PHUKET AND PATTAYA REAL ESTATE LEGAL ISSUES
NSRE Real Estate legal issues offers you an up
to date guide below of the property and Real Estate laws in Thailand. If
you have any questions please feel free to email us using the email form
below.
Laws governing
a foreigner's ability to acquire freehold property in Thailand are
currently under review by the Government. Clarification of existing
laws, particularly in relation to the 'Foreign Business Act', is
expected this year as part of a referendum process on a new
constitution. However, it is widely anticipated that new laws will be
implemented in 2008 following a return to democracy with national
elections, planned for December 2007. Whilst the legal future on foreign
ownership of freehold property (land & stand-alone houses) remains
uncertain there are still several ways in which foreigners can acquire
property in Thailand. Here is an overview:
Ownership of an apartment by foreigners
Buying a condominium
or apartment in Thailand is probably the simplest and easiest way to
acquire property; there are many excellent choices contained in this
website.
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The law covering condominium ownership is the 'Condominium Act (No. 3)
B.E. 2542 (1999), which allows foreigners to participate in the
ownership of apartment units, as long as foreigners do not own more than
49% of the total number of units in the block. The only other
stipulation is that the funds used to acquire the interest are remitted
from abroad and are correctly recorded as such by a Thai bank on a money
transfer certificate (tor tor sam). Once completed each owner is issued
a certificate of ownership, which records the exact percentage of common
area rights the owner has. There are discussions that the 49% foreign
share limit may be increased up to 70%; watch this page for further
developments.
Ownership of a villa or land by foreigners
Ownership of land in Thailand is governed by
regulations set by the Ministry of the Interior' including the 'Land
Code BE 2497 (1954)', the 'Land Reform for Agriculture Act BE 2518
(1975)' and the 'Civil and Commercial Code'. Any individual under Thai
law, foreign or otherwise, can own a structure developed on land, in
their own name, which must be registered with the local land office. In
this way the registered property is treated as separate from the land
which it sits on. The Ownership of the land itself however can only
owned by a Thai entity; corporate or individual. Outright ownership by
foreigners is restricted but possible under the following circumstances:
a) Leasehold
ownership
The maximum period of lease, under one single agreement, is 30 years;
foreigners have the same rights to acquire such a lease as a Thai
national. These leases can be extended by two further periods, of up to
30 years; giving a maximum contract period of 90 years. All leases of 3
years or more must be registered with the local authority and are liable
to a registration fee and stamp duty (based on a percentage of the total
lease value). Foreign leaseholders may also have drafted into the
contract the right to acquire the freehold of the property in the event
of a suitable change in the law in respect of foreign ownership rights.
The one drawback of a lease is that while the parties can contractually
agree to renewals, the renewal cannot be registered until commencement
of the new term and in the event of the lessor selling/transferring the
freehold, the new owner is not bound by the original contracts.
b)
Limited Liability Company (LLC)
Traditionally this has been the most popular method
used by foreigners to acquire property in Thailand. In brief, foreign
interest in a LLC is limited to 49%, the remaining 51% shareholding must
be owned by Thai nationals. A minimum of seven shareholders are required
to set up a LLC. However, if a LLC wishes to acquire the freehold of a
property, the foreign shareholding must be pruned back to a maximum of
39%; giving 61% to Thai shareholders. Despite the foreigner holding a
minority of the shares, it has been possible for them to gain control of
a LLC by changing the Articles of Association, keeping the all important
controlling 'preference shares' in foreign hands and by appointing the
foreigner as the sole director. In 2006 the Government became aware of
the extent to which foreigners were using LLCs as a front to acquire
land, so they issued an instruction to regional land offices that they
should more strictly enforce the interpretation of the law to stop
foreign controlled LLCs from using the law to acquire property. They
also require that all shareholders in a LLC are scrutinized to ensure
that they have sufficient cash assets to prove that they have an active
interest in the LCC and are not just a 'name' to make up the required
number of shareholders. This instruction has caused some uncertainty in
the regional land offices, which are now more reluctant now to approve
land transfers involving foreign controlled LLCs. The current interim
Government has had other priorities and has not comprehensively
addressed this confusion. Observers are predicting that it will take the
election of a new government at the end of 2007 before the laws relating
to foreign ownership of freehold property are re-drafted.
c)
Becoming a Thai resident / citizen
d)
Through inheritance
Section 93 of the 'Land Code' allows a statutory heir to inherit a
property which does not exceed 1 rai (1,600 sqms) and which can only be
used for residential purposes.
e)
Making a substantial capital investment in Thailand
Providing that an investment of forty million Baht (approx US$1 million)
or more is made, a foreigner can acquire a property, of not more than 1
rai (1,600 sqms) in size, for residential use only.
f)
Usufruct interest (Sidhi-kep-kin)
This is a temporary interest (up to thirty years) in a property,
somewhat akin to a lease. A usufruct ownership can be successively
renewed, however, unlike a lease, it can also be sold or transferred.
Title
deeds in Thailand
There are four types of title deed, the first two (chanote & nor sor sam
kor) are recommended as the most secure for foreigners. Exotiq do not
list property unless it has either a chanote or nor sor sam kor title.
a)
Chanote
The 'title deed' or 'chanote' is the certificate for ownership of land.
The person whose name appears on the chanote and the titleholder has the
legal right to the land. The chanote is issued after a GPS survey has
been completed to ascertain the exact boundaries. The chanote is the
purest form of freehold land title and the one which is most commonly
sort after by investors.
b) Nor
Sor Sam Kor
This is the 'right to use' title and implies that all the necessary
requirements for the issuance of the chanote have been met and that the
final issuance of the chanote deed is pending. Under the nor sor sam
kor, the title holder can sell, lease, mortgage & build on the property;
but they cannot leave the land unattended for more than 12 years.
c) Nor
Sor Sam
A watered down version of Nor sor sam kor in that the formalities to
certify the right to use have yet to be completed. Before a transfer can
be made, a notice of intent must be publicly posted for 30 days before
any change in status can be registered.
d) Sor
Kor Nung
Recognition that the title holder is in possession of the land but the
deed doesn't imply that there are any rights associated with the title.
This title is often associated with land that is retained by a Thai
family, which has never been measured by the Land Office and which is
passed down to future family generations.
Taxes
applied to property ownership in Thailand
There are two taxes levied on owners of property: the Land Tax and the
Structures Usage Tax. The Land Tax is an annual tax but it is rarely
collected annually because the amounts payable tend to be so small (a
few thousand Baht) that the collecting body tends to wait for a few
years or until the title is transferred to a new owner. The Structures
Usage Tax, as the name implies is a tax on the building of a structure,
but it only applies to commercial buildings
Taxes
applied to property acquisition in Thailand
Unlike taxes associated with ownership, taxes linked to buying and
selling property are taken more seriously by the Government. There are
four taxes to consider:
a) Stamp
duty
0.5% of the assessed value or sale value of the land, whichever is
higher
b) Land
transfer fee
2% of the assessed value of the land
c)
Specific business tax
3.3% of the assessed value or sale value of the land. Only applies to
transactions involving the sale of a company and to all private sales
which occur within five years of the original purchase.
d)
Income tax
Varying between 1% & 3% of the acquisition price and is calculated using
quite a complicated formula.
It is common that
some of these taxes are shared between the buyer and the seller. It is
important that you ascertain exactly what tax burden the seller is take
during the course of the negotiation.
Legal
fees
For obvious conflict of interest reasons, and unlike many real estate
brokers in Thailand, Exotiq does not offer legal services. We strongly
recommend that you seek independent legal advice before acquiring any
property in Thailand. For our part we can point you in the direction of
the best legal providers in each of our locations. We suggest you
consult at least two firms before deciding on which one to work with.
Depending of the complexities of your acquisition, and the value of the
property, you can typical expect to pay a lawyer between 50,000 to
100,000 Baht for one of our typical listings.
Our fees
Exotiq commission fees are amongst the lowest in Thailand and are
normally paid by the vendors. All property prices we advertise have our
fees built in, including those featured in this website.
Land
measurement conversion
1 Rai = 1,600 mē
1 Ngan = 400 mē
1 Wah = 4 mē
1 Hectare = 6.25 Rai (approx.)
1 Acre = 2.5 Rai (approx.)
'Please Feel Free To Email Us
if You Need Our Assistance With Any Legal Issues.'
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