The Thailand Property Market is a Success Story
Despite medium term downturns purchasing a property in Thailand has proven to be an outstanding investment opportunity in the long run.
While owning a house or condominium in Thailand does come with some regulations it is undoubtedly a conventional process that many foreigners have taken advantage of to their benefit.
In this post, we outline the primary considerations and parameters of owning real estate in Thailand.
Living in the Kingdom and the Thailand Property Market
The most common way to stay a long time in Thailand is probably to rent an apartment or a house. Typically there are no problems involved if you pay your rent on time and are cautious with the interiors and the building.
A foreigner or a foreign company are not allowed to own any interest in land in Thailand, but there are a few exceptions. One example is a company approved by BOI, The Board of Investment, can own property for the company’s purposes. A foreigner that invests at least 40 million Baht can also own up to 1 rai (1600 square meters) used for personal living.
It is also possible to own a condominium, but foreigners also have other options if they want to stay for a long time in Thailand or even more or less permanent.
One of the most common procedures is that a Thai partner if the foreigner has one, is registered as the owner of the land. But the foreigner will then have no legal interest in this property.
Companies and foreigners are also allowed to lease land for 30 years, with a possible extension for another 30 years. The local land office, or ‘korm ti din’ in Thai, has to be informed and approve the agreement within three years to make it valid.
In principle, a company that is owned by at least 51% by Thai nationals, can own land in Thailand, but in practice, the land office will probably reject the transfer of property if foreigners own more of 39% of the shares in the company.
The prices for land varies a lot in Thailand. Land in attractive destinations can be costly nowadays. Beach land and properties in popular tourist destinations or land in major cities as Bangkok and Chiang Mai are such examples. But in smaller towns and the countryside of Thailand, you will often find the prices of land and property quite affordable, compared internationally.
Thai Land Certificates
A true land title certificate issued by the provincial land office are called Chanote or Nor Sor 4 Jor. This is the ‘safest’ land deed, and it is measured with GPS and has been marked by numbered concrete signs in nature.
Nor Sor 3 and Nor Sor 3 Gor are also land certificates indicating the owner of a specific plot or land area. Nor Sor 3 Gor is the more detailed and ‘safe’ certificate.
Other land certificates and definitions exist and it is, of course, important to know about all conditions when you are going to buy land in Thailand. If you are in any doubt, consult a lawyer with good knowledge of land titles and legal issues, or the provincial land office.
Thai Land Measurements
Thailand adopted the metric system in 1923. However, old Thai units are still in common use, especially for measurements of land.
Gladly, Thai land measurements are easy to calculate:
1 Talang Wah = 4 square meters
1 Ngarn = 400 square meters
1 Rai = 1600 square meters
1 Acre = 2,5 Rai
1 Hectare = 6,25 Rai
What Options are there to own Property in Thailand?
Thailand’s property and real estate laws can seem fairly restrictive as applied to foreigners, but they are no different from other countries where special treaties are not in place. Although foreigners may own buildings, condominium units or houses, in their names, Thai law stipulates that foreigners cannot own Thai land in their names. There are, however, several ways in which foreigners can acquire land rights in the Kingdom of Thailand.
1. Repeating 30-year lease
2. Limited Company
4. Vacation Investment Program
Option # 1 – Repeating 30-year lease
Leasing is legally the simplest, most straightforward way to own land rights in Thailand, a solution used by foreigners and Thais alike. Land lease contracts can cover periods of 30 years, or 3 times 30 years, or can confer rights equivalent to freehold ownership to the buyer.
If the intention of the seller is to transfer rights equivalent to freehold ownership to the buyer, and a leasing solution is used as the best legal alternative, the actual purchase contract will reflect this intention by featuring clauses concerning renewal of the lease or freehold sale of the property, putting control of these with the lessee and obliging the lessor to provide and sign (and stamp if a company) the required documents at any given time. This is a business agreement concerning the buyer’s right to resell, not the buyer’s ownership rights, and is supported by Thai commercial and civil law.
The actual contract to lease the land for the first 30 years, and the buyer’s rights therein to build and own, is the part of the whole agreement which is covered by Thai land law and which can be registered with the Land Department. If the intention of the buyer is to lease for 30 years only, a retirement plan or perhaps a commercial plan, this part of the agreement covers all ownership aspects.
Thai land lease contracts, therefore, are all based on the registerable 30 year period for which a standard contract is often used, and after that make the appropriate agreements between buyer and seller in the purchase contract. The registered 30-year lease contracts are in the Thai language, but they are, of course, accompanied by notarized English translations. With all this paperwork in order, the future of a lease can be considered legally fully secure.
Option # 2 – Limited Company
This option has long been the most popular way of enabling foreigners to acquire land in Thailand. It involves the incorporation of a limited company, a “Thai Juristic Person” with the undeniable right to own land, using the identities of voluntary Thai persons as shareholder nominees and the establishment of the foreign investor as sole executive director of the company. During 2006, the Thai government made moves to control the use of this solution because it has been abused by many foreigners conducting real estate business with Thai land without any real involvement of Thai people, which is illegal. The company solution is facilitated and allowed for domestic property acquisitions by a generous interpretation of applicable laws by government officers because of the enormous value of foreign investment in Thai property. Creating such companies is a little more difficult and costly to do than before, but this solution is still highly viable and effective.
Many properties are already owned by foreigners under the company model, and the most expedient way to buy these is as follows: One does not actually buy the property, one buys the company director’s shares and is installed as the company’s sole executive director, thereby taking over full control of the company and its asset, the property. This takeover procedure must, of course, be administrated by a law firm or agency with the knowledge and experience to do it properly. All documents are in the Thai language, but English translations can be provided and notarized.
Option # 3 – Condominiums
Under condominium law, up to 49% of the units in a condominium complex can be owned by foreign nationals. To ensure that the registration of ownership goes smoothly, there are clear procedures which ought to be followed correctly: Foreigners buying condos must transfer funds in foreign currency from a bank account outside Thailand to an account at a Thai bank. The name of the transferee must be the same as the name that will appear on the final purchase contract, i.e. the buyer. Use Bangkok Bank or Kasikorn Bank, the only two with full international services and English speaking staff, and be sure that the fund’s transfer documentation stipulates that the funds will be used to purchase a condominium. It is also common to transfer funds to the escrow accounts of estate agents or lawyers administrating the condo purchase, who can ensure that the correct documentation is collected from the receiving bank. Transfers must be made in amounts USD 20.000 or more to qualify for Foreign Exchange Transaction Forms issued by the receiving bank to verify that the originating funding came from outside Thailand in a currency other than Thai Baht. This bank certificate confirms the origin and purpose of the funds and furthermore facilitates the repatriation of the funds if/when the condo is later sold. The Department of Lands (Land Office) may refuse to execute ownership transfers if these bank certificates cannot be produced. There is a great deal of paperwork, which can be very awkward to correct if first done wrongly, required for the purchase of condos, so please do use a qualified agent or lawyer to handle this.
Option # 4 – Vacation Investment Program
On 25 November 2006, the Royal Thai Government presented its first fully-comprehensive solution for foreign ownership of Thai property at a public meeting in Cha-Am sports Village attended by Jack Service and other estate agencies and property developers. Perhaps the most secure solution by its governmental endorsement and management, this solution is, however, by far the most expensive, although it does come with several advantages.
A private enterprise named Thai Longstay Management Co. Ltd. (TLM) has been established in a joint venture between the private sector and the governmental Tourism Authority of Thailand. When a foreigner buys a property in Thailand using TLM’s Vacation Investment Program (VIP), the buyer pays the seller in the normal way, and a new company is formed with the name Thai Longstay Property (TLP) (Customer’s Name) Co. Ltd., co-directed by TLM and the VIP customer. The buyer’s money is secured via a loan agreement between the buyer and this new company. This loan agreement also documents the funds used for the company’s share capital (equal to the purchase price of the property), and the property is then transferred to the new company. The buyer’s investment is further secured with repeating 30-year leases (maximum 90 years) which can be sold or sub-leased.
Entrance fees to the Vacation Investment Program are rather high. For example, purchase of a 10 million baht property costs 1.1 million baht and yearly management fees of 98,000 baht. In return, buyers get absolute legal security and further advantages including long-stay visas, “Fast Track” services through Thai international airports, discounts at participating commercial outlets such as hotels, golf courses, restaurants, hospitals and insurance companies, telephone SIM cards, legal advice, and property taxes, and accounting and auditing costs are covered. The VIP charges an exit fee of 5% of the capital gain when the property is sold, offset by an interest calculation of 3.5% of the initial investment. This “interest’ amount is exempt from the exit fee.
The Vacation Investment Program was officially launched in Bangkok at the Ministry of Tourism and Sports on Wednesday, November 29, 2006, but has met little success.
The result of joining this program is that you will have paid about 1 million Baht merely to join up, you will then pay about 100,000 baht annually for administration, and you still only have a 30-year lease, which it will cost another million baht to renew.