Acquisition of real estate in Thailand
The first and most important part of any real estate investment and buying a house in Thailand is the land title deed (and for a condo the unit title deed). Secondly you should look at the building permit or possible building permission. A sale and purchase agreement (SPA) for land or SPA for land and house or sale and purchase agreement (SPA) for a condominium apartment unit contains most important aspects and details of the property, the seller and buyer, the terms and conditions of the sale and in general finalizes the interests of both the seller and buyer before closing the deal. The downloadable land sale agreement contains a list of subjects that needs to be verified with the seller of the property. What follows is a list of general subjects that could be part of the due diligence process or general considerations prior to buying or leasing of real estate (due diligence is not limited to the subjects below).
Check the ownership title deed (sample title deed document right).
- The land title deed (the government issued private land title ownership deed) should be a Nor Sor 3 Gor or Nor Sor 4 Jor (Chanot). A chanote title deed is the best title as this is a full ownership deed. Such title is also issued for each apartment unit in a licensed condominium.
- Verify the information on the front and backside of the title deed.
- Verify previous official Land Office Thai script sale contract.
- Verify the government assessed value of the property (as this is among others used by the land department to calculate ownership transfer fees).
- There should be a general review of all information related to the land at the local land office.
- It should also be verified that the title deed has been legally issued (this is checked among others by verifying the history and issuance process of the land title at the local land office).
- Were there any restrictions in the previous transfer of the land (prohibition to transfer the land, or was the transfer under conditions or any priority or third party rights).
- You could also check the zoning and building regulations for the location of the land (this is not at the land office).
- Note, under the land code act foreigners cannot claim land and cannot be named as the owner of land in Thailand.
Foreigners can lease land but also here the same considerations apply as with buying land. The land (or land and house) lease agreement must be registered by the land owner at the Land Department and requires free and unencumbered land with a proper title deed.
In case of land and house, check the house details
- Review the house book (Tabien Baan), the building permit and previous land office sale agreement of the property (if any). If the seller can't show a building permit or land office sale agreement including land and structure the house could be illegally built, not built according to the building permit or could be owned by someone else.
Are there any burdens or claims registered against the land
- Most types of legal burdens and claims are registered on the backside of the title deed (here you can see if there are mortgages, leases, superficies or other encumbrances registered). Not all types of claims are registered and among others the previous official land office sale agreement should be verified at the local land office and neighboring plots could have rights over the land such as right of servitude.
- Especially 'land for sale' suggesting huge profits when developing (which could involve helpful Thai officials) should be triple checked. Investors risk losing all their investments because of fraudulent land titles, ownership issues or illegal or possible upgrading of the land or zoning problems....
Check the owner
- Is the seller free to dispose of the property or are there any legal restrictions or disputes affecting his ownership. Possible restrictions for transfer of ownership, bankruptcy or civil court cases the owner is involved in, marriage and divorce circumstances that could also restrict him (or him solely) from disposing or encumbering the property. You do not want to be confronted after registration with something that could void the transaction because you did not do a proper due diligence.
The sale and purchase agreement
- The sale and purchase agreement is an important document because it is a legal contract that confirms the respective rights, responsibilities and obligations of the parties. Should the seller have the intention to cheat or conceal certain facts related to the property he will generally not be willing to sign a detailed sale and purchase agreement.
Other general considerations (land)
- Are there any building or zoning restrictions. In certain areas it is not allowed to built or you cannot built what you want (even though the land has a property title deed);
- Is anyone else than the owner in occupation on the land, or is it rented out;
- Is the land burdened with a servitude for neighboring land (note that some a created after a period of time a certain right or practice has existed);
- Are there any drainage problems on the land or subsidence;
- Is there access to the land (e.g. dirt roads on hill sides become inaccessible during the rainy season);
- Is there a public or registered private road access to the land (direct access from a public road or is there need to cross over private land to reach the public road);
- Can you connect the land to the main utilities such as water (water availability is essential) and electricity;
- How will you get rid of trash, sewage disposal;
- Confirm the actual size of the land with the size on the land title deed;.
Buying into a planned or small housing developement
In the official larger housing developments (with an official housing development license under the Land Development Allocation Act B.E. 2543) it is relatively safe to buy a property because of government control and the development must comply with minimum standards and consumer protection laws. A point of warning is the leasehold sales to foreigners in these developments as these lease contracts do not have to comply with the same laws and regulations and often include various dubious and misleading clauses to generate sales.
Most smaller private housing or apartment developments in the tourist areas are not official or government controlled developments and do not have to comply with minimum sale standards or consumer protection laws. In such developments you should be much more careful and you could among others check the following:
- Are there separate title deeds issued for each property in the development or is the whole development under one title deed;
- Is there the need for compliance with the requirements under the Land Allocation Act;
- If applicable, are there any environmental impact assessment approval reports required for the development;
- Are the building permits issued and in who is named on these documents;
- In a private development it is advised to double check the responsibilities and terms in the contracts (the legal position of a tenant is weak in Thailand and you do not want to be burdened with all kinds of additional costs for management, service and maintenance set by the developer);
- how long has the developer been developing properties in Thailand and what is the developer's registered share capital;
- what is the payment schedule and are payments held in escrow till transfer (payment to the developer prior to delivery has risks and disadvantages);
- Which architectural company has for example been appointed to design the houses and which construction company has been contracted to build the houses;
- Can the purchaser instruct an independent building surveyor to inspect the build upon completion (prior to full payment);
- Any building warranties;
- If sold under a leasehold structure, who is responsible for paying building and land tax during the lease period;
- If sold under a land leasehold structure, will the houses separate from the land be owned by the purchasers (how will this be registered);
- If sold under a leasehold, maintenance and management contracts are often part of the lease arrangement putting additional long term burden on the lessee (non compliance could lead to termination of the lease).
- Maintenance and management contracts in private housing developments (or unlicensed apartment complex) could be undemocratic and completely set and managed by the developer and a financial burden for the occupants of the development.
- Will the developer apply for the house registration booklets for each property;
- Who will be responsible for transfer or registration fees;
- How many houses are being built in the project and could the view be blocked by new construction;
- Will the land and house be connected to public utilities in the purchasers' separate names or is it delivered by the developer (e.g. electricity and water is often delivered as a service through the developer at twice or more of the official government rate);
- If any, what services will be provided and what are the monthly or yearly maintenance and service fees in the project? How will these costs and fees be calculated? Do decisions about maintenance and services rest with the house and plot owners within the project or with the developer?
Buying a condominium could in addition include:
- Is it a true registered and licensed condominium or an apartment block sold as leasehold (not governed by condominium laws);
- Who manages the condominium and what are the management charges;
- Review of the rules and regulations of the condominium;
- Is the condominium juristic person financially healthy (have you seen the juristic person accounts and sinking fund);
- The condo sale and purchase agreement.