10 Points to Verify when Land or Condo Due Diligence in Phuket’
Purchasing land, Condo or Property in Phuket, Thailand is popular for foreigners. In most cases, the purpose of the purchasing is an investment or a residence. Often, both investment and residence at the same time. First importance step of the Purchasing is ‘the Due Diligence’. 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.
In order to understand the dud diligence in Thailand. Firstly, we have already the pleasure to introduce you to this matter. However, it is an investigation of the key points information before the purchase to determine. This article not only aims to give you an idea how to prevent a legal problem. But also to protect your investment when buying land, condo or property in Phuket.
Importantly, the due diligence should have a validation to the matter of law involved at the listed below in minimum;
Land law Code (BE 2497).
Civil and Commercial Code Book 1 to Book 4.
Tax Code (BE 2559).
Build Control Act (BE 2522).
Ministerial Regulation Nr. 20 (BE 2532) concerning the Build Control Act (BE 2522).
Department of Public Works and Town & Country Planning of Phuket (BE 2554).
Office of Natural Resources and Environmental Policy and Planning (BE 2553).
Condominium Act. (BE 2551) in case of purchasing a condominium.
Step by Step to the 10 Standard key Points for the Land or Condo Due Diligence are as below;
1-Land Deed Due Diligence;
If we see that the type of land is important. Keep key fact to remember that the Land must have investigation in the deep details. It not only to see the registration recorded at the back page of the title deed. Moreover, it need to go to the deed history. To ensure that the land deed is legal. As well as it is not possible for a Court to rule the land deed illegal after the purchase. It is common to have heard about one plot of land or project who was declared illegal despite providing a document that looks authentic. National park land becomes illegally private one.
2-Land Bordering Checking;
The land bordering can be a serious issue after the purchase. Bordering dispute with neighborhood may arising. Importantly, this due diligence should make by a professional surveyor. Encroachment on the neighborhood land is not the best way to introduce yourself to them.
3-Access Way of the Land or Condo;
You know that way and road are legally different. Often see in Phuket are Public Road and Servitude or Easement. So you have to ensure that the land has an access way connected to the Public road. Plot connected to the public road is the best. But a Private way with the servitude registration is acceptable. With this in mind, the simple mention on the title deed that shows that the public way is connected is not enough. The cadastral map of the land department and local authorities documents should have a validation.
4-Limit of Construction;
Due to City zone and Environment law. For example, in Phuket, since 2010 a building permit is not issue to the land at an altitude over 80 meters. Also, how will you feel when your nice view is blocked by a 6 story building, built after your purchase. And vice-versa, you project to erect a 6 story building, but the regulations allow only a 3 story one.
In some cases, the ownership of land and building are held by different persons. The land belongs to a Thai Company but the building belongs to the company director. Therefore, legally two different persons and you should ensure that the sellers have the rights to sell, lease or liens without third consent. Again, with thing in mind, to be director of the company. It doesn’t mean that you have the right to sell its assets without acknowledgement and authorization of the board of shareholders. The Director has a liability towards shareholders and third parties.
6-Building Due Diligence;
Importantly, the illegal building may get an Administrative or Court order to demolish the building. That is why an accurate building permit is important. In some cases, we found that the building permit does not cover the whole building above the land.
7-Condominium License Due Diligence;
In case of purchasing a Condominium. Many times the purchase contract and payment are made before approval of the Condominium license. The risk is that the buyer can’t register the freehold to the unit. As well as, a leasehold registration with non acceptable management standard problems comes up often later.
8-Outstanding Tax Due Diligence;
This is very important notably. In case the ownership of the land belongs to Thai Company Limited and the buyer takes over the Company Limited. An accountant analysis is addition due diligence. Furthermore, where B.V.I. company involved as shareholder in the Thai Company Limited. The Certificate of Incumbency and the Certificate of Good Standing has a validation by Registration Agency. This to avoid tax problems after the purchase.
9-Management Structure of the Land or Condo;
Keep this in mind, management agreement need to be clarified in case of purchase of the real estate in a development project. As well as Regulation of Condominium Juristic Person need to be clarified in case of purchase of the Condominium. What about if you pay for some services that are not provided or if you don’t have the right of vote during the co-owners meeting. They can affect your future residence happiness.
To understand the cost involved. Private or common meters shared between co-owners, lessees can lead to bills multiplied by 10 or more. Development expenses can be increased exponentially if the connection to the Public Electric Authority is far and power is not enough to cover all your project. Electric Transformer costs lots of money that you expected and can bill up to Million Baht.
With this in mind, it is not only these 10 key points are the minimum to verify. But also many other points are interesting for validation. It is your choice. As they are not only legal but coupled with environment, safety, healthy and happiness.
Common Mistakes When Land or Condo Due Diligence;
1. Deep detail of land title history is not checked perfectly and some points are unclear or unseen.
2. Land bordering have not validated by a land surveyor to know exactly the reference mark and the boundary mark (GPS).
3. Access Way have not validated by cadastral map to ensure that the simple mention to public road is connected to the public road.
4. Building permit have not validated because it doesn’t cover all construction above the land. Under Build Control Act (BE 2522) most buildings require a building permit so even if your completed building is smaller than you expect, you shall rectify it.
5. Limitation of use of land have not validated in case of purchasing a condominium due to Town & Country Planning, Natural Resources Law and Environmental Policy and Planning Law and Condominium Law are not respected.
In conclusion, the land, condo or property due diligence or property due diligence check list is an important step. It not only to prevent a legal problem but also to protect your investment. And there is more to understand when buying land or condo in Phuket. For instance, contract, things in relevance, leasehold and freehold.
Finally, hope this article helps you to understand the necessity of Land or Condo Due Diligence. If you need help from a Law Firm who offers Full Legal Services in Phuket. You can email one of our Lawyers directly, you will NOT be charged for the first session to determine your needs.
Frederic Retif, Master in Business law, French Lawyer and Thai Legal Advisor.
and Akenarin Thongplod, Thai Barrister at Law, Thai Attorney at law and Notarial Services Attorney.