The price of property in Thailand might be considered reasonable to a newly arrived Westerner and buying property in Thailand seems an attractive investment. True, real estate prices in the tourist property resort areas like Samui, Phuket and Pattaya are very reasonable compared to their home country or other tourist destinations, however, ownership of land is not open to foreign nationals (section 86 Land Code Act) and therefore property purchase in Thailand does not offer full ownership, unless it is a unit in a registered condominium (section 19 Condominium Act), and registered rights to land (lease) may not exceed 30-years (section 540 Civil and Commercial Code).

Foreigners may own 49% of the shares in a Thai company that owns freehold land, and until the regulations preventing the use of nominee structured companies this structure was a commonly used by foreigners. The current purchase structure for foreigners in Thailand is a registered renewable leasehold of up to 30-years for all types of titled land combined with separate ownership over the house. Lease structures aimed at foreigners can be divided into 2 categories:

• True lease structures
• Lease (contractual) structures that aim to become tantamount to freehold ownership

Under a normal lease structure the lease rights are straightforward and can't exceed 30 years. The lease may be renewed after 30 years, although there is no guarantee for renewal. A 90-year or perpetual lease does not exist under Thai law.

Lease structures for foreigners that aim to become tantamount to freehold ownership or aim to become more than normal 'hire of property', like the 90-year lease, are more complex and the foreigner's rights as the lease purchaser may become more and exceeding the normal laws concerning 'hire of property' in the Civil and Commercial Code. The drawback of these structures is that the foreigners registered rights remain a registered leasehold of up to 30-years. The foreigner can't sell the property, nor the lease nor renew the lease without the consent of the registered owner, and in case of any dispute with the registered owner it will be up to a court's decision to determine the purchasers true rights. So bear in mind that in any lease structure the registered rights can't exceed 30 years.

		A lease structure should NOT include the house and the lease should only concern the land. The house should be owned by the purchaser. It could be in the interest of the developer to sell a project under a land and house lease structure, but this is not in the interest of the foreign purchaser.

Proper legal advice should be sought before engaging in any real estate transaction. Do not fully put your trust in any (local) lawyer you hire in Thailand and take legal advice independent from the seller or property development you are interested in. 'Let the buyer beware' applies more to buying into a off the plan development than just about anything else.

Standard agreements in a 'off the plan' development:

• reservation agreement
• sale and purchase for land and house (purchaser must be a Thai person), or
• lease agreement for land and house, or
• lease agreement land and a sale and purchase for the house, or
• lease agreement land and a construction permit for a house
• other contracts: maintenance service agreement, rules and regulations of the project

The licensed developments are somewhat safer, but often very pricey (or a quote from an article in the Bangkok Post: 'some projects in Samui are overpriced by up to 300%'). A licensed housing development must have obtained a land trading permit and (depending its size) the property development must be allowed under the zoning regulations, obtain a confirmation letter of land use, drawings of the power system must be approved, a connection permit access road must be obtained, housing development permit must be issued by the Land Development Committee, an environment impact assessment must be conducted, construction permits applied for, connecting permit drainage permit obtained, etc. The standard contracts offered to the purchasers must be approved by the Land Development Committee and comply with consumer protection standards.

Some projects offer buy back guarantees or guaranteed rental returns. Unless this is guaranteed by a bank or by a reputable developer with a considerable share capital these promises have in practice little value and generally will not be paid. This is current practice for some developers, and usually you are not dealing with the main company but with subsidiary limited liability companies set up specifically for the development, or the sale and purchase agreement will include something like; 'the seller may at its own discretion and without seeking prior consent from the buyer, assign, transfer or sell the project to its affiliated company'.

Even if you would be successful in a claim against the developer or subsidiary company, you would likely only be paid if there is sufficient capital to cover your claim. Say you have a claim against a company with a 2 million baht registered capital, the shareholders enjoy limited liability, i.e., limited to the remaining unpaid amount, if any, of the par values of their shares. If the money has gone it would be unlikely you would get any money from this company or in a civil action against the director(s) should they be personal liable.

Many foreign managed real estate/ development companies with the help of Thai locals subdivide a larger plot into smaller plots by using tricks to get round land allocation and housing development regulations and start advertising a project in magazines and in glossy brochures and on websites with 3D photorealistic images to show how it could look like. There are practically no licenses or permits applied for in these property developments. Until recently there has been little control by the local authorities, even though these developments are not licensed and therefore illegal ( article).

Real estate agencies are not regulated in Thailand and there is no national registry of real estate agents. Qualifications like 'certified property specialist' or 'licensed broker' have no value under Thai law and do not offer any guarantee or security that you are dealing with a licensed development or get proper advice.

General procedure
When buying from a Thai individual or developer mostly a reservation agreement and secondly a sale and purchase and/ or leasehold agreement is drawn up. This stops either party changing their minds and gives time to prepare the actual agreements and:

• find out if the property is free of debt, liens and encumbrances
• if the property really belongs to the seller
• if the description of the property matches what the buyer has been told
• if the property has a legal land title document and building
• agree on the terms of the purchase with the seller, such as who pays what taxes, and what furniture or appliances (if any) will be included in the sale
• for a new construction, confirm that the developer is the owner of the land, and check the legal status of the developer, approval of the development and construction licenses.

A reservation agreement is usually made under the condition that a proper due diligence will be conducted upon the property and subject to a satisfactory report on the property in question, a sale and purchase agreement or lease agreement shall be entered into. Should the due diligence prove unsatisfactory, the seller shall refund the full amount of the reservation fee to the purchaser.

A reservation fee of 100,000 Thai baht is usually required on signing of the reservation agreement and taken as part payment of the purchase price.

Upon signing of the final agreements a deposit of 20% is usually required to secure a property and total payments should be made upon transfer of the property and/ or registration of the lease. Deposits are normally non-refundable, except by default of the seller. Once the deposit is placed you are committed.

Transfer tax of immovable property (land, house, condominium)

To boost real estate sales the Thai government has granted a temporary tax rate reduction ( article)

Lease registration fee shall be collected at the rate of 1 % of the total rental throughout the lease term. Stamp duty shall be collected on the registration of the lease at the rate of 0.1% of the total rental throughout the lease term.

The seller wants the declared price to be less than what I'm going to pay
Normally the registered price is pretty much lower than an agreed purchase price between the parties. In practice, particularly the seller tend to insist on declaring the registered value rather than the real sale price as this decreases the tax burden of the seller. This is a known practice, but not so common. What is happening is that the seller wants to have less capital gains so they can pay less (income) taxes. The problem for the buyer is that when you go to sell the property down the road, you will then have to pay more taxes (unless you also find a buyer willing to make this deal). You will pay in taxes all that the current seller didn't pay. In addition, parties are required by law to state the correct price at the Land Department.

In case the purchaser is a company, for accounting purposes the company accounts should reflect the purchase price as reflected in the actual sale and purchase contract (separate from the land office sale agreement). These are the accounts that will eventually be audited and on which and the company tax return will be based. In case a lower price is declared there is a risk that this valuation discrepancy will be caught in the future. This is for Revenue Department comparing the official land office documents with the company accounts, the situation would have to be corrected and a fine to be paid.

Which party usually pays which tax
Unless you are buying from a developer in a licensed housing development there is no fixed rule for who pays which part of the transfer taxes. This can vary from purchaser pays all to seller pays all. It is part of the overall price negotiation to come up with an appropriate formula for sharing these costs. It's most important that you have resolved this in the sale and purchase agreement so the seller doesn't try to force in this provision a week before the transfer or you must work out such details when you arrive at the Land Office.

If the seller is a developer the purchaser is usually responsible for the transfer fee (2%) in connection with the transfer of the property only. The developer will be responsible for Specific Business tax, Withholding tax and Stamp Duty

The registration of a land transfer or lease registration in the land office may take up to six hours, depending on how busy the officers are and the connections of seller or if 'extra money' has been paid to ensure the smooth registration. If the foreign purchaser cannot attend the land office, a proxy can be appointed. In this case, an official land office power of attorney form is required. If the foreign purchaser is abroad when signing the power of attorney, the document must be notarized (which could be difficult as it is in Thai). Other forms of power of attorney are NOT acceptable by the Land Office.

Share transfer
If the owner/ seller is a Thai incorporated holding company selling to another foreigner a share transfer agreement is usually drawn up. The property (land, house or condo unit) sale will look like a share transfers, without the necessity of re-registering the property at the Land Office. It could be deemed a tax evasion to create such legal arrangements. Selling a property naked you will be liable for all of the taxes and fees that were applicable at the time of purchase over the sale amount. The proceeds derived from the sale of property by a company are taxed as corporate income tax.

Information on transferring a house separate from the land here

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