How to Buy Property in Thailand
Wanting to buy a villa or apartment in Thailand but not certain as to how this is done ? Well here you will find the basic breakdown of what needs to be done and how to buy property or any real estate in Thailand.
Select A Property Agent
Since you will be looking for property in a foreign country you need expert local assistance. The agent knows how to communicate in Thai and they're familiar with the geographical area. The agent will save you valuable time in selecting and showing you the property in your price range that meets your needs.
Purchasing directly from the developer isn't going to save you money as compared to buying it from an agent. A quality property for sale in Thailand is generally offered at a fixed price by the Seller. The best benefit of using a property agent is that they will act as a liaison between you and the Seller. They will obtain a fair price for you and act on your behalf to represent your best interests throughout the entire process.
Remember that you are spending part of your life savings to acquire this property and you must carefully plan your steps in the process. You need to know the correct legal process in Thailand for the foreigner to acquire property. Before you sign any deposit agreement or contract, you should sit down with a lawyer or solicitor to discuss the legal process.
Best Method Of Ownership
In Thailand, a foreigner may only own a condominium in his/her own name. If the foreigner wishes to acquire land and build a house, he/she should obtain a long term lease on the land (for a period not exceeding 30 years each term). Read more about "Leases in Thailand".
The foreigner should apply for the construction permit to build the house in their own name. This way the foreigner owns the house and has a secured long term lease on the land.
The lease can be written with the option to reassign to another person (if you sell), ability to sublease and with a purchase option (should the law change in the future to allow freehold ownership by the foreigner). Therefore, a lease is the most common legal method for the foreigner to acquire property in Thailand.
A comprehensive examination of title deed recorded at the Land Department should be done. You need to verify that the Seller has clear and legal title of the land before you enter into a contractual agreement.
The title search will trace the land to its first possession. It will reveal any registered interests on the land such as mortgage or liens. This investigation will also verify the right to access to your property; the residential zoning, environmental and planning codes applicable in the area It is a good idea to make sure that you can build a structure on the land.
When you feel satisfied with the property, you will be asked to make a deposit to show your good faith to continue the process.
In return, the Seller will reserve the property for you and start the process by drafting the contracts for purchase. Unless you write specifically a "get-out" clause in the deposit agreement, for example "subject to clear title" or "subject to agreement on the contract terms," the money deposited is non-refundable.
Review Of Contracts
The Seller will have the contracts prepared for you. Since the Seller will write the contracts, it is highly recommended that you have a lawyer or solicitor review the terms and conditions. You will want protection for your interests should there be a delay in the property being built. A proper remedy should be stated in the contract.
The contract will contain a clause for penalty if you are late with your payment. This should be fair and reasonable to both parties should the Seller default.
Your payment schedule and its ration should be reasonable and practical. Normally, a first payment is 25 percent. Thereafter payments are made on a progressive basis: 25 percent when the roof is on, 25 percent when the door and windows are secure; and 25 percent when the fixtures and fittings are completed for instance.
Buying a Villa or House
Buying a house or a villa in Thailand always requires the use of a property lawyer who can guide you through the process. Property in Thailand is complex and for the better part unregulated.
Buying A Villa Or House In Thailand - 3 Steps
STEP 1: Finding a House in Thailand
Real Estate in Thailand has taken off in the past decade or so with more foreigners' wishing to live here or make this country their second home. While many wish to own a house in Thailand, it is important that you consider the following when purchasing a house:
Be aware that many of the problems that do arise when buying a house in Thailand can be avoided early on in the property search.
STEP 2: Setting up Your Thai Company
Once you have decided which house you are going to purchase, always consult a lawyer before signing any documents. Foreigners may not own a house in their name; however their Thai registered company may own the house. There are different forms of business entities in Thailand. The most commonly used is a Thai Limited Company. There are certain business registration criteria for the limited company. The Thailand Amity Treaty is also still in existence for Americans and there are also tax considerations so check Corporate Tax in Thailand if you are going to do more than own a house or need a Thai Work Permit.
STEP 3: Buying a House in Thailand
Once we registered your Thai Limited Company we do the following amongst other property services so consult our property lawyer today. They would do a title search and check the contracts before signing. Also note the type of Title Deeds in Thailand. If you are buying a house off plan, you would need legal advice as to buying in pre-construction projects. There is also the cost of transfer for your condominium and Thailand property taxes. Use the property transfer calculator to check your fees payable. Always consult a reputable firm of attorneys before you embark on the process of buying a house in Thailand. If you are looking at finance and obtaining a mortgage bond in Thailand then call us for more details.
Property Rights In Thailand For Foreigners
- Beware of development companies who appoint their own managers as this might create problems later as everything might not be transparent.
- Also be aware of the Condominium Act in Thailand which sets down certain rules and regulations for condominiums. Check your rights in the Property Rights in Thailand .
Selling Your Condominium
- A number of things can go wrong in a sale of your condominium, the worst being the failure of your buyer to complete. There is an easy 4 step plan listed to guide you through the steps on selling your condo, called Condo Resale. A number of things can go wrong in a sale of your condominium.
Renting A Condo In Thailand
- Many were smart enough to have anticipated the immense benefits of property investments in Thailand perhaps in their first or second visit in the country.
- Ensure that you know your condominium rights in Thailand. There are no tenant protection schemes in Thailand like they would have in the UK.
Re-Selling Your Condo In Thailand
- Drafting your sale agreement is also important as one of the many pitfalls is that at times buyers do not complete the transaction.
- Things to also consider are the viability of using an estate agent, the costs of a non performing buyer and any potential financial losses in a worst case scenario. See also re-selling your condo in Thailand.
Your Property Rights
- In you are considering or have already purchased a condominium unit in Thailand, consider what rights you have and which laws are applicable to you.
- Know your condominium rights in Thailand. If you wish you can either download the publication or view it online. See also the property rights in Thailand article.
Buying Off-Plan In Thailand
It is always best to contact a reputable attorney in Thailand when wanting to buy into a pre-construction project so that the attorneys can provide you with legal advice and direction as to the development. See below.
Thailand Your Second Home
Make sound investments in Thailand in the form of property and quickly reap rewards. This kind of investment acquires property for the purpose of affording you the same convenience that your first home provides but during a vacation or for retirement a home. Thinking about property investment in Thailand today.
Mortgage Bonds In Thailand
There are other options for obtaining local financing from domestic banks in Thailand but they are not usually available to non-residents and therefore are often more difficult to obtain. Consult our property lawyers about mortgage bonds in Thailand and who issues them.
Thai property can potentially yield strong rental returns particularly in main cities such as Bangkok or Chiang Mai and in well developed tourist destinations such as Hua Hin, Phuket and Pattaya. Consult our property lawyers about investing in property in Thailand today.
Escrows In Thailand
- An escrow is designed particularly with consumer protection in mind safeguarding your rights should anything go wrong before the transfer of the property.
- Nevertheless, an escrow system does offer equal protection to all parties involved. Consult our property lawyers about Escrows in Thailand and its uses.
Under-Declaring Your Property
A day before the transaction with the seller, your estate agent gives you a call and tells you that the money for the stamp duties and registration, which you are paying in equal shares with the seller, are just one-tenth of what you thought they were. Under-declaring your property has problems in its own right.
Buying Off Plan Properties
Buying Off-Plan Property In Thailand
Pre-construction in Thailand is not uncommon. Thailand is seeing a current surge in housing and condominium developments despite the slight downturn in the economy. The demand for these projects by foreign investors is still strong, particularly in traditionally popular markets such as Bangkok, Phuket, Pattaya and Hua Hin.
This is not exceptional in Thailand as the rest of the world have for many years embraced pre-construction investment for its highly attractive buy low and sell high scenario. Regardless of this trend, in order to protect your future investment and interest with such types of acquisitions, there are certain things to look out for when buying a pre-construction property here in Thailand.
What Is Pre-Construction Acquisition?
- Firstly, pre-construction real estate acquisition is the practice of buying properties very early on in the construction process.
- Developers are selling these future properties to customers in order to finance the development itself.
- The customers, on the other hand, are banking on the appreciation of the property once the land has been subdivided all infrastructures and amenities have been put in place.
- There are certainly advantages to buying a pre-construction property such as the relatively discounted price, the choice of selecting a more appealing plot within the project or other added incentives offered by the developer to early buyers.
You should, as you would with any property acquisition:
- Carrying out proper due diligence on the pre-construction development is by no exception, very important. In fact, it is prudent to do so.
- It is often easy to get caught up in the buying excitement and the sales pitch of the developer but it is always important to know exactly what you will be purchasing.
- Apart from title deed checks, you may wish to also check on the history of the developer, their financial standing or any previous projects they have developed.
- You can check if the developer has applied for any necessary licenses required for development or if an environmental impact study has been conducted on the project as these licenses give you some automatic protection under Thai law.
- You can also conduct your own investigation into the values and costs of the property or you may want to have an independent surveyor appraise the property or project for you and compare this with the figures given to you by the developer.
These are just some of the things you can do before signing any contracts with the developer in order to safeguard your future investment.
The Thai Contract Culture
- It is interesting to note here that the Thai approach to contracts in general is linked to its cultural importance to relationships between parties.
- Back home, we place great faith on what is written on paper whereas in Thailand, far greater emphasis is given to relationships itself. Throughout the many years of dealing with international clients, Thailand has shifted its approach to accommodate a more comprehensive type of document.
- A "Boston lawyer" style of contract drafting may still not work too well here and it is still common for Thai parties to give you a 2 to 3 page type contract for all types of matters. This is based on the tradition that the contracts are just an outline of the principles.
- We are much more used to seeing a contract as an exhaustive list of all the rights and obligations which allows for all possibilities and contingencies. So it may be good to keep this in mind when dealing with contracts in Thailand although you will generally find they can be quite accommodating to amendments if your relationship with them is good.
- Some foreign managed developers do tend to offer a more comprehensive contract which we are more accustomed to in the West. However, they still tend to provide contracts which are largely biased against the buyer as opposed to a more 'balanced and fair' approach we are used to back home.
Care should be taken whether you are buying from a local or an international developer.
What To Look Out For In Pre-Construction Contracts?
There are some minimum requirements which must be met in a pre-construction contract in order to minimize your exposure to any risks should anything happen. These are some fundamental elements which should be included in every pre-construction contract:
- Time Frame
- An agreement should have a time frame which clearly stipulates the starting date for construction as well as its completion date.
- Check for any extension clauses which normally give the developer a few extra months to complete without incurring any penalties.
- The agreement should state clearly the price, the payment terms and the payment method. Ideally, in a construction agreement this should be listed as a schedule.
- It should also be calculated by units such as per square meter or square wah as plot size may wary after completion. Be wary of additional charges that you have not discussed with the developer.
- Payment Penalties
- Check that the penalties for default of payment are not too burdensome on you.
- Terms such as immediate rescission of contract and retaining the money you have already paid are not uncommon but there should be a period given to you to remedy this default.
- Developer's Default
- Ensure that you have some recourse to a full refund in the event that the developer does not complete the construction due to insolvency or for any other reason.
- Late Completion
- Penalties should be given to you, a buyer, if the completion is late.
- This is normally deducted from the final payment due upon completion.
- Penalty rates vary greatly in Thailand although for condominiums there is a daily minimum penalty of 0.01% of the total unit price. For homes and villas, the penalties tend to be around the 3,000 THB to 5,000 THB per day figure.
- Building Specifications
- The contract should have a comprehensive list of all the materials being used in the construction including its quality, quantity and model. Usually, the more detailed the better.
- Be wary of substitution clauses which gives the developer the latitude to replace certain materials with "similar or better quality" items should the price of that material increase.
- Ensure that such a clause is drafted in a way so as to give you the final decision on the matter.
- Building Floor Plan
- Ensure that a floor plan is also attached to the main documents.
- Again be wary of clauses in the agreement which allows the developer to "modify" the floor plan but keeping it 'similar' to the plan agreed upon.
- You will want to be aware of such deviations whether minor or not and the agreement should be drafted to reflect this.
- Ensure that in the recital or in the beginning of the agreement, it states that the developer is the rightful owner of the land in question.
- If they don't, you should address the concern in the fine print or by adding an addendum by inserting language such as if the developer does not currently hold title, the agreement may be rescinded by the buyer along with full refund.
- Many things can happen in the future so it is useful to have an 'exit clause' should your plans change.
- An assignment clause allows you to transfer the obligations of the agreement to a third party.
- Note the administration fee due to the developer for this action. An assignment clause may also allow you the option to 'flip' the property should the market be conducive.
- Alternative Dispute Resolution
- No matter how careful you are or how good your relationship is with the developer, a dispute may arise.
- The agreement should have an arbitration clause so settle any disputes.
- Arbitration is generally less costly and formal compared to court proceedings.
It is always a good idea to have your contracts reviewed by a legal practitioner here in Thailand whether it's drafted in English or Thai. There can be many unanticipated problems associated with pre-construction acquisitions. However, if proper due diligence and research is done and accompanied with a sound contract, you will be in a much better position when making that decision to invest.