Resources thai real estate legal information - Pattaya House Guide

A.Ownership - The 49 Percent Foreign Ratio Restriction

Foreigners may purchase a House unit wholly in their own name freehold (as opposed to leasehold), without restriction as long as the unit is within the 49 percent foreign ratio of the total units inside the building, according to the House Act, as specified by Thai law. As well as gaining individual ownership rights over the unit purchased, the purchaser also obtains joint rights over the common areas of the property.

However, in certain areas, such as Pattaya, Hua Hin and Phuket, when the 49 percent foreign ratio is exceeded, there is a provision allowing foreigners to have leasehold occupation, or ownership via a Thai company in the remaining 51 Thai percentage of the building. Leaseholds have several drawbacks, however: lease renewals cannot be registered, and are not effective against a purchaser of the property. In addition, the lessee cannot sublease, sell or transfer their interest without the lessor's consent.The Thai company ownership route, too, is a grey area and prospective purchasers who wish to take the company ownership route are strongly advised to seek proper qualified legal advice to ensure the company structure, conditions of formation, nominees and tax obligations comply with the Thai law.

B.Preliminary Checks – caveat emptor (let the buyer beware)

Even before conducting Due Diligence if you are thoroughly conversant with your rights under the House Act and all the elements and restrictions of the contract, you may save yourself unnecessary headaches and heartache if you scrutinise the following:

• The Sinking Fund and Maintenance Fees: these risk management tools should cover the daily maintenance and upkeep of the House and common areas, like the stair-well, lift/s, or lobby and the respective amounts should be stated in the contract and be based on the area of the individual House units, calculated according to cost per square metre, and any changes agreed by three-quarters of the co-owners of House, entered in the Rules & Regulations of the House and registered at the Land Office.

• The Rules & Regulations of the House, which should specify the following:
  • a) The juristic person’s name
  • b) Objectives
  • c) Office address
  • d) Sinking fund amount per owner
  • e) Individual maintenance fees
  • f) Other common properties
  • g) Usage of the individual and common areas
  • h) Spatial ratio per unit
  • i) General Meeting procedures
  • j) Managers and their appointments.
  
  
• Restrictions: the Rules & Regulations will normally specify what limitations are placed upon residents and their usage of common areas. These restrictions usually include the following:
  • a) Usage of common recreational areas
  • b) Pets and the ages of children that can use the amenities
  • c) Parking restrictions
  • d) Noise
  • e) Curtains, drapes and floor coverings
  • f) Balconies
  • g) Painting and decoration
  • h) Structural changes to the units.
  
  
• Responsibilities of the Juristic Person: prime responsibilities of this person or group of people include collection and management of sinking funds and maintenance fees and liaison with the House management company if one exists, after the period of liability of the developers has expired. These funds are to be used for general maintenance and the upkeep of the building and common areas and facilities. Owners have the right to check the accounts of the Juristic Person to ensure funds are being used for the correct purposes. A consortium of nine co-owners elected by at least three-quarters of the other co-owners at a General Meeting can even appoint a committee to supervise the management of the Juristic Person.
  
  
• Voting rights: normally grievances, and complaints are aired and expenditure monitored at a General Meeting, which should be held at least once annually or as often as deemed necessary. Every co-owner has proportionate voting rights in accordance with the amount of property owned in the House, so an owner of three units has triple the voting power of one individual. Matters on the agenda of such General Meetings can include such things as noisy neighbours or inadequate maintenance of the common areas, and frequently includes assessing the justification of the raising of funds for emergency repairs etc.

C.Legal Procedure – usually conducted by a bona-fide lawyer or the legal department of a real estate agent.

A New Development

• Title Search: Here there are two title deeds to consider - The House Title and the Land Title. The House Title will specify the floor area of the House unit, the ground area of the common land and the percentage interest which that unit has in the common property, such as swimming pools and parking. The first step in the checking process is to establish the validity of the Land Title Deed to ascertain the status of the land on which a House is built. Frequently, the land is mortgaged to a bank, so a check would first be conducted on all the relevant documentation, including ensuring the title document is in order. Next, a check would be run on the seller to make sure they are the legal owner of the House unit. After that a check would be conducted to make sure there was no mortgage on the property, liens or other encumbrances on both the land and House unit. Following that a check would be made to see that there were no legal actions in process or pending against the seller in the local courts or the Central Bankruptcy Court. Finally, a check would be made to ensure no restrictions exist on the development of the land.

• Review of the Sales and Purchase Agreement: although there is a standard contract outlining the selling price, terms and conditions of the sale approved by the Land Office, it isn’t sufficiently comprehensive to cover all the necessary provisions in a purchase contract, so your lawyer should be consulted to ensure the protection of your rights as the purchaser. Your lawyer’s brief is to verify the sales agreement, scrutinise the clauses of the sales agreement and negotiate modifications as necessary.

• Payment: all purchases of property in Thailand must be in foreign currency, transferred into a Thai bank account and converted into Thai Baht. This must be clearly labeled: “For Purchase of a House”, and processed using an Exchange Control Form (Thor Tor 3), issued in the purchaser’s name.
  

  • Deposit: in general, 1 percent of the total House unit price is put down as a deposit to reserve the right to buy a House.
    
    
  • Down Payment: normally, 25 or 30 percent of the total House unit price is necessary as a first payment, depending on the agreement between the buyer and the seller. In addition, further payments may be necessary between the time of the down payment and the final transfer payment, depending on the sales contract.
  
  

• Property Transfer and Registration: the lawyer will first prepare the application and supporting transfer and registration documents, then, after the final payment and the delivery of House unit, the seller will transfer the ownership of the House unit into your name at the Land Office. If you don’t wish to appear personally, the lawyer can register on your behalf via a power of attorney. The registration fee, stamp duty and withholding tax must be paid at the time of the transfer of ownership.

Second-Hand Sale Of A Unit In A House Project

1. Title Search: as per the buying procedure for a new House, except that the land is not usually mortgaged.

2. Sales Agreement: a less complex, ready-made contract is usually the norm here.

3. Payment: usually the full purchase price is paid to the seller at the time of the transfer of ownership at the Land Office.

4. Registration of Ownership: When purchasing a House unit, the buyer, seller, or both, depending on their agreement, pay the registration fee, stamp duty (if the seller has owned the property for over 5 years) or a special business tax* (if the property has been owned for less than 5 years), as well as the withholding tax.

Typical Transaction Cost Breakdown

FEE/TAX	AMOUNT	PAYER
Legal Fees	Bt20,000 - 30,000	buyer
Real Estate Agent's Commission	3 - 5%	seller
Withholding Tax	1%	seller
Stamp Duty	0.5%	seller
Specific Business Tax*	0.11%	seller
Transfer Tax	0.01%	seller
Costs paid by buyer	0.2% - 0.5%
Costs paid by seller	4.62% - 6.62%

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