Thursday, 6th December 2012
THE PROBLEMS OF BUYING PROPERTY IN THAILAND - All countries need various types of foreign investment and one of the most popular is investing in land, homes, villa and condominiums. Making a property investment, in many countries, is very similar to that of most western countries; that is you sign a contract, pay your money and then receive a property deed. However, there are many countries around the world, such as Thailand, that have a set of rules which appear to most potential foreign investors as draconian at best.
The Basics of Property Ownership in Thailand
It is quite clearly stated in Thai Law that no foreigner may own land in Thailand. You may, as a foreigner, own the building, but NOT the land upon which it sits. Land title deeds come in an array of differing types; however, the following are the main four that are commonly offered:
1. Nor Sor 3
These are often difficult to verify as this is only, in essence, a notice of ownership or use of the land. These also rarely come with a defined area, that is no actual boundary points are entirely clear, making it extremely difficult to determine the area of the land in question.
2. Nor Sor 3 Gor
This is almost identical to Nor Sor 3 however it does have boundary points and a map reference.
This is an actual certificate of land ownership and the most common when buying land and property. The Chanote Title provides a clear notice of who owns the land and their legal right to ownership.
While you have this information at hand it is really irrelevant to any foreign buyer due to the fact that regardless of the type of title deeds a foreigner is unable to own land. On that note there are other avenues a potential foreign buyer can explore and these are:
This is probably the safest and most common route to property ownership in Thailand for a foreigner. Again, it does NOT allow you to own the land on which the condominium sits but does allow you ownership of the unit that you purchase. Traditionally the entire complex of the condominium in order to comply with Thai Law, is split 49/51 – that is the total amount of foreigners allow to own a unit, in anyone block, is 49% while the remainder 51% is owned by Thais.
Note that when it comes to management of the complex the foreigners are outnumbered and therefore any changes the Thais wish to implement can be done so without consulting the foreign owners.
Houses and Villas
It is often the case that foreigners may set up a Thai Company in which the Thai Company may own the Land and the Building. Note carefully that the Thai Company owns both and not the individual foreigner. Also under Thai Law no foreigner may own more than 49% of a Thai Company and therefore your assets are controlled by Thais owning 51% of the company. The danger here is that if the Thais wanted to sell your house / villa and walk away with 51% of the proceeds there is nothing legally preventing them from doing so.
The other legal issue is that setting up a Thai Company solely for the benefit of owning land is illegal. So, even though the above often happens in Thailand it is actually illegal. The real estate agents will often say that this is done all the time and that the Thais are just nominees with not rights over the company. It doesn’t matter which way you cut the cake this activity is illegal. Just because a person who breaks into houses for a living doesn’t get caught doesn’t mean his/her activities are not illegal and once caught will face the full force of the law.
Many foreigners, particularly men, fall in love with a Thai lady and then process buying a home / villa and circumventing the law by either A: Putting the land in his wife’s name and or; B: Putting the land and house in his wife’s name.
Both are technically illegal, however to make it legal the foreigner would have to sign it over as a gift and therefore has no rights over either the land, if that is just the case, or the house and land if option B was taken. It is well documented that many foreigners have fallen foul to this type of practice – many having to return home for personal reasons, only to return to Thailand to find that his Thai wife has sold the property and absconded with the proceeds with no legal recourse to the foreign husband.
For many foreign visitors to Thailand it is all too easy to get caught up in the romance of the country, where everything appears a much more relaxed and easy going lifestyle. However, you really should approach the acquisition of any property carefully and never believe what the agent tells you about it being safe to set up a Thai Company or put the property in your wife’s name – remember most agents are on between 3% – 10% so they want the commission. As a rule of thumb NEVER buy property in Thailand, even a condominium and here’s why…
Renting Property in Thailand
Renting a home, villa or condominium is the only sensible thing to do considering there are no legal ways that a foreigner may own land. Besides that Thailand has some of the worse planning and zoning laws anywhere in the world. Most construction is of a standard that is way below anything foreigners are generally used to and little, if any authority inspection is undertaken before, during and after the build. There are many cases of buildings suffering from subsidence and other life threatening defects and the chances of a foreigner acquiring favorable recourse in a court of law is almost non-existent.
Note carefully the statement of planning and zoning laws. Generally if you purchase a property there is nothing stopping a Thai from building a fish cannery right next door, or any other type of property. This would then make it extremely difficult, if not impossible, to sell.
By renting a property you can freely move whenever it suits you and without having to put your valuable financial assets in jeopardy.
On a final note, just in case you are thinking about buying a property, even with a Chanote Title and putting it in your wife’s name – Do you know if the Chanote Title is actually any good? Your Thai lawyer may tell you that the Chanote Title is in fact genuine but how can you be really sure? The reason I ask this is because recently in the news was a series of events in Phuket, Thailand. A number of properties are now under investigation after it was discovered that a previous Governor of Phuket and a few other officials, were involved in providing Chanote Titles on National Park Land illegally. All told some 14 Resorts and Private Homes came under investigation which has resulted in just one person, a Frenchman, having his property, at the value of 100m Baht (approx US$3.2m or £2m) being confiscated. Obviously the Frenchman involved is taking the Authorities to court as it was they who were responsible for the issuing of the Chanote Title in the first place – it’s a dangerous situation as the courts will probably turn around and say that he wasn’t legally entitled to own the land in the first place, although he might be eligible for the cost of the building.
The perusing news and on-going investigations have resulted in property sales falling to a record low in the last year. I emailed one Phuket Real Estate Agent to get their views on the situation and they reported that property sales in their offices had declined by over 80% this year and the only sales achieved was to Thai nationals, as foreigners are reluctant to buy something they simply cannot own.
To finish off this article here’s some food for thought… I friend that I know did buy a house in Thailand. The building was in his name while the land was in his girlfriend’s name. When it came to selling the property the Land Department charged him a 10.3% tax all because he was a foreigner. If he had been Thai the tax bill would have been 0.3%. Discrimination is open and rife in Thailand and foreigners are frequently the target of Thai greed and corruption.