At Paradise City Property we strive to give our clients the best possible service in line with our motto “with you every step of way”. We find that many of our clients are unsure about the legal system in Thailand and often need advice. At Paradise City Property we are pleased to announce that we offer a full comprehensive legal service. This includes company setup; changement des administrateurs / actionnaires et ainsi que les bilans annuels.
Nous sommes également en mesure d'offrir des conseils, à partir d'un point de vue juridique, with regards to purchasing a house or condominium. Below is a brief guide to process but for a more detailed explanation please contact us.
Buying a House
Thailand has so many different types of properties for sale that whatever your dream home is, you can realize it here if you do the paperwork right. Prices are a lot cheaper than Western houses but some aspects need close scrutiny especially wiring, water & most importantly the deed title. Now that you want to buy a house what should you look for?
The first thing you need to do is obtain the services of a reputable real estate agent or lawyer on your behalf. (Try us as we are upfront on everything including after service support.) Check over the title deed and make sure the property is what it says. Some buyers have bought the house only to find the land is on a different title & visa versa.
The same goes with the boundaries of the property which need to be the same as the title deed, In Thailand there’s no survey pegs as such but it is an important point. If buying from a private individual we draw up a reservation or purchase option contract. This contract binds you and the vendor to the sale of the house at a specific price in accordance to schedules you have both agreed to make. Such an agreement will include any penalties for default of either party. This is a good idea to do as it then stops either party changing their minds & allows time to secure finance from a Bank.
If owning a Thai company you can secure finance and also have the house in your Company name.
Now that the title is all checked out ( we arrange this) you can go ahead and translate it into English just to make sure. We can do the job for you. If you are buying a new home from a developer, the developer will almost certainly have a standard contract format. The format may vary but always have your solicitor go over the deed and title and anything else in the contract regardless of what the developer shows you.
A deposit of 10% is usually required to secure a property and total payments should be made within 30 à 60 days. You can obtain longer periods but you will probably be required to pay a higher deposit. Deposits are normally non refundable, except by default of the vendor, so bear in mind that once the deposit is placed you are committed.
This situation also prevails for the vendor. He must refund your deposit and pay a penalty of an equal amount if he defaults on the contract. Deposit in escrow is still rare in Thailand, but it is becoming an increasingly recognized way of proceeding. It generally trades off greater security for the buyer’s deposit versus a weakened claim for damages in the event of vendor default.
Beyond the price, payment and closing schedules, it’s important that a contract includes clauses to cover who will pay the legal fees, transfer fees and taxes (there is often a business tax and always an income tax assessment made at time of sale) as well as an understanding of the value at which the sale will be declared – this is typically (for tax reasons) at or close to the government minimum assessed value.
Buildings apart from condominiums do not have any form of title document, but their sale or long lease can be registered at the Ampher (district) land office. Proof of ownership, must be established either from proof of construction or document showing previous sale-purchase (not to be confused with the House Registration document, which is only a register of the house’s occupants).
Buying a Condominium
There are three legal acts relevant to the purchase of a condominium unit by an alien, being the Condominium Act B.E. 2522 (or 1979, the Condominium Act (Sur. 2), B.E. 2534 (or 1991) and the Condominium Act (N. 3) B.E. 2542 (or 1999) issued on 28th April, 1999.
Up until recently, foreigners could only own forty percent (40%) of the aggregate unit space. This has been amended to 49% of the aggregate unit space although the ministerial regulations governing this change have not yet been issued.
As an attempt to reduce the surplus number of condominiums, the new Act has made an exception so that aliens or alien juristic persons (majority foreign-owned companies) can own up to 100% of the aggregate unit space registered in a condominium up to 27th April 2004.
There are a number of regulations related to foreigners who can own a condominium unit. Basically they boil down to any foreigner who can enter Thailand legally can buy a condominium.
So you have decided to buy a condominium. What next?
If you want to buy a condominium, you have to take great care in finding one. Caveat emptor! ‘Let the buyer beware’ applies more to buying a condominium than just about anything else.
In the current market it is best to avoid buying “off plan” unless you are absolutely sure of the developer and that the development will be completed. Unfortunately many condominium buyers in the past few years have paid deposits only to find the developer has failed and the building has either not started at all or it is standing in a state of partial completion.
As there is no legal requirement for escrow accounts in this country, the buyer is very much at the mercy of the developer. Other than taking a civil action against the developer or going to the consumer protection board, there is really nothing you can to do to recover your deposit.
The best advice would be to buy in a completed building or to build a resale unit in a well-maintained and well-managed building.
Where Should I Look For A Condominium?
When selecting a condominium, location is very important whether you want to live in it or rent it out. The better the location, the higher the rental your unit will be able to command.
If you have children, being close to the school or road access to the school will be important but easy access to the office will also be a consideration.
Access to the Sky Train is also now quite an important consideration.
Is it deep in a soi or close to the main road? If you have no car, getting a taxi or public transportation deep in a soi could be difficult.
Is it near to shopping facilities?
What are the neighboring buildings? Could your view be blocked by new construction?
I’ve Found A Condo I Like. What Next?
- Before you go ahead with anything else, have you really looked at the building? Have you been there during rush hours to see what the traffic situation is like?
- Did you open pipe shafts and electrical shafts to see their condition? Were they sealed off between floors to prevent a fire rising up the building?
- Are there any signs of leaks on ceilings and around windows?
- What fire protection and alarms systems are there? Are the fire escapes clear of any stored items? Are all fire exit doors open?
- Did you go into the mechanical plant room? Did you look at the jockey pumps for the sprinkler system to make sure there is pressure in the sprinkler system?
- Is the building in an area that flood? Were they piles of filled sand bags stored somewhere? Were there “tide marks” on walls? That is a probable sign the street floods badly.
- If you have a car, do you get a fixed parking space or not?
- Who manages the condominium juristic person? Is it a reputable company? Did you ask to see a copy of the CJP accounts? If not, it would be a good idea to do so.
- Have you asked about the sinking fund? What are the CJP charges? Does the CJP have many accounts receivable?
- What Currency Can Be Used To Buy A Condominium?
Basically you can use any negotiable foreign currency to purchase a condominium. The foreign currency MUST be transferred into Thailand as foreign currency and exchanged by the handling bank in Thai Baht.
For foreigners to be eligible to purchase a condominium in Thailand they must present proof to the Land Department that the funds have been remitted from overseas in foreign currency. Without such proof the Land Department will not permit the transfer of ownership to the foreign buyer.
You should take note of the following:
- Remittances must be sent in exactly the same name as that on the purchase contract, i.e. if JOHN DOE is the purchaser then the name JOHN DOE must appear on the remittance advice. J. Doe or Doe Enterprises are unacceptable.
- Transfers of funds must be made in FOREIGN CURRENCY only and NOT in Thai Baht, i.e. if you are working in US Dollars then remit in US Dollars. Do not remit in Thai Baht.
- Amounts transferred must be more than $5,000 in order to obtain a Thor Tor 3 form. (The bank will NOT ISSUE a Thor Tor 3 form for amounts less than $5,000.) This may mean you will have to agree to a modified instalment schedule so that all amounts remitted are more than $5,000.
- The purpose of the remittance MUST be stated on the remittance advice. This should be “FOR THE PURCHASE OF A CONDOMINIUM”. The Bank of Thailand’s code for this is 5.22.
- Insist that the developer or seller sends you a copy of the Thor Tor 3 for each of your remittances. If you do so, this will avoid future problems. Make sure that the Thor Tor 3 has been issued correctly:
Name of purchaser is correct – exactly the same as on the purchase contract
Reason for remittance is correct – It should state 5.22
If it is wrong, tell the developer or seller IMMEDIATELY and insist on getting a corrected Thor Tor 3 form from their bank. This will save you from having endless problems in the future.
So What Documents Do You Need When Buying A Condominium?
If you are in Thailand yourself and are buying the condominium in your own name, then you need your passport as well as the Thor Tor 3 document. The Thor Tor 3 document is the bank document showing proof that you have brought foreign currency into the country to purchase the condominium.
If you are purchasing the condominium in the name of a company, the documentation is more extensive and more complicated.
With the range of properties and locations available finding a dream house in Thailand is not difficult and in many cases the price will seem very reasonable to a newly arrived Westerner compared to property prices in his or her home country. Assuming that an attractive property has caught your eye what should be done to ensure the smooth transfer of ownership?
The first thing to do is some due diligence work. A reputable real estate agent or lawyer can do this on your behalf. Essentially the property in question has to match the description in the title deed that represents it; the boundaries of the property have to be concur with the boundaries stated on the title deed; no-one should dispute the boundaries; the vendor has to be confirmed as the owner of the property and there should be no encumbrances registered against the property that would prevent the unencumbered transfer of ownership (or obtaining an unencumbered registered lease).
Once all that has checked out, it is time to move towards the contract. If you are intending to buy a new home from a developer, the developer will almost certainly have a standard contract format (the format of these varies widely depending on the type and progress of the development and as a general rule, you should always have an attorney or an experienced independent realtor read through it and give you an opinion).
When purchasing a completed property from a private vendor the standard approach would be to draw up a reservation or purchase option contract This is a contract which binds you and the vendor to the sale of the house at a specific price in accordance to a specific schedule, and will typically set up penalties for default of either party.
A deposit of 10% is usually required to secure a property and closing payments will typically be expected within 30 à 60 days. Longer closing terms are sometimes agreed but usually against the payment of a greater deposit. Deposits are typically non refundable, save in the event of default by the vendor, so bear in mind that once the deposit is placed you are committed.
There is typically an equal and corresponding commitment from the vendor, where he will commit to refund of your deposit and payment of a penalty of an equal amount if he defaults on the contract. Deposit in escrow is still rare in Thailand, but it is becoming an increasingly recognized way of proceeding. It generally trades off greater security for the buyer’s deposit versus a weakened claim for damages in the event of vendor default.
Beyond the price, payment and closing schedules, it’s important that a contract includes clauses to cover who will pay the legal fees, transfer fees and taxes (there is often a business tax and always an income tax assessment made at the point of sale) as well as an understanding of the value at which the sale will be declared – this is typically (for tax reasons) at or close to the government minimum assessed value.
You need to sit down with the vendor or someone who knows how to do the calculation of these various fees and taxes and then , generally as part of the overall price negotiation, come up with an appropriate formula for sharing these costs. There is no fixed rule, it can vary from buyer pays all to seller pays all, but it’s most important that you have resolved this in advance of the transfer date. The last place you want to be working out such details is when you arrive at the Land Office.