Overview Property Law Thailand

Buying property in a foreign country: the most common real estate laws in Thailand.

Author: Robert M. Spelde (LL.M)

Thailand has similar real estate laws and regulations as western countries as the Thailand Civil Code is based on the mainland European civil law system and copied aspects from common law countries. Thai property laws are considered western. What makes buying realty in Thailand different and more complicated is that Thai land laws prohibit foreigners from owning land making it impossible for foreigners to obtain outright freehold ownership over land and house.

Thai real estate laws:

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1 Land ownership by foreign nationals

1.1 - In theory individual foreigners can own land up to 1 rai (1600 square meters) for residential purposes through a Board of Investment regulation (section 96 bis Land Code Act) which requires a 40 million baht investment into Thailand in specified assets or government bonds beneficial to the Thai economy, in addition to the land purchase. IF granted (unlikely) it is under strict conditions and in specified areas and requires approval of the Minister of Interior. Moreover this ownership is not transferable by inheritance, therefore limited to the life of the person granted the right to own the land for residential purposes under this exception. In practice, even if you would be very rich, this is not a viable option. Besides this one exception land ownership in Thailand is strictly prohibited for foreign individuals read more...

1.2 - Foreign companies with substantial investments benefiting the Thai economy may have special privileges and exemptions for land ownership granted under section 27 of the Investment Promotion Act, under section 44 of the Industrial Estate Authority of Thailand Act or section 65 of the Petroleum Act (only for the duration of their business in Thailand) read more....

1.3 - The foreign controlled Thai company with a majority Thai shareholding (in number of shareholders and percentage of shares) is through preference shares the only vehicle available for foreigners to control their investment in land in Thailand. Even though land ownership by a partly (up to 49%) foreign owned Thai company is as such not illegal under Thai law, the legality and land ownership by most of these partly foreign owned companies is controversial if not illegal. In addition new laws and regulations may affect foreign control in a Thai company. The Thai government is since 2006 restricting and discouraging the misuse of Thai companies to circumvent foreign property ownership restrictions in Thailand read more...

1.4 - According to section 93 of the Land Code Act, a foreigner who acquires land by inheritance as statutory heir can have ownership in such land upon a permission of the Minister of Interior. Note that section 93 applies only to ownership of land by foreigners under a treaty (section 86) and NOT to foreigners receiving land as a statutory heir from their Thai spouse. There is currently no treaty in place allowing foreigners to own land in Thailand, therefore no foreigner will be given permission by the Minister of Interior. They can inherit the land as a statutory heir, but cannot register ownership and must sell the land within one year from the date of acquisition.

2 Condo ownership - Buying a condominium registered under the Condominium Act

2.1 - Foreigners (natural and juristic persons) may have freehold ownership of a condominium apartment unit in Thailand but must comply with the requirements of the Condominium Act. Ownership of a condominium refers in this matter to a unit in a condominium registered and licensed under the Condominium Act (as opposed to unregistered apartment buildings). The main requirements for legal foreign ownership of a titled apartment are:

• a) Not more than 49% of the total floor area of all apartments added together in a condominium or apartment complex can be foreign owned. The remaining 51% must be owned by Thai (natural or juristic persons). In case of 100 equal apartments in a complex 49 can be foreign-owned.
• b) Any foreigner who buys an apartment in a condominium must qualify for foreign ownership under section 19 of the Condominium Act. Usually this means for a foreign purchaser having properly brought into Thailand foreign currency at least equal to the total purchase price of the condo and having exchanged this amount to Thai baht inside Thailand. The beneficiary bank in Thailand will issue proof of the exchange of foreign currency and withdrawal of Thai baht (a Foreign Exchange Transaction form or a bank letter confirming the transfer and exchange of foreign currency) which must be submitted with the Land Department in order to register foreign ownership of the unit. 

2.2 - In case the foreign ownership quota in a condominium project is sold out the remaining units may be sold to foreigners under a condominium lease agreement. As opposed to buying a condominium freehold in Thailand there are no separate laws issued regulating leasehold purchases of condos by foreigners. A condominium lease agreement is a normal hire of property contract governed by the section hire of property in the Civil and Commercial Code (see under 4 in this page). It gives the right of use and possession of the unit for a set period of time. You won’t own the condo, nor will you have co-ownership in the common areas of the condominium, nor will you have voting rights in the condominium juristic person. Once the set period in the lease expires the lease must be renewed (the owner willing to renew the lease) or possession of the unit must be given back to the real owner - read more...

3 Unlicensed apartments, i.e condos not registered under the Condominium Act

There are two types of residential apartment buildings in Thailand. Condominiums registered and licensed with the Land Department, offering outright ownership over the individual units - and multi-unit apartment buildings NOT licensed as a condominium, not offering individual ownership over the units. On the outside these buildings look the same but legally they cannot be compared. Condominiums registered and licensed with the Land Department must comply with the legal structure as laid down in the Condominium Act which is built around individual unit ownership, joint ownership over the common areas and joint management of the building by all the unit owners. Unregistered apartment structures are not regulated by specific condominium laws and the developer of an apartment building can sell possession of the units under his own terms and conditions. There are various contract structures under which these units are sold which vary from time-sharing schemes, mere apartment leases to leases combined with shares in a holding company. Beware, these apartment projects do not offer individual freehold ownership over the units and the purchasers do not find protection in the law as with registered condominiums. The contract structures and intention of the developer should be triple checked (e.g. the quality of the lease structure, management system of the building, and ongoing financial costs through maintenance and management contracts).

4 Rental, hire or lease

Thai law does not have seperate leasehold laws (meaning lease as a real property right, separate from normal hire of property laws). A property lease in Thailand is in the first place a hire of property contract attached to the lessee governed by the section hire of property in the Civil and Commercial Code (sections 537 to 571). A lease in Thailand is in essence a normal (prepaid) tenancy that cannot be bought and sold as an asset but can only be assigned as a hire of property contract with formal acceptance by the owner of the property. Real estate lease in Thailand, as a hire of property, is a personal contract right of the lessee with limited real rights associated with it. This is the reason why a normal lease in Thailand is terminated upon death of the lessee, but not upon death of the owner (section 569), however death of the owner does terminate the contract rights in the lease agreement that are not in essence hire of property rights (e.g. renewal option). A lease in Thailand can last for a period not exceeding 30 years, when the fixed term runs out the lease comes automatically to an end.

Some sale contracts for land leasehold aim to create or suggest more rights than just a 30-year prepaid rental. These contracts between the seller and the leasehold buyer can be complex and must at least separate ownership over the house from the land and often include additional 30-year prepaid hire periods and the option in the contract (or addendum to the contract) to transfer the land to a freehold title. Legally this remains a contract structure between 2 or more parties only (not registered on the title). These contract structures are not protected by Thai law and could be considered void and illegal (foreigners are prohibited from owning land and leases cannot exceed 30 years), and despite the contract, the owner may at the end of the registered 30 year lease regain possession of the property. It will then have to be up to a court to decide what the actual rights of the leasehold purchaser are, if any more than a 30 year prepaid rental contract.

Under new land office regulations (2008) the land offices must refuse registration of a lease agreement with obvious void or illegal provisions such as a foreigner's right to transfer land to freehold title and pre-paid 30-year renewal terms. For this reason these provisions are often made in a separate addendum to the lease (a part of the lease arrangement not registered with the Land Office), despite the fact the Land Department considers these sale methods void or illegal.

5 House ownership separate from the land

5.1 Foreigners can't own land but are allowed to own the building separate from the land. Basically there are 2 ways of obtaining ownership over the house separate from the land, a- you build a house upon leased land (with or without a right of superficies) or b- you buy an existing house separate from the land and obtain a land lease. Transfer of an existing house must be in writing and registered with the competent authority (i.e. the Land Department/ branch office). The transfer of ownership of an existing house starts at the local land office and requires a 30 day public announcement at specified locations, after which the transfer of ownership of the house is completed by the competent authority, again at the land office. It should be noted that ownership of a house on land owned by someone else is relative to the right to use the land (e.g. the land lease and/ or the right of superficies term). When the right to use the land expires, the right to own the house on the land exipres with it.

5.2 A Ta.Bian.Baan (house book), pronounced as Tabien Bahn, is the government issued booklet with the official exact address of the house and registers the (Thai) persons who live in the house. It could state the name of the owner but in case of a foreign owner not necessarily. Note that a house in Thailand (separate from the land) does not have an official ownership title deed document. A house book is not an ownership document but merely a house and resident registration book. Proof of ownership is usually established by the Thai script construction permit issued by the local Or.Bor.Tor (if any) or the the official Thai script land office sale agreement in case of an existing house. There are 2 types of Tabien Bahn: The blue book (Thor.Ror.14) for Thai nationals and; the yellow book (Thor.Ror.13) for foreigners.

6 Real estate ownership by a Thai married to a foreigner

Foreigners married to a Thai national can't own land in Thailand and can't have an ownership interest in land as jointly owned marital or matrimonial property between husband and wife. The Land Department does allow a Thai national married to a foreigner to own land as a personal property after a joint statement with the foreign spouse that the money expended on the land is personal property of the Thai spouse. This means that the land (and in practice often land and house and in some cases condominium) is purchased as a personal property of the Thai spouse and not becomes a jointly owned property between husband and wife (Sin Somros). The confirmation in the certify letter is based on the principle of section 1472 of the Civil and Commercial Code that if personal property has been exchanged for other property (in this case land) that property becomes a personal property of that spouse, and not a joint matrimonial property between husband and wife, therefore the foreign spouse has no ownership rights in that property based on Thai family laws, ‘property between husband and wife’.

7 Nominee owner

Nominee owner refers to a situation where a Thai national purchases or where it appears based on the circumstances a Thai national is purchasing land on behalf of a foreigner or acts as the agent for the foreigner in the land purchase. In practice it occurs that foreigners purchase land and register ownership in a Thai national’s name and in return is given a lease, superficies or usufruct. This could be combined with a loan agreement and sometimes a mortgage registration. This structure is legal as long as the Thai national is not restricted in exercising his or her absolute ownership rights in the land which in essence relates to the right to manage the land - such as the freedom to encumber, sell and transfer the land. If such rights are restricted and lies with the foreigner it could deemed that the Thai national acquired the land under section 96 of the Land Code Act ‘as the owner in place of a foreigner’ or acquired land on behalf of a foreigner as his agent. If it is deemed the Thai national acquired the land under section 96 of the Land Code Act both the foreigner and the Thai national are liable for fines and even imprisonment.

8 Usufruct

Usufruct contract refers to the agreement and the right to use or occupy another's real property for one's life or up to 30 years. A right of usufruct in Thailand gives the right to use and manage a real estate property during a person’s life time. The right in the real estate property exists so long as the usufructuary (the holder of the usufruct right) is alive. After his or her death the real estate property reverts back to the owner. Often a usufruct is given to a family member such as a foreign spouse with the idea that a foreign spouse is protected in the event of death of the Thai spouse (owner) who then can remain in the property upon the death of the Thai spouse. The usufructuary is not allowed to sell the property (this right remains with the registered owner of the property) and under sections 1417 to 1428 of the Civil and Commercial Code the usufructuary has the obligation to maintain the property and take normal care of the property. If the usufructuary fails to do so and the property would lose value or becomes in a poor state of repair the owner has the right to terminate the right of usufruct. The usufructuary is liable for loss of value or destruction of the property unless he can proof that damages are not caused by his fault. The creation of a usufruct could in certain circumstances be an effective option to protect a foreign spouse during his marriage in Thailand and upon death of his or her Thai spouse, however in some case a usufruct is not the best option.

9 Superficies

Right of superficies (sections 1410 to 1416 of the Thailand Civil and Commercial Code) in Thailand is a civil law real estate right. A right of superficies legally separates ownership over the land from anything on the land. The right of superficies must be registered on the land title deed to be complete and enforceable. A superficies can be registered as a separate right or as a supporting right (i.e. in combination with a land lease agreement). The person in the agreement granted the right of superficies obtains ownership over the building he builds upon the land without obtaining or having ownership rights in the lands. Registration of a right of superficies will be allowed before construction or during the construction of a building, but an existing building requires transfer of ownership (and payment of transfer tax) first.

10 Habitation

The right of habitation (sections 1402 to 1409 of the Thailand Civil and Commercial law) refers to the right of a person to live in the house of another gratuitously. The right of habitation differs from a usufruct contract that the person granted a usufruct is allowed to transfer the exercise of his rights to a third person (not the actual usufruct), where the right of habitation grants only the use of a property for the residence of the grantee himself and family. A habitation contract refers to the right of dwelling in a house. The right of habitation is granted gratuitously, otherwise the matter would become 'hire of property'. A right of habitation can be created by last will in Thailand (the owner grants the right of habitation in his last will or testament) or by gift from the owner to a third party. A right of habitation is complete upon registration and endorsement on the title deed at the land office where the property is located.

11 Servitude

Servitude is for a part the Thai legal equivalent of an English easement. It is s a non-possessory interest in land. Servitude is governed by the Civil and Commercial code sections 1387 to 1401. Section 1387: 'An immovable property may be subject to a servitude by virtue of which the owner of such property is bound, for the benefit of another immovable property, to suffer certain act affecting his property or to refrain from exercising certain rights inherent in his ownership'. Servitude usually involve two or more separate properties/ plots of land, one of which is burdened and the other benefited by the servitude. The burdened parcel is called the servient property and the benefited parcel the dominant property. Servitude can involve several kinds of benefits and burdens, but usually it involves the use of neighboring well, the use of an access road over adjoining land plots, laying irrigation ditches, laying pipelines or utilities over neighboring plots. A registered right of servitude is an important right in case a plot of land is surrounded by other plots without direct access to a public road. In this case a right of servitude registered over adjoining plots guarantees uninterrupted access to dominant property.

12 Buying real estate in foreign controller Thai company

Up to the 2006 Land Office guidelines issued jointly by the Ministry of Interior and the Land Department it was common practice for foreigners to form a Thai company for the purchase of land or condominium (beyond the foreign ownership quota) in Thailand. As long as the company had majority Thai shareholdings there were no restrictions when purchasing a property and the partly foreign owned company was treated like any other Thai company. Currently the government is restricting the illegal use of Thai companies and nominee shareholding structures used by foreigner to purchase property. Under new regulations the officials must follow procedures when dealing with partly foreign owned companies to determine if the Thai shareholders are not illegally acting as nominee shareholders on behalf of foreigners and if the company is not set up to circumvent the law.

The practice of holding companies for property purchases by foreigners is currently much less common. A company formed merely as a front for foreign property ownership is illegal and leads to unlawful ownership. When a foreigner chooses to own property in Thailand in a Thai company the foreigner will generally not appear on the company formation documents (Memorandum of Association) or on the shareholder list. After the property has been transferred to the 100% Thai company up to 49% of the (preference) shares will be transferred to the foreigner. A company that owns a real estate property must appear to be a normal company and file yearly balance sheets and correct accounting. It may not be a dormant property holding company.

13 Land Titles

The most important part of any real estate investment is the land title deed. Does the land have a suitable and legally issued title deed. The land title deed is the official a document administrated by the Land Department which states and proves a person's legal right to own or possess a piece of land, its survey status, as well as rights, obligations, or mortgages on the property. The ONLY viable land titles for investment, whether freehold through a company, by a Thai national or through leasehold is in the first place the Chanote (N.S.4.J) freehold land title followed by the Nor Sor Sam Gor (N.S.4.G). Less attractive is the Nor Sor Sam (N.S.3) as this land title is not (yet) accurately surveyed and the area must be confirmed with neighboring land. This land may only be sold subject to a 30-days notice period in which it is not uncommon that boundry or ownership disputes are started. This type of land can be upgraded to a Nor.Sor.3.Gor or Chanote.

Overview of all titles issued by the Thai Land Department Sor Kor Nung (S.K. 1), Nor. Sor. Song (N.S. 2), Nor. Sor. Saam (N.S. 3), Nor. Sor. 3 Gor (N.S. 3 G.), Nor. Sor. 3 Khor (N.S. 3 K.), Nor. Sor. 5 (N.S. 5), Nor. Sor. 4 Jor (N.S. 4 J.) or Chanote title deed. Land titles issued by other government departments Sor. Por. Gor. 4-01 (S.P.G. 4-01), Sor. Tor. Gor. (S.T.G.), Por. Bor. Tor. 5 (P.B.T. 5), Nor. Kor. 3 (N.K. 3), Gor. Sor. Nor. 5 (G.S.N. 5)

14 Property Transfer fees

When purchasing a freehold apartment unit in a project licensed under the Condominium Act or real estate in a government licensed housing development consumer protection laws specify that the developer may ONLY pass on the transfer fee at a percentage of 50% to the buyer. As there is no fixed rule in the law on how the land office fees and taxes are split between the seller and buyer in a private sale or sale in a private development this should be agreed as part of the sale and purchase. The following land office taxes and fees apply to condos, land, land and house, and the transfer of a house separate from the land and are charged by the Land Office at the time of transfer: transfer fee (2%), Specific Business Tax (3.3% and if applicable), Stamp Duty (0.5% and does not have to be paid if Specific Business Tax is paid), Income Withholding tax (for companies fixed at 1% and a progressive rate for individuals).

15 Building and Construction

Building in Thailand is mainly regulated by the Building Control Act and the Town and City Planning Act. The Building Control Act provides for governmental control of virtually all types of construction by means of various applications and punishment in case of violation. The Town and City Planning Act deals with the permissible uses of land in different zones. In addition there are under both Acts numerous Ministerial Regulations specifying regulations and zone restrictions.

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