26/06/2021
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Buying a house or land in Thailand
Land and real estate in Thailand is regarded as “immovable property” or what is called in western
countries as real property. Generally speaking foreigners are not permitted to own immovable property
in Thailand. It is possible, however, for them to own the improvements or buildings on land provided the
necessary legal requirements are met. The effect of this is that a Thai citizen can own the land and
another person, such as a foreigner, can own the buildings on the land generally speaking 30 days’
notice must be given to the local Land Office before ownership of the building separately can be
registered. In addition foreigners are permitted to have an interest in land other than the actual
ownership. Such an interest may be a leasehold interest, mortgage interest or what we would call in
western communities a trust interest.
One of the common ways used to overcome the restriction on foreign ownership is for a foreigner to be
granted a lease of the land for a maximum term of 30 years with an option for renewal. Such an option
for renewal will generally only operate as a personal agreement between the lessor and lessee and may
not bind third parties. In conjunction with the granting of a lease a foreigner can also acquire ownership
of the buildings or improvements on the property. A Superficies agreement can also be added to the
lease contract. Another possible strategy is for the foreigner to acquire a usufruct interest in the land for
a term of up to 30 years or for the life of the person who is granted the usufruct, called the
usufructuary. Another strategy used is for the foreigner to establish a Thai limited company to acquire
the property.
In to establish which strategy is appropriate and suitable for each individual client it is important to seek
expert advice. Care should be taken not to enter into a binding contract until the various available
options have been considered.
The various alternative options are discussed below.
1) Thai Limited Company
Since July 2008 only 3 shareholders are required for a Thai limited company where one of the
shareholders is a foreigner. Pursuant to the Thai Business Act, a company with more than 50% foreign
ownership is regarded as a foreign company and the embargo against foreign ownership applies. In
order to avoid this, the foreign shareholder must not own more than 49% in number of the shares in a
company.
It is common to find in the establishment of such companies that shares will have differential voting
rights and therefore whilst a foreigner my own 49% or less of the shares in the company he may hold
the majority of the voting rights and therefore effectively control the company.
There are however stringent restrictions on the Thai shareholders being nominees only of the foreign
shareholder. Care must be taken to avoid any infringement of this requirement.
A further disadvantage in using a Thai limited company for the purchase of real estate is the fact that
expense will be incurred in establishing the company and in meeting the ongoing compliance costs.
Annual general meetings will be required to be held, accounts maintained and returns lodged with the
Department of Business Development. Care should be taken to fully assess the additional expenses
involved.
2) Leasehold Interests
Another strategy that is often employed is for real estate to be purchased in the name of a Thai wife or
partner and a lease is then granted to the foreign husband or boyfriend which can be for a maximum
term of 30 years. It is possible for agreement to be made for an option for renewal for a further term of
30 years. Clients should be aware however that the option for renewal may not be binding against a
third party in the event that the property is sold by the owner/lessor. Leases for terms of more than 3
years must be registered to be binding. A professionally and carefully drafted lease can on the lessee’s
death pass to his or her heirs by Will or under the laws of intestacy.
Leases should be professionally drafted in both the Thai and English languages.
Often a well drafted and registered lease coupled with a superficies agreement will provide quite good
protection to a foreign buyer.
3) Superficies Agreements
A superficies agreement, being a right to own the improvements erected on land, can be entered into
with the same time as a lease agreement and will provide additional protection to the foreign purchaser.
Some Land Offices refuse to register superficies agreements where the improvements are already in
place. Superficies rights can be passed onto heirs in the same way as a leasehold interest. For more
information on superficies please contact u
4) Usufruct interests
A usufruct interest is a right to have the beneficial ownership and receive the profits or rents from the
property during the term of the usufruct agreement. A usufruct agreement can be for a term of up to 30
years or for the life of the person who isgranted the interest. For more information on usufruct interests
please contact us.
5) Loan and Mortgage
Another strategy to protect the interests of a foreigner purchasing real estate is for the property to be
purchased in the name of his Thai wife or girlfriend with the benefit of a loan from the foreigner. The
loan can be secured by way of mortgage against the title and provision can be made for payment of
interest at the time of sale of the property calculated in accordance with a fixed formula or based on the
increase in the value of the property. A loan and mortgage arrangement can be entered into in
conjunction with leases, superficies and usufruct. Land Offices may require purchaser to provide a
declaration that the property is being purchased with the purchaser’s own funds.
6) Purchase a Condominium
The purchase of Condominiums is a partial exception to the rule precluding foreigners from owning real
estate in Thailand. Condominiums or home units are governed by a title system which is similar to but
not as strong as the strata title system in many foreign countries including Australia.
In Thailand foreigners are permitted to own up to 49% in number of the Condominium units in each
block without infringing the foreign property ownership preclusion. There are however additional
requirements imposed on foreigners who purchase condos.
Top Ten Points to Consider When Buying Real Estate Property in Thailand
1. Firstly, you should decide precisely where in Thailand you wish to purchase real estate and the
type of property you wish to purchase. You should also consider the purpose for which it is
used. Generally most foreigners wish to buy a property for use as a residence either alone or
with a Thai partner. When you have decided to proceed consideration should be given as to the
strategy that will be employed to ensure compliance with the prohibition on foreign real estate
ownership.
2. Having determined where and what type of property you wish to purchase you should then
familiarise yourself with the real estate market in that area for the type of property you want.
You should consider the location of the property, facilities available, access to facilities such as
shopping, hospitals, medical services, schools and the like. You should also become familiar with
the state of the market and the price levels that would be paid for properties of that type. You
should be aware that most Thai real estate agents simply list the properties for sale at the price
nominated by the vendors. Most do not give any advice to clients as to the market value of the
property. If you have done your homework you will be aware of the likely range of probable
values of the properties you are looking at. Next comes the negotiation phase. Before making an
offer to purchase a property you should be aware of or receive advice as to the type of title that
exists for each property. There are a range of titles in Thailand ranging, at the top, from a
chanote, what in Western countries would be called freehold title. The type of titles then ranges
down to what we would know as a permissive occupancy. The type of title will dramatically
affect the market value of property.
3. Most Thais are reluctant to negotiate with on price unless there is a real need to sell. Many
would prefer to lose money than face. Therefore, properties will remain on the market at an
inflated price for years and often prices will be increased year by year with perceived inflation.
Property developers similarly will usually not negotiate on price but both private vendors and
property developers will negotiate on other terms. For example, they may agree to, say, repaint
the property, upgrade the garden or provide appliances such as washing machines, televisions
et cetera. Foreigner vendors on the other hand are often well motivated and almost always
want to sell for a particular reason. They are therefore likely to be more negotiable on price.
4. Once agreement has been reached as to price, special conditions, time for settlement et cetera
the vendors should then provide a contract your consideration. You should read the terms and
conditions of the contract very carefully. You should ask your lawyer to explain to any provisions
in the contract which are not entirely clear to you. The contract should be in English or in your
own language and, if it is not, it should be translated into your language before you sign it. There
are various taxes and fees payable on the purchase and sale of real estate. You should make
prior enquiries as to what these are and as to how they will be shared between vendor and
purchaser. The contract should stipulate this. Separate information is available in our article on
taxes and charges payable on the sale and purchase of real estate.
5. Before entering into any contract you should ensure that you have put in place arrangements to
have the purchase moneys available and have investigated the requirement for transfer of
monies from outside Thailand for the purposes of the purchase. You should ensure that for
subsequent repatriation of the monies you can prove precisely where the monies came from
and how they were transferred into Thailand and used for the purchase. This is not only
important the purposes of recording these transactions but also in the event of any dispute on a
breakdown of a marriage relationship with your Thai partner.
6. The next step is for you or your lawyer to carry out due diligence in relation to the property. This
will include ensuring that a good and marketable title will be transferred to you, that there is
legal access to the property, the government permission has been given for the er****on of any
improvements on the property, that the improvements are erected within the boundaries of the property, that you actually going to receive the area specified in the contract and many other issues which are discussed in our separate article concerning due diligence. This should all be
done before entering into a binding contract.
7. You should also consider carefully the choice of strategies which will be employed by you in
dealing with the prohibition against foreign ownership. Instructions should be given to your
lawyer to prepare the necessary documents for this and you should ensure that registration of
all relevant documents by way of mortgage, superficies agreement, it usufruct agreement or
whatever are in place are registered at the Land Office on completion of the purchase.
8. Many vendors will seek payment of a deposit, small or large, on exchange of contracts. There is
generally no provision in Thailand for deposits to be held in agent’s trust accounts and therefore
if you pay most directly to the vendors then is a risk if there is a breach contract and the vendor
fails to proceed to completion. You should ensure that any monies paid by way of deposit are
held on behalf of both parties by an independent and trusted third party who will act as
stakeholder and deal with the deposit following completion in accordance with the conditions
contained in the contract. Normally on settlement the deposit monies would be paid to the
vendor or less any amount to be deducted by way of agent’s commission. If the vendors is it is in
not in a position to provide good title to the property and is unable to complete then the
deposit should be refunded by the stakeholder to the purchaser.
9. On the date appointed for completion all of the parties including any outgoing or incoming
mortgagee are required to attend in person or by an attorney holding a duly completed our
returning the signed the necessary documents to allow transfer of title to the purchaser,
discharge of any existing mortgage, registration of any new mortgage and registration of any
other relevant documents such as a superficies agreement or usufruct. The purchaser will be
required to provide a bank cashier’s cheque in favour of the purchaser or as directed by him or
her for the balance of purchase monies. Upon completion of registration of the relevant
documents the original title documents will be handed to the purchaser or his or her
representative
10. Following the sale arrangements should be made for transfer of services to the property from
the vendor to the purchaser. These would include telephone, electricity, administration services,
water supply and the like the contract should have specified precisely what is to be done by
each party in respect of each of these matters and any adjustment should be made for accounts
outstanding or paid in advance.
