale. The SPA is therefore of paramount importance to both sellers and buyers.

The developer usually proposes the contents, which may sometimes include clauses limiting or excluding any liability in the construction of the condominium. In Thailand, the Ministry of the Interior specifies a standard format for the contract of sale and buy property as a condominium unit, as required by Section 6/2 of the Condominium Act, which developers must use when selling a condominium unit.

The section states that “every contract of sale and purchase between an owner of land or buildings under section 6 and the purchaser of a unit shall be in such form as the Minister may prescribe. Any part of the contract of sale and purchase of the unit under subsection 1 that does not conform to the form prescribed by the minister and is not in favor of the purchaser is void.”

Any developer who does not use the standard contract specified by the Ministry of Home Affairs, and thus violates Section 6/2, is subject to a fine of up to 100,000 baht.

The standard contract covers the following essential conditions to be included in the sales contract to protect the buyer:

Any provision in the contract that is contrary to the developer’s obligations under the standard contract shall be deemed unwritten. Particular care should be taken in drafting the contract of sale to ensure that the purchaser’s rights are properly protected.

All property transfers and leases over 3 years must be registered with the Land Department. If a property is purchased prior to completion, the transfer of ownership occurs after the property is completed. If the property has already been purchased, the transfer takes place only after the installment payments have been made according to the signed contract. The balance of the purchase price is usually paid at the time of transfer to the land department.

All real estate rights must be registered with the land department. Ownership of land or real estate and other forms of land rights, such as leases of more than three years, mortgages, easement rights, habitation, superficies and usufruct, must be registered with the land department of the region in which the land is located. Once the registration is completed, the information regarding the transfer of ownership of the land or property will be registered with the relevant land department. The registration of the new owner is accompanied by the payment of the taxes related to the transfer of ownership.

Sometimes circumstances prevent you from transferring property in person. In this case, you can appoint your attorney to represent you in the transaction by means of a formal power of attorney. However, this document follows stricter rules than the more common general power of attorney, as the former is explicitly used to transfer property with land department officials. For the registration of rights or transfer of ownership of real estate by someone other than the owner of the land, provincial and local land department offices in Thailand only accept the “power of attorney” (PoA) in Thai characters, the official standard of the land department (the tor dor 21). The land offices do not accept any other form of power of attorney. Therefore, if you cannot come to Thailand to register your property and transfer it, you must give an official power of attorney to a law firm, for example.

Real estate investment can be made by purchasing an apartment or buy property or land. However, there are different rules regarding real estate ownership depending on the nature of the property invested. Any foreigner can freely buy a condominium. On the other hand, foreigners are not allowed to own land or property, except in exceptional cases.

In Thailand, it is possible to acquire real estate ownership for foreigners in apartment buildings with the “Condominium” license and the “Foreign Quota“.

In the case of land, houses or apartment buildings that do not have a condominium license, a foreigner cannot hold the title in his or her name. It is not possible to register a foreigner’s name as a landowner with the Land Department. However, foreigners may have other rights to the property. They may have a right of use in the form of a very long lease of 30 years renewable, registered with the Land Department.

In principle, a foreigner cannot fully own land in Thailand. Only Thai nationals can hold a title of “change” to land. However, there are exceptions for some foreign nationals with necessary investment amounts and rather restrictive procedures.

A first possibility for the latter to own the land is to register on the Chanote the name of his Thai spouse. In this case, the foreigner gives up any right of ownership on the land. He will not be able to own the land in case of divorce or death of his spouse. He will have to sell the land within one year.

A second possibility is the creation or acquisition of a Thai limited liability company allowing the acquisition of the land by a Thai legal person. However, it should be noted that the foreign shareholder must be a minority shareholder and can only hold a maximum of 49% of the share capital. A foreigner can legally be a minority shareholder and a director of a company that can own the land. While this may be a solution for people with real economic activity, the creation of an ad hoc company to buy land (with fictitious Thai shareholders or “nominees”) is an officially illegal practice.

A third possibility, which does not allow ownership but rather a right to use a property, is the “leasehold” contract, also known as a lease agreement.
It is therefore possible for a foreigner to lease land for 30 years with a right registered with the Land Department (name of the lessee written on the back of the title deed) and which cannot be cancelled without the agreement of both parties. This right is legally renewable. Other contractual rights may be entered into between the landowner and the tenant, allowing, among other things, the resale or transfer of the rights to the lease and its renewals.

In the case of buy property as a house, a foreigner may own the walls through the building permit if it is issued in his name, which constitutes an additional guarantee. A building can be the subject of a deed of sale registered with the land department.

The restrictions on the property rights of foreigners in Thailand are only on the land, not on the buildings that might be built on that land. Thus, another option for foreigners is to own the building itself but lease the land on which it sits from the owner. Since land ownership restrictions do not apply to building ownership, some foreigners enter into a 30-year lease on the land and then build their property on that land. Thus, a foreigner wishing to build a house in Thailand may lease the land under a long-term lease and, on the other hand, own the house in his or her name.

Buildings, with the exception of condominiums, are not titled. The procedure for obtaining ownership of a house built on a lot is as follows:

The seller of a house must have a building permit issued by the local government called Or Bor Tor. The building permit is proof that he owns the house and has received permission to build it. If the seller is unable to provide a building permit, care should be taken as this could mean that the house was built illegally or in violation of local regulations. In the event of non-compliance, the authorities may stop the work or request a rectification to ensure that the construction complies with the building permit. The authorities also have the power to order the demolition of any building built illegally.

Buy property is not tax free. Once the property is registered with the Land Department, it is also necessary to pay the fees associated with the buy property. Likewise, the ownership of a property is also an annual charge to be taken into account and imposed by the Revenue Department.

Except for the transfer fee, which is generally shared between the buyer and seller at a rate of 1% each, the payment of all taxes and fees related to the sale of real estate in Thailand is the seller’s responsibility.

The transfer fee is calculated based on the valuation of the property as held by the Land Department. The valuation is always lower than the market valuation.

If a property is owned by a corporation or for less than 5 years by an individual, a specific business tax is levied at a rate of 3.3% of the declared sale price. If an individual has held the property for more than 5 years, a stamp duty of 0.5% is applied. A withholding tax at the rate of 1% of the property’s assessed value by the Land Department is also applied.

Effective January 2020, all land owners, villas and condominiums must pay the new Land and Building Tax. The old tax imposed a majority of the annual rental income at a rate of 12.5%.

In contrast, the new law requires the taxation of the property’s value and not the rental income. The tax rate will differ depending on the property’s use and the official value of the property. The law distinguishes four possible services: agricultural, residential, commercial, or vacant.

When an investor buys a condominium unit, he or she has two options: buying a ready-to-move-in unit or buying off-plan (before or during construction). Buying off-plan is the purchase of a property that is not yet built. The majority of new homes, whether apartments or houses, are sold while they are not built, or while the construction is not completed. This means that you are buying a new property where construction is not yet complete. In some cases, construction will begin several months after the property is purchased.

The first step in the purchase process is the Condominium Quote or Reservation Form issued by the developer. Once received by the purchaser, the reservation must be made for a specific fee. Once the developer has received the reservation fee, an official receipt will be issued to the buyer to guarantee the money. Therefore, the developer will issue the sales contract to the buyer.

Pre-construction property acquisition is the practice of purchasing properties very early in the construction process. Developers sell these potential properties to clients to finance the development itself. On the other hand, clients are banking on the appreciation of the property once the land has been subdivided and all the infrastructure and amenities have been put in place. The advantages of buy property during the pre-construction phase include a relatively low price, selection of a more attractive parcel within the project, or other additional incentives offered by the developer to first-time buyers.

One of the main differences between buying a pre-construction apartment and buying a resale apartment is the financing. In the case of a resale, you can only pay 5% of the purchase price. On the other hand, in the case of a pre-construction condominium, you are often required to pay a down payment of at least 20%. This may seem like a lot of money, but the total payment is divided into several installments. Therefore, developers usually require a 20% deposit to guarantee your commitment to the project. It will be tied up for the duration of construction. Payments are usually made directly to the developer’s bank account and not to a third party escrow account.

A contract of sale for a property under construction must meet specific minimum requirements to minimize your exposure to risk. The following terms and conditions must be included in the contract:

The Consumer Protection Act of 1979 protects the “consumer” against the “trader” under certain conditions and limits and prevents unfair and unjust competition. Consumers, as well as foreigners, have the option of using this strong Thai legislation as a more economical alternative to litigation in the Thai civil courts.

Thai consumer protection legislation applies not only to commercial transactions, but also to residential construction and condominium purchases.

A consumer within the meaning of the Act is any person who purchases or obtains services from a merchant, a person who has been offered or invited by a merchant to purchase goods or obtain services, or a person who properly uses goods or receives assistance from a merchant, even if the person is not the person who pays the fee.

Under consumer protection legislation, a merchant is a seller, manufacturer or importer of goods for sale, a buyer of goods for resale, a person who provides services and a person who engages in advertising.

The consumer rights protected by this law are as follows:

In any business involving the sale of goods or the rendering of services, if the law or tradition requires that the contract for sale or service be in writing, the Board of Contracts has the authority to declare that business to be a “controlled contract business.” This is a business whose business contracts must be controlled.

Therefore, the contract between a professional, and his or her consumers who are part of a controlled business, must meet the following conditions:

As of 2017, residential construction for consumers is a “contract controlled business.” Residential construction contracts must contain specific terms and conditions. The rules also include a list of clauses that cannot be included in the construction contract.

The legal rules regarding real estate investment are numerous and sometimes complex. Any foreigner wishing to buy property in Thailand must be informed of his rights and possibilities. The law strictly regulates the prospects of real estate investment by a foreigner. Themis Partner informs you about the possibilities and your alternatives. Do not hesitate to contact us if you have any questions on this subject.