Things to Be Considered Before Buying Land in Phuket, Thailand
Even the Land Code B.E. 2497 Section 86 and 87 have the exemptions for foreigners to have a ‘land freehold’ but the exemptions don’t apply to most foreigners. However, buying ‘Land freehold’ is possible through a Thai Company when running the business by a Thai Company. In addition, a ‘house freehold’ is allowed for foreigners. This article aims to give important things to be considered before buying land in Phuket or somewhere in Thailand. In case you are looking for a clear idea about buying land or a condo in Phuket, we highly recommend reading the article 5 steps to understand when buying real estate in Phuket.
Step 1: Get to Know the Land and Things to Be Considered.
A: Type of Land.
Land Code and Civil and Commercial Code (CCC) divides the land into two main categories;
(1) ‘Ownership Right Land’
It means ‘title deed of land’ (โฉนดที่ดิน) (Nor Sor Si Djor (N.S.4.Jor) and includes ‘a map title deed’(โฉนดแผนที่), ‘pre-emption certificate title deed’ (โฉนดตราจอง) and ‘pre-emption certificate stamped has been utilized’ (ตราจองว่าได้ทำประโยชน์แล้ว); see Land Code section 1 ‘Title Deed’.
(2) ‘Possessory Right Land’
It means “the land with Certificate of utilization Document” for example the Nor Sor Sam Kor (N.S.3.Kor), Nor Sor Sam Gor (N.S.3.Gor) and the Nor Sor Sam (N.S.3) (หนังสือรับรองการทำประโยชน์).
The ownership right is a right under section 1336 of CCC. It stipulates that within the limits of law, the owner of property has the right to use and dispose of it and acquire its fruits. A right to follow and recover it from any person not entitled to detain it. a right to prevent unlawful interference with it.
The Possessory Right is mostly the same with ownership rights. The big difference between Ownership Right and Possessory Right is the right to recover from any person not entitled to detain it; 10 years for the land of Ownership Rights and 1 year for the land with Possessory Right (section 1382 and 1375 of ccc). It is known as ‘Usucapion’.
You may see that there are many sorts of land titles, most people are looking for. To buy land in Phuket we’d recommend the 4 sorts of title deeds to be considered.
B: Type of Access Road.
Thai law divides the Access road into two main categories;
The plot which is connected with the Public road, there will be no problem for right of use of road. Above all, the public Road is one of public property which is very strongly protected for public benefit including your benefit under section 1034 to 1037 of CCC.
2-Private Road (Easement or Servitude),
Keep in mind, the easement or the servitude which arises by the consent of the owner of the land surrounding is a right attached to a person. It is not a right attached to a property. It means the consent may be withdrawn or terminated at any time.
However, this consent servitude can be changed to real rights or rights attached to the property. That is by registering with the land department. So. you have a full protection and transferable to all assignees of both easement/servitude land and your land. That under Section 1299 and 1387 of CCC.
In common mind, we think that servitude concerns only the right of access for cars, water or electric supply. But in Thai law, the servitude includes another right of use such as limiting the height of buildings which may block the view. Of course, this servitude is limited to the area concerned and not to the other part of the plot or adjacent one.
Finally, the easement or servitude may arise by the law easement or servitude rights. In case the right of way is being blocked by the private land surrounded, the way of necessity could be applied. The easement is one of importance things to be considered before buying.
C: Type of Community.
The community relates to the utility and common area, management and fees. According to the real estate market in Phuket, it may divides the community into 3 main categories;
It means undeveloped land. No common area, all utility matters will be handled directly between the owner and government agent in relation.
2-Community under Land Development Law;
When the developer divides the land for sale from 10 plots or more. The developer must have a land development license. Also, provide all necessary utility and common area. At the beginning, the utility and common area will be undertaken and controlled by the developer. Then handover to the Villa Juristic Person (‘VJP’) for their control when half of the plot owners have registered the VJP with the Land Department. That is according to Section 4, 21, 22, 23(5), 44(1) and 45 of the Land Development Act B.E. 2553.
VJP will have a right to set the community regulation in relation. In order words, to make internal rules between the owners. For instance how to manage and maintain the utility and common area, fee and sanction. The owner will be a member of the VJP. The VJP is governed by Section 46 to 53 of the said law. These Sections of law lay down how to manage the utility and common area together with the member. In conclusion, duties and rights in relation to utility and common area, the owner will be bound by the VJP’s regulation.
It means the land development without a land development license, whether the developer has divided the land for sale from 10 plots or more, or not. Utility and common area will be under control of the developer or a Thai company which may be established by the developer or the owner or both. In this case, duties and rights in relation to utility and common area, the owner will be bound by the Management Agreement between the developer and the owner or between the owner.
Step2: Get to Know the House and Things to be Considered.
All houses (buildings) in Phuket are under construction control law. It needs to have a building permit. Important note that the building permit is not the ownership document. It is only the permission from the government agency to allow a person to build the house. Also, the blue book (Tabian Baan) is only the list of people who live ( have their official residence ) in the house. it is not an ownership document.
Most importantly, according to CCC section 144, 146, 1299 and 1410, house freehold or ownership of the house always belongs to the land owner which the house is builded on. House purchasing registration at the land department is only a validity to avoid the void of purchasing of the immovable property under Section 456 of CCC. Then, in case of litigation between the Purchaser and the Seller in dispute of who owns the house, other acts and facts shall be brought to the court as building permit holder, construction agreement, lease etc. But, if the seller transfers the land to a third party, and there is a dispute of who owns the house, the purchaser may lose or win the case under the mentioned Sections of CCC that depend on many factors.
In practice, all points about Land and House and things in relations shall be verified by your due diligence provider before purchasing.
Step 3: Get to Know Leasehold and Freehold
Freehold is an ownership right. Leasehold is right of use under the period of time but the ownership right belongs to the landowners. Freehold is always the base in many points of view, one you may see the big difference point mentioned above. There are more differences between Leasehold and Freehold.
For land freehold, If you have a business which is run by a Thai company. Land freehold is possible for you. Also, it is possible to have full control of both your land and your Thai company. That even if the Thai company has Thai shareholders in excess of 51%. However, by the difference of the voting rights of each shareholder. The 49% of shareholders can have 75% of voting rights. It is more than enough to have full control of the company. For more understanding, you may read the relevant article on how to have full control of a Thai company.
In practice, there will be 2 relevant contracts
You will be bound by essential provisions like purchase price, sinking fund and next processes of the purchasing, a time frame for your due diligence, for instance. You will need to pay a deposit fee which shall be refundable when the due diligence is not passed and has a serious impact to your leasehold or freehold right. For example, if the land title history is not enough to say the land title is legal, incorrect building permit, the condominium building not satisfied with the Building safety laws.
2-Sell and Purchase Agreement (S&P):
which you will be bound by all general provisions of the purchase agreement i.e. purchasing price, payment, leasehold or freehold right transfer, closing date, registration date. Also, default and penalty also dispute solutions. It is good to know that the brochure and all marketing advertising is a part of the S&P under the Consumer Protection Law (supreme judgement no. 851/2544).
However, Consumer Protection Law protects only natural persons, not juristic one, so you have to be careful when you sign the contract to do it under your name.
Step 5: Get to know the Registration.
Both freehold and leasehold must be registered at the land department. It is a condition of validity under Thai law. The leasehold (more than 3 years lease period) must be registered with the competent land department under the Section 538 of CCC. The freehold (purchasing an immovable property) must be registered with the competent land department under the Section 456 and 1299 of the CCC.
This registration system aimed at the recording of your rights to the public document. Your name will be shown at the title deed to declare your right to the public.
This article is already too long. But there is more to understand. The Required document, taxes and fees. Also an option to avoid taxes and fees by taking over the company. Both a Thai company or BVI. These matters are mostly the same with the condominium article. You may read it there.
In conclusion, things to be considered before buying land in Phuket are importance. Hope you see the reason why to consult and use the service of a lawyer before any purchase. It is imperative to clearly know what you are doing to do and save your investment in real estate in Phuket. If you are looking for an experienced law firm with a real estate lawyer in Phuket to assist, feel free to contact us.
Frederic Retif, Master in Business law & Nuansnit Chantawong, Master in Law
Department of Lands