Property types and purchase details

According to the Thai law (specifically the ban on the ownership of land by a foreign person) the purchase of an apartment in condominium and purchase of the house and land should be reviewed as two different processes.

Buying an apartment

Buying an apartment in the condominium (apartment building) is probably the only way for a foreigner to purchase real estate in Thailand freehold. According to the local law there are only two limitations:

1. The total amount of living space in a condominium sold to foreigners cannot exceed 49%. Thus there are foreign and Thai quotas.
2. Funds to cover the real estate cost should be transferred from abroad.

The process of buying an apartment by foreigner is preceded in accordance with clauses specified in the law on condominiums of 1992. Each owner gets certificate of ownership. In addition the certificate prescribes what specific part of condominium belongs to the owner of the apartment in percentage rate.

If foreign quota in condominium is sold out there is still an option to purchase real estate on Thai company or long term leasing option.

There is a difference between buying an apartment on primary and secondary market. Buying apartments on the secondary market often means covering the total cost of object by one transfer. Purchasing apartments in new project (under construction) makes it possible to get financial payment plan: the first payment is usually 25%, the remaining 75% should be paid in following installments that are pre-arranged and prescribed in the agreement payment schedule. It is very convenient for the buyer as there is no need to pay the entire cost of object at one time, and on the other hand it motivates developers to comply with deadlines for the project construction in time.

Average price growth after project is finished is 10-20% – thus investments into new developments are the most profitable on Pattaya market.

The average returns from apartment’s rentals in Pattaya are about 6-8% annualy, i.e. investment will return in 10-12 years.

Purchasing an apartment is also followed by additional costs related with transfer of ownership from one person to another or registration of the first owner. According to the local law this sum is around 6.5% from the base cost of apartments listed in the register of the Land Department.

Practically this sum varies between 100-300 thousand Baht depending on the size of living area and apartments’ location. The law does not specify which of the parties is obliged to cover the transfer of ownership thus it is a subject for negotiations.

Purchasing land and houses in Thailand

Ownership of land is regulated by the Land Code of 1954, the Civil Code, Land Reform for Agriculture Act of 1975 and a number of decrees of the MIA.

Despite the fact that Thai law prohibits foreigners to own the land, there are still a number of options that allow freehold land.

Ownership of land on behalf of company limited

This option is one of the most popular among foreign investors.

According to Thai law, 51% of the shares must belong to the Thai, so as a rule Thai nominee shareholders are employees of the law firm office or members of their families. Thus it is necessary to specify in the company charter that only foreigner can be the director of the company, and the only person who can represent the company in various transactions.

At the time when the company is registered, you will receive the following documents signed, but undated, from each of the Thai “co-owners”: the power of attorney, document of shares transfer and the resignation.

The above points effectively ensure full ownership of the company by the foreigner. Normally one property is issued to one company only. The purchase process from a legal point of view is changing of a single foreign shareholder and director (seller) to another (the buyer). There are also several options for the ownership of land through leasing, but in view of the fact that this option does not offer the possibility of full ownership, we recommend pay extra attention while making the deal.

Long term rental from the citizen of Thailand selected by the buyer or his lawyer, who becomes a shareholder of the buyer, without the right to perform any action on behalf of the company.

In this case a citizen of Thailand buys a house/land and you rent this property for 30 years, with an option to renew.

In order to rent for more than 3 years with legal force the rental agreement must be registered. This process entails the cost of registration and stamp duty - a certain percentage of the total cost of rent for the entire term. You can renew the lease twice for 30 years - a total of 90 years.

Providing the house/land secured a citizen of Thailand, or a lawyer chosen by the buyer. This option ownership is also registered at the Land Department. Worth noting that only the owner of the land has the right to pledge the land. The tenant is deprived of such legal possibility.

The process of purchasing property

The standard process of purchasing property in Thailand involves engaging law firm.

This option is convenient because:

• Eliminates the need to travel to Thailand each time to get the documents.
• There is one more party to represent your interests and it is interested of smooth deal process.

Once you have chosen your object, you can proceed to the signing of the contract, as well as power of attorney to leave the support of the transaction on the chosen lawyer. If necessary, you can open an account in Thai bank to transfer money on and then leave Thailand.

After completion of the financial payment, you will be sent a certificate of ownership on the object that you selected, as well as the receipt of abroad transfer.

The actual procedure of purchase as follows:

1. You are using a broker service or find a property you are interested in and negotiate with the owner about the price and conditions of purchase, such as:
   1. Property price
   2. Interior that is included into the price
   3. Transfer fee and law firm services charges; the party obligated to cover the cost of those services
   4. The amount of deposit and transfer date (usually - about 10%)
   5. Date(s) of further transaction(s) (transfer)
   6. Move-in date
2. After agreement is signed both sides are directed to the office of a local lawyer, where the follow-up process:
   1. Buyer and seller sign a sales agreement, in which all abovementioned clauses are mentioned.
   2. Seller shall provide copies (or originals) of documents of title (Chanot) and passport to the law office to verify the authenticity and validity of the ownership of his object.
   3. After documents verification by the law firm the buyer sends seller the deposit as a mortgage payment. Since this the apartments are considered as booked and buyer has sufficient time to transfer money to Thailand. The easiest way is to open an account in Thai bank and make a transfer into it with an indication of “real estate purchase”.
   4. As soon as money are transferred from abroad to the account of the buyer he writes a receipt for the remaining amount to the seller and pays it to the law firm.
   5. Seller provides the original documents to the the law firm, which carry out the process of ownership transfer in the local branch of Land department (Land Office) from one owner to another according to the agreement conditions.
   6. As a result, the buyer gets ownership entitlement (Chanot) - the document that assures the transaction of the ownership which contains the passport number of the new owner; seller receives a check (receipt).
3. After transaction is done seller is obliged to pay agency reward to the real estate broker.

Primary market purchase is similar but the function of law firm is taken by the lawyer of Developer Company.