In Thailand like most other countries, there are a number of potential pitfalls that lay in wait for unsuspecting victims who have not carried out the necessary due diligence or failed to adhere to the local laws. If you are looking to purchase a property in Pattaya or anywhere else in Thailand for that matter you should seek the advice of an independent, qualified lawyer with experience of the local property market and also in dealing with foreigners. Thai land ownership laws are very different to those that many of us will have experienced in the past, so here are just a few of the points clarified.
It is possible for a foreigner to own a condominium in their own name so long as it is “Foreign Quota”. Under Thai law, a minimum of 51% of the internal area, excluding common areas such as corridors, in a condominium must be in Thai ownership. This means that up to 49% of the area can be owned by foreigners in their own name. For example, John Smith can buy a condo and the name shown on the Chanote will be John Smith.
Owning your own unit in a condominium is certainly the most straightforward option for foreigners looking to buy in Thailand. It must be noted that in order to purchase a condominium in foreign quota the money must have been transferred into Thailand from overseas and correctly recorded by the receiving bank in Thailand. They will then issue you with a certificate called a Tor Tor 3 (Sam) that will need to be presented to the Land Office at the time of transfer.
Any purchase of any condominium by a foreign individual comes under the jurisdiction of the Condominium Act B.E. 2535 (1992).
The ownership of land and houses is far more complex than owning a condominium. The laws governing ownership of land and houses comes under the jurisdiction of the Land Code BE 2497 (1954), the Civil and Commercial Code, Land Reform for Agriculture Act BE 2518 (1975) and the regulations that are laid down by the Ministry of the Interior.
The ownership of land by a foreigner in Thailand is strictly forbidden under Thai law although there are several ways in which you can get around this such as; establishing the controlling interest in a Thai company which in turn owns the land, or own a 30-year lease for the land so that it is in your own name. Both of these methods if done correctly comply with all existing Thai laws.
Set up a Thai company
Setting up a Thai Company is one of the most popular methods foreigners use when purchasing a property in Thailand. It involves the formation of Limited Liability Company which in effect is a Thai company. As a foreigner, you can only own 49% of the company but the Articles of Association can be setup in such a way the foreign minority have the controlling interest in the company.
It should be stressed that any company that has more than 40% foreign interest and then goes on to purchase land will automatically be investigated by the Central Land Office in Bangkok. This is something that is stipulated in Section 74 of the Land Code. The reason for this is to ensure that a company has not been established to circumvent foreign ownership of land regulations. Therefore, companies that are set up with the intention of owning property are limited to 39% foreign ownership but the Articles of Association should be set up so the foreigner is sole director and the only officer who can sign legally binding agreements.
Nominee with a mortgage
It is possible to use a Nominee to purchase the property on your behalf and do the necessary registrations at the Land Office. You would then create a mortgage against the property although whether this would stand up in a Thai court is debatable as there has been a precedent set whether the court ruled that it wasn’t a bona fide mortgage. In a similar scenario to that of buying a property in company name, whereby foreigners make up more than 40% of the shareholding, the view was held that the mortgage had been set up purely with the intention of circumventing the foreign ownership of land regulations. This is NOT and advisable option.
Nominee with lease and an option to buy
In this scenario, the land/property is purchased by a Thai Nominee who will then lease the property back to the foreigner on a 30-year lease that should include a 30 plus 30-year option from the Nominee. Any lease that is setup for a period of longer than 3 years would need to be registered in order for it to be recognised. This involves the payment of a registration fee, proof that rent is being paid and the payment of Stamp Duty. Even if the property is sold the lease would still remain. This is a very viable option if the relationship between the lessee and lessor is a strong one.
Tor Tor 3 (Sam)
As mentioned above, a Tor Tor 3 is the certificate that would be issued to you by the bank that received the transfer of funds from overseas. Obviously, this would need to be Thai bank. The Tor Tor 3 should clearly state that the funds were transferred with the sole intention of purchasing property and this document would then need to be submitted to the Land Office when you purchase a condominium in Foreign Quota. Without such a document the transaction cannot be finalised and this may lead to penalties imposed on the buyer by the seller in line with the terms stipulated in the contract.
A Thai lady legally married to a foreigner can now purchase land in her OWN name. Up until 1998, any Thai lady who was married to a foreigner had to forego the right to own land in Thailand although she was allowed to retain land that was acquired prior to the marriage. However, from 1999 onwards, the Thai spouse is required to prove that the money used to purchase the land is solely theirs effectively meaning that no foreigner could lay claim to it. To do this foreign spouse is required to sign a document clearly stating that they have no right to property and it is solely owned by the Thai wife.
What are the different types of title deeds in Thailand?
Title deed (Chanot)
The Chanote is the most common type of land title deed in Pattaya but not necessarily in the rest of Thailand. One copy of this document is retained by the owner of the property or land and another copy is held by the Land Office where the transfer takes place. The Chanote can be easily recognised by the red crest found at the top of the original certificate.
Confirmed certificate of use (ngor sor saam gor)
This type of document is far less common in Pattaya but allows the owner to use the land prior to a title deed being issued. The transfer will be completed at the local Land Office and the document can be recognised by the green crest found at the top of the original document.
Other types of land titles area available but these should be avoided due to the potential complications connected to their authenticity.
How to measure land in Thailand
The land measurements in Thailand are probably not what you are familiar with in the West. Firstly, they are a combination of both metric and imperial measurement systems. All title deeds will be written in Thai and include the Thai land measurement system so we strongly advise that you get this translated into your native tongue. This is again something that we would be happy to assist you with. To try and make things a little easier to follow, below is a comparison between the Thai and Western systems:
1 Wah = 2 Meters.
1 Sq Wah (Talangwah) = 4 Sq Meters
100 Talang Wah = 1 Ngan = 400 Sq Meters
4 Ngan = 1 Rai = 1600 Sqm = 400 Talang Wah
1 Acre = 4047 Sq Meters = Approx 2.53 Rai
1 Hectare = 10,000 Sq Meters = 6.25 Rai
Taxes & Duties
There are a few taxes and duties involved when it comes to the sale/purchase of property in Thailand. Firstly, there is Stamp Duty that is levied at 0.5%, Withholding Tax (WHT) which is levied at 1% of the registered Government price or sales price (whichever is the higher), a transfer fee of 2% and 3.3% business tax that is levied against owners who have been in possession of the property for less than 5 years. There is no Capital Gains tax in Thailand.
Although there are no set rules, the general practice is for the fees to be split 50/50 between the buyer and seller when the property is purchased on the secondary market and when properties are purchased direct from the developer often the developer pays 100% of the fees. If you would like more information about the legal aspects of owning a property in Thailand or indeed anything else regarding real estate in Thailand, Contact Us.