Contract price and final price
Price calculation is an off-the-plan condominium
Price variations in the contract
Selling condominiums freehold in Thailand is a government contract controlled business (not the leasehold sales of units in a condo project). The sale and purchase contract in an off-the-plan condo project must comply with ministerial regulations issued under the Condominium Act and minimum consumer protection standards. The contract must be a fair contract and comply with the law or the content is not enforceable (section 6 Condominium Act).
An ignored aspect of a sale and purchase agreement in an off-the-plan condo purchase is possible price increase based on the final floor area of the unit to built. In case of a sale and purchase of a condominium building under construction the sale and purchase agreement will usually state that the square meter contract price of the condominium is adjusted based on the final floor area of the condo as measured in the official land office survey and as will noted in the unit title deed.
What is the final floor area of a condominium and how could it affect the purchase price.
Final floor area is not the exact use-able floor area of a condominium unit. The official floor area of a condo as stated in the condominium title deed is measured from the center of the walls of the unit that are not joint ownership under section 13 Chapter II of the Condominium Act. The outside structure of a condominium is joint co-ownership of the condominium, the adjoining walls between the units are for 50% private ownership belonging to the floor area of the individual unit. This for example means that the air-conditioning unit attached permanently to the outside wall of a condominium is part of the common property (Civil and Commercial Code).
Upon completion of a condominium the actual building size and floor area of the individual apartment units do not always match with the measurements of the original building plan. Per individual unit size difference of op to 10% could occur. The final purchase price upon completion will therefore also be adjusted pro rata.
Developers in Thailand are very quick in demanding a price difference according to the final floor area as measured by the official land office survey upon completion of the condominium when this is in their advantage. Usually they keep quiet or do not or not easily refund or adjust the price difference when the contract purchase price decreases based on a smaller final floor area. Developers often try to agree a different settlement with the purchaser (note: when the payment installments of the purchase price are made in a third party escrow account the purchaser has a much stronger position in any negotiations with the developer read more...).
Condominium sale and purchase contract clauses
The condominium sale and purchase contract for a condo in an off-plan condominium development usually include the following clause:
'In the case where the area of the condominium unit to be sold varies from the saleable area shown in the relevant title deed, the parties shall continue to be bound by this agreement and shall in no case terminate the agreement on the grounds of such variance. In addition, the parties agree to adjust the purchase price to correspond to the increased or decreased area at the rate of the purchase price per square meter as mentioned above.'
This clause could be amended to limit the allowed price increase by the developer, e.g. that any increase of the floor area of the unit by more than 3% will be for the risk of the developer.
- Condominium practical legal questions and answer
- Payments in escrow for an off-plan condominium
- Escrow in real estate development in Thailand (external)