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 or property. Foreigners cannot own 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 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 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 title.
This is one of the easiest ways for foreigners to acquire property in Thailand, and it is the clearest, straightforward and unambiguous ownership.
According to the 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.
In Thailand, apartment buildings differ from registered condominium developments. With apartment buildings, buyers only receive an interest in their separate unit 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 Condominium Act and did not go thru the cumbersome process of becoming a registered condominium titled development.
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 30+30+30 years. As a legal interest, 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 50-year leasehold structure (published by Bangkok Post in March 2017). If this happens, we can expect another property boom.
Leasehold with a Share of Freehold
Many 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 property 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 a 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 firm can be engaged to help with this process.
Now that you have read this you have a good grasp on Thailand Property Ownership. For more detailed information, call us today at +66 93 606 0906.