Thailand Property Ownership
What can a Foreigner Buy?
There is a general perception that Thai property law is complicated. Actually, the opposite is true: the laws relating to foreign property ownership in Thailand are quite clear. Foreigners can buy and own freehold condominiums. Foreigners can buy and own buildings and structures, such as villas (as distinct from the land on which they sit), and foreigners can take leases on land, apartments, or property. Foreigners can buy property in Thailand but they cannot own the land.
Where things get complicated is in the methods and legal structures employed by lawyers (on behalf of foreign clients) to “get around” the rules on foreign land ownership. The ownership laws together with the legal structures used to circumvent them appear to provide a balance of convenience for both sides: foreigners get to buy properties in Thailand: Thailand benefits from investment money coming into the country.
Condominium Freehold Title
Registered condominiums hold a special legal type of freehold that foreigners can directly and legally own in Thailand referred to as condominium foreign freehold ownership. Registered condominiums are governed by legislation contained in the Thai Condominium Act, which clarifies the law for property developers and provides a degree of “consumer protection” for foreign buyers. This means that developers must follow certain procedures and comply with certain regulations in order to obtain a registered condominium license.
This is one of the easiest ways for foreigners to buy property in Thailand, and it is the clearest, most straightforward, and unambiguous form of ownership.
According to the Thai Condominium Act, only 49% of the units can be allocated to foreign freehold ownership. It is still possible for foreigners to purchase the remaining 51% of the building, although such purchases must be made on a leasehold basis. Therefore, in cases where there is insufficient interest from Thai nationals, a registered condominium project could for all practical purposes be completely sold freehold and leasehold to foreigners.
The land offices in Thailand refuse to register condominium and apartment leases for more than 30 years, although they do allow private agreements to contain lease renewals. Consequently, great efforts are made by registered condominium developers to provide buyers the opportunity to acquire longer leasehold periods. It is common to come across a 90 (30+30+30) year condominium leasehold structure in Phuket. But to be clear, when you buy property in Thailand through leasehold the longest it can be legally registered at the land office is 30 years. The contract must grant the two extensions.
In Thailand, apartment buildings differ from registered condominium developments. With apartment buildings, buyers only receive an interest in their separate units and no shared interest in the common area. Apartment owners also have no say in the management of the building. Most importantly, apartment buildings are not governed by the Thai Condominium Act, and thus they do not go through the cumbersome process of becoming a registered condominium licensed development. It is therefore more practical when buying a property in Thailand to focus on condominium registered developments.
Foreigners can buy and own buildings and structures, such as villas distinct from the land on which it sits.
The three most popular ways for foreigners to purchase land are:
Long-Term Leasehold Agreements
Leasehold is an interest in land or property whereby the leaseholder does not actually own the land but is granted the right of exclusive possession and use of the property. A lease is not just a contractual agreement; it is also a registrable legal interest against the freehold title document. Once registered, the lease becomes a lien upon the title deed which serves as notice to anyone who attempts to purchase the underlying land that the lease exists and that by purchasing the land they would be subject to the lease.
The maximum lease period currently permitted under Thai law is 30 years. Most developers allow for lease extensions to be put in the contract for a 90-year term (30+30+30). As a legal interest in Thailand property, it also means that the lease can be bought, sold, and transferred. Make sure that your contract has a succession clause. Your leasehold contract should also include an option to transfer to freehold should Thai laws change in the future to allow foreigners to own land directly.
However, the Finance Minister of Thailand is considering amending the current laws to allow foreigners to buy land under the 50-year leasehold structure (published by Bangkok Post in March 2017). If this happens, we can expect real estate prices to rise rapidly.
Leasehold with a Share of Freehold
Many Thailand property developers are now offering this innovative approach to provide leaseholders with additional security and a greater degree of control over their own lease renewals. The developer sets up a Thai company that owns the land on which the estate sits and each owner of the estate is given an equal share of this Thai company. With a leasehold with a share of the freehold structure, in addition to legal registration of the initial 30-year lease, purchasers also become part owners of the freehold, which grants control over lease renewals. This is commonly used by off-plan developers marketing to foreigners.
Thai Private Limited Company
Current Thai law does not allow foreigners to own a direct freehold interest in land, so using a Thai private limited company has, therefore, become an “accepted method” for buying and holding freehold land in Thailand.
In order to be considered a Thai company, at least 51% of the company shares must be Thai owned and at least three shareholders are required to register a Thai company. The Thai shareholders might own more of the company than the foreigner by having a majority of the registered share capital, but the foreigner controls the company through voting rights according to different classes of shares.
Many safeguards can be put in place to protect the foreign shareholders and local qualified accounting and the legal firms can be engaged to help with this process.
Now that you have taken the time to read this, you should have a solid grasp on Thailand Property Ownership. Next, get familiar with Title Deeds in Thailand.
And for more detailed information or to talk to one of our consultants, just give us a call at +66 93 606 0906 (WhatsApp) or send us an email at [email protected] We would be happy to walk you through the steps of buying a property in Thailand.