Buyers Guide

Below is a general guide as to different type of property purchase (it is strongly recommended that you consult a professional for any property purpose):

Land Purchase:
Thai law stipulates that foreigners may not personally own land in Thailand. That is to say in their name. However, they have the right of freehold ownership on their own name of building(s) only. If a foreigner wishes to purchase land to build a property there are 2 options:
1. The land is purchase on 30 year leasehold, with an option to extend the lease for further 2 of the 30 year periods (90 year in total). Possession of the fact the property occupies of the land. The lessor cannot seize the property upon expiration of the lease, as the property is separate from the land.
2. If a foreigner is going to operate a business in Thailand then he may purchase the freehold of the land through his Limited Company. The land will be owned by the company, not the individual. The foreigner then exercises complete control and ownership.
Even recent amendments that allow a Thai spouse (male or female) of a foreigner to buy land require proof that the money used in the purchase of freehold land is a legally solely theirs with no foreigner claim to it.
NOTE: It is important that buyers are aware of the different grades of land title in Thailand and they should make sure that the land has an adequate title for the intended purpose.


There are 6 types of land title, below are 3 most common examples:

1. Nor. Sor. 3
Is the lowest land title which allows for legally building a property an instrument certifying the use of land issued by the government to the proprietor of land not a possessor title, i.e. is confirmed by law that a person holding Nor Sor 3 has the legal right the land title can be used as a legal document or to use the benefit of the land as an owner. Nor Sor 3 is a floating map with no parcel points. It's issued for a specific plot and is not connected to other land plots. This causes problems in verifying the land area. Any legal acts must be publicized for 30 days.

2. Nor. Sor. 3 Gor.
Is a legal land title with the same legal basis as Nor. Sor. 3. The difference being that Nor. Sor. 3 has parcel points on the map, and is set using an aerial survey to set the points and the land area. It is possible to verify a nearby land area. It always uses the same scale of 1: 5000. There is no need to publicize any legal acts, and it is possible to partition (divide) the land into smaller plots.

3. Chanote-Land Title Deed (Nor. Sor. 4 Jor)
Is a certificate for ownership of land. A person having their name shown on the deed has the legal right to the land, and can use it as evidence to confirm the right to government authorities. The title deed has been issued by using GPS to set the area and boundaries of the land, which is a very accurate method. Any legal acts can be done immediately, as per the right of ownership. Land partition of more than 9 plots must be carried out according to the Land Allotment Law, Section 286. This is the most secure type of land title.

House Purchase:
If however, what you want is a house, the fact that you can't acquire freehold land should not be deterrent. You may own building freehold and together with constructed (typically a 30 year lease with 2 prepaid 30 year renewals) and a purchase option for the land (that could be exercised in the event the laws of foreigner ownership, to be a Thai person or legal entity) you will have effective ownership, yet still remain within the laws of Thailand. Again, this option is best arranged through the formation of Limited Company where the ownership of the land is desired.

Development Purchase:
Foreigner may own assets in Thailand such as a development constructed on the land. The owners of the development usually set up a legal structure and mechanism which enables the purchase of the property to own property. Below is an example of how this is achieved:

Corporate Ownership of the property:
Thai corporate structures are very similar to British common law. Thai law allows for PLC;s LLC; Ltd partnerships and other types of corporate entities. Once formed they to as "Juristic preson" in Thai jargon (legal entities). A Juristic person in Thailand who owns land within a legal structure also held by a Thai majority are considered in terms of property ownership, to be a Thai person and therefore, may own property in Thailand. Note that equitable ownership which Thai law addresses, does  not necessarily equate to actual control of Juristic person. The most popular from of corporate land ownership is the Limited Liability Company (LLC).

Control of the Limited Liability Company:
Thai law allows the issuing of classified or two tired stocks. Hence shares of the LLC may be issued as " Ordinary Share" where the of one share is entitles to one vote, and Preferred Share where a shareholder must have multiple in order to obtain one vote. The majority shares may be issued as "Preferred" and foreigner minority shares as "Ordinary". This allows the foreign minority shareholders to hold fewer numbers of shares, but in fact have control of the company by voting rights.

Typical Structure:
The land of the development is owned by XYZ Phuket Co.Ltd, which in turn is owned XYZ Phuket Holdings Co.Ltd (XYZCHL). The partner in the development holds the Reference Share in XYZCHL and the Ordinary share are owned by XYZ Owners Ltd ("OWNERS"). Each purchaser at XYZ Co,Ltd receives one equal pro rate of share of the common stock of OWNERS.

Ownership/Lease:
On completion of the agreed purchase amount each purchaser will own the Villa plus an equal share in Owners and lease.

Condominium Purchase:
Purchasing a condominium is the easiest, simple transaction. The law allow foreigner to hold 49% of the units in a condominium freehold which in certain condominium blocks a full 100% of the units can be foreigners on a freehold basis. One important requirement in order to qualify for freehold status is that the foreigner currency funds for the purchase have been remitted from abroad and correctly recorded as such by a Thai bank. The foreign freehold is definitely the preferred structure for purchase of condominium apartment.
Foreigners have the right to ownership of buildings only, where land is not included. Legal acts are unlimited. A suggestion for foreigners are to lease the land for 30 year with an option to an extension of the lease, then purchase ownership of the house built on the land. Certainly of possession of the land house is assured, by being the owner of the house. The ownership of the land shall be leased out. If arranged as stated above, then the house will be separate from the land, and will not a component part under the Civil Law. Ownership of buildings can be confirmed, and the lessor cannot seize the house upon expiration of the lease.

Payment method for your property
If you are purchasing property in Thailand and you want to pay in Thai Baht ensure that you funds are transferred into Thailand in foreign currency and converted to Thai Baht here. The reason for this is that the receiving bank will issue a Foreign Exchange Transaction Form confirming the transaction. The relevance of the Foreign Exchange Transaction Form is that it is one of the documents you will need in the future if you wish to repatriate funds without incurring tax penalties. Also, please be aware that Banks will only issue Foreigner Exchange Transaction Form for individual inward transfers exceeding 20,000 US$. Repatriation of investment funds and repayment of overseas borrowing in foreign currency can be remitted freely upon submission of supporting evidence. One of these documents would be the Foreign Exchange Transaction form mentioned above, or in respect of a foreign currency loan, the loan contract. Remittance of funds without proper documentation could be regarded as income and become liable for tax.

Other cost involves in purchasing a property?
Property tax - Does not apply to property being used for private residential purposes.
Costs only apply upon transfer of ownership. These fall into four categories:
· Transfer fees 2%
· Stamp duty  0.5%
· Business tax 3.3%
· Income tax (the Thai equivalent to capital gains tax - a variable rate).
Most of the fees are calculated relative to the government's "tax assessment value of the property" and this value is well below market value.
The precise methods of calculation are complex, but as a rough guide for residential sales, expect the total fees and taxes to work out to be approximately 2-3% of the property market value-and usually these costs are split between the buyer and seller.

What is buying off-plan?
Buying off the plan means buying a property before it has been built. Most large apartment and villa developments are sold this way. Off the plan buying lets you purchase a property for tomorrow at today's prices. In a rising market, this can result in large capital gains before you even move in.

Why has buying off the plan become so popular?
This is for the developer to ensure that they build according to the demand thus prevent the oversupply and unoccupied property. They can also use a combination of deposit funds, project loan and finance backing to commence construction.

What are the risks and benefits for a buyer?
Risks:
the buyer is expected to pay a large proportion of the agreed purchase price before receiving the legal transfer of the property
A developer suffer from financial problem and caused the development to become unsuccessful
Both developer and buyer may face a substantial lost if neither are properly insured during the construction phase in the event of serious or complete damage to the property
Construction problem may delay delivery
Buyer is buying an unseen site

Benefits
Long payment schedule may give buyer time to seek funds
Buyer may have greater say in finishes, floor plan and interior style
For investment purposes, buyer may have time during the construction phase to market the property for a re-sale or rental
Buyer is buying the property for tomorrow at today’s price, this can result in large capital gains in a rising market
New home offer lower maintenance cost

How to avoid the risks?
Avoid signing a contract without consulting with a professional lawyer/adviser
Conduct a full title search on the property and any necessary due diligence
Make sure you obtain a professional advice on the terms of contract and check out the insurance policy and terms
Obtain a professional advice on credit/financial check of the developer
Buyer should look for protection/compensation in the case of unreasonable delay in delivering the final product

 Land measurements
Sq Wah Sq ft Sq m Ngan
1 43 4 -
100 4305 400 1
400 17,222 1,600 4
800 34,444 3,200 8
1,200 51,667 4,800 12
1.600 68,888 6,400 16

 

1 RAI = 1,600 Sqm = 400 SqWah
2.5 RAIS = 1 ACRE
 
Home2Thailand Exclusive Real Estate
Tel +66 (0) 85063 0033
Thailand  +46 (0) 8 5592 4545 Sweden
Web www.home2thailand.com  Email info@home2thailand.com