Among the many measures the government has devised to help revive the property business, easing limits on foreign ownership of condominiums has helped to reduce the oversupply of units. New condo development, dormant for five years, has even begun to emerge.
While the availability of condominiums has improved, though, the mechanics of purchasing a condo for foreigners have not changed. Only those with secured financing from abroad can get a foot in the door.
There are three legal acts relevant to the purchase of a condominium unit by an alien, being the Condominium Act B.E. 2522 (or 1979, the Condominium Act (No. 2), B.E. 2534 (or 1991) and the Condominium Act (N. 3) B.E. 2542 (or 1999) issued on 28th April 1999.
Up until recently, foreigners could only own forty percent (40%) of the aggregate unit space. This has been amended to 49% of the total unit space although the ministerial regulations governing this change have not yet been issued.
As an attempt to reduce the surplus number of condominiums, the new Act has made an exception so that aliens or alien juristic persons (majority foreign-owned companies) can own up to 100% of the aggregate unit space registered in a condominium up to 27th April 2004.
There are some regulations related to foreigners who can own a condominium unit. They boil down to any foreigner who can enter Thailand legally can buy a condominium.
So you have decided to buy a condominium. What’s next?
If you want to buy a condominium, you have to take great care in finding one. Caveat emptor! ‘Let the buyer beware’ applies more to buying a condominium than just about anything else.
In the current market, it is best to avoid buying “off plan” unless you are sure of the developer and that the development will be completed. Unfortunately many condominium buyers in the past few years have paid deposits only to find the developer has failed and the building has either not started at all or it is standing in a state of partial completion.
As there is no legal requirement for escrow accounts in this country, the buyer is very much at the mercy of the developer. Other than taking civil action against the developer or going to the consumer protection board, there is nothing you can to do to recover your deposit.
The best advice would be to buy in a completed building or to build a resale unit in a well-maintained and well-managed building.
Where Should I Look For A Condominium? When selecting a condominium, location is very important whether you want to live in it or rent it out. The better the location, the higher the rental your unit will be able to command.
If you have children, being close to the school or road access to the school will be important, but easy access to the office will also be a consideration.
Access to the Sky Train is also now quite an important consideration.
Is it deep in a soi or close to the main road? If you have no car, getting a taxi or public transportation deep in a soi could be difficult.
Is it near to shopping facilities?
What are the neighboring buildings? Could your view be blocked by new construction?
I’ve Found A Condo I Like. What Next?
Before you go ahead with anything else, have you looked at the building? Have you been there during rush hours to see what the traffic situation is like?
Did you open pipe shafts and electrical shafts to see their condition? Were they sealed off between floors to prevent a fire rising the building?
Are there any signs of leaks on ceilings and around windows?
What fire protection and alarms systems are there? Are the fire escapes clear of any stored items? Are all fire exit doors open?
Did you go into the mechanical plant room? Did you look at the jockey pumps for the sprinkler system to make sure there is pressure in the sprinkler system?
Is the building in an area that flood? Were they piles of filled sandbags stored somewhere? Were there “tide marks” on walls? That is a probable sign the street floods badly.
If you have a car, do you get a fixed parking space or not?
Who manages the condominium juristic person? Is it a reputable company? Did you ask to see a copy of the CJP accounts? If not, it would be a good idea to do so.
Have you asked about the sinking fund? What are the CJP charges? Does the CJP have many accounts receivable?
What Currency Can Be Used To Buy A Condominium?
You can use any negotiable foreign currency to purchase a condominium. The foreign currency MUST be transferred into Thailand as foreign currency and exchanged by the handling bank in Thai Baht.
For foreigners to be eligible to purchase a condominium in Thailand, they must present proof to the Land Department that the funds have been remitted from overseas in foreign currency. Without such documentation, the Land Department will not permit the transfer of ownership to the foreign buyer.
You should also take note of the following:
1. Remittances must be sent in the same name as that on the purchase contract, i.e., if JOHN DOE is the purchaser then the name JOHN DOE must appear on the remittance advice. J. Doe or Doe Enterprises are unacceptable.
2. Transfers of funds must be made in FOREIGN CURRENCY only and NOT in Thai Baht, i.e., if you are working in US Dollars then remit in US Dollars. Do not remit in Thai Baht.
3. Amounts transferred must be more than $5,000 to obtain a Thor Tor 3 form. (The bank will NOT ISSUE a Thor Tor 3 form for amounts less than $5,000.) This may mean you will have to agree to a modified installment schedule so that all amounts remitted are more than $5,000.
4. The purpose of the remittance MUST be stated on the remittance advice. This should be “FOR THE PURCHASE OF A CONDOMINIUM.” The Bank of Thailand’s code for this is 5.22.
5. Insist that the developer or seller sends you a copy of the Thor Tor 3 for each of your remittances. If you do so, this will avoid future problems. Make sure that the Thor Tor 3 has been issued correctly:
Name of the purchaser is correct – the same as on the purchase contract
Reason for remittance is correct – It should state 5.22
If it is wrong, tell the developer or seller IMMEDIATELY and insist on getting a corrected Thor Tor 3 form from their bank. This will save you from having endless problems in the future.
So What Documents Do You Need When Buying A Condominium?
If you are in Thailand yourself and are buying the condominium in your name, then you need your passport as well as the Thor Tor 3 document. The Thor Tor 3 document is the bank document showing proof that you have brought foreign currency into the country to purchase the condominium.
If you are purchasing the condominium in the name of a company, the documentation is more extensive and more complicated.
With the range of properties and locations available finding a dream house in Thailand is not difficult and in many cases, the price will seem very reasonable to a newly arrived Westerner compared to property prices in his or her home country. Assuming that an attractive property has caught your eye what should be done to ensure the smooth transfer of ownership?
The first thing to do is some due diligence work. A reputable real estate agent or lawyer can do this on your behalf. Essentially the property in question has to match the description in the title deed that represents it; the boundaries of the property have to concur with the boundaries stated on the title deed; no-one should dispute the boundaries; the vendor has to be confirmed as the owner of the property, and there should be no encumbrances registered against the property that would prevent the unencumbered transfer of ownership (or obtaining an unencumbered registered lease).
Once all that has checked out, it is time to move towards the contract. If you intend to buy a new home from a developer, the developer will almost certainly have a standard contract format (the format of these varies widely depending on the type and progress of the development, and as a general rule, you should always have an attorney or an experienced independent realtor read through it and give you an opinion).
When purchasing a completed property from a private vendor the standard approach would be to draw up a reservation or purchase option contract This is a contract which binds you and the vendor to the sale of the house at a specific price in accordance to a specific schedule, and will typically set up penalties for default of either party.
A deposit of 10% is usually required to secure a property, and closing payments will typically be expected within 30 to 60 days. Longer closing terms are sometimes agreed but usually against the payment of a greater deposit. Deposits are typically nonrefundable, save in the event of default by the vendor, so bear in mind that once the deposit is placed, you are committed.
There is typically an equal and corresponding commitment from the vendor, where he will commit to refund of your deposit and payment of a penalty of an equal amount if he defaults on the contract. Deposit in escrow is still rare in Thailand, but it is becoming an increasingly recognized way of proceeding. It generally trades off greater security for the buyer’s deposit versus a weakened claim for damages in the event of vendor default.
Beyond the price, payment and closing schedules, it’s important that a contract includes clauses to cover who will pay the legal fees, transfer fees and taxes (there is often a business tax and always an income tax assessment made at the point of sale) as well as an understanding of the value at which the sale will be declared – this is typically (for tax reasons) at or close to the government minimum assessed value
You need to sit down with the vendor or someone who knows how to do the calculation of these various fees and taxes and then, generally as part of the overall price negotiation, come up with an appropriate formula for sharing these costs. There is no fixed rule, it can vary from buyer pays all to seller pays all, but it’s most important that you have resolved this in advance of the transfer date. The last place you want to be working out such details is when you arrive at the Land Office.
Frequently Asked Questions:
What condo units are foreign nationals legally permitted to purchase?
In general, non-Thai nationals may purchase condo units in condo buildings throughout Thailand, as long as their purchase would not cause the foreign ownership ratio of combined units in the building to exceed 49% of the total floor area. Certain condo buildings in the Greater Bangkok Metropolitan Area may not be subject to the 49% foreign ownership ratio restriction.
What are the requirements for a foreign individual to purchase a condo unit in a building in which foreign purchases are permitted?
Foreigners who do not have a Thailand residence permit must show proof that the funds for the purchase of the condominium were brought from outside of Thailand. Non-Thais who have legal residence permits are not required to show evidence of funds coming from abroad.
What is the most typical way for a foreigner to purchase a condominium in Thailand?
Most foreigners purchase a condominium by showing evidence of an incoming remittance of foreign currency into their bank account from abroad. This is typically demonstrated by requesting the issuance of a certifying document from a bank in Thailand.
Can foreigners inherit ownership of a condo?
Property ownership of a condo may be inherited by either Thai or non-Thai descendants under normal circumstances.
Are condominium long-term leases available?
Yes. Condominiums may be leased to foreigners for periods of up to 30 years and may have options to renew. Leases of greater than three years are required to be registered with the Land Department. This option may be useful to acquire condominiums in buildings that have exceeded their foreign ownership ratio quota.
Why is important to have a qualified lawyer supervise your condo purchase transaction?
Thailand laws regulating real estate transactions do not provide as many inherent consumer protections as those in most western jurisdictions. For example, in Thailand, real estate agents are not licensed, and title insurance is not commonly used. Thailand is very much a “Buyer Beware” jurisdiction.
ThaiVest is a free online resource and community for anybody living or wishing to live in Thailand aiming at being financially independent.
ThaiVest covers the following topics:
Please note that Thailand’s rules and regulations are constantly changing and it is vital that you check with the Thai Authorities for updated information. Disclaimer: We do not take any responsibility for the accuracy and correctness of any information provided on Thaivest.com.
A reminder when you look at #thaistocks today: "Be fearful when others are greedy and greedy when others are fearful" - Warren Buffet.Jul 9, 2021
There's no such thing as entitlement, unless someone has first met an obligation. - Margaret Thatcher #quote… https://t.co/Gb7g40JSuPMay 18, 2021