property due diligence

How Property Due Diligence works in Phuket?

First of all, in this article, property due diligence means all types of immovable property. Such as land, house, condominium and another commercial building both developed and undeveloped. This article we focus on basic knowledge regarding land and building 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.

Western and Thai

In some western countries, during the process to transfer ownership of real estate. The law obliges the parties to use the services of a public body or representative to protect the buyer by making the due diligence compulsory.

But, in Thailand, the parties can directly go to the competent administration to register the ownership or rights in immovable property transfer. Consequently, some buyers take the risk to engage without performing a competent and comprehensive due diligence and unfortunately lose a lot of money.

Law Relevant to Property Due Diligence 

Keep in mind, in Phuket, the land and/or building use restrictions are under the laws listed below with the relative Ministerial Regulations:

1) Land law Code (B.E. 2497).
2) Civil and Commercial Code Book 1 to Book 4.
3) Tax Code (B.E. 2559).
4) Build Control Act (B.E. 2522).
5) Ministerial Regulation Nr. 20 (B.E. 2532) concerning the Build Control Act (B.E. 2522).
6) Department of Public Works and Town & Country Planning of Phuket (B.E. 2554).
7) Office of Natural Resources and Environmental Policy and Planning (B.E. 2553).
8) Condominium Act. (B.E. 2551) in case of purchasing a condominium.

That is why the property due diligence checklist or commercial due diligence checklist is needed. So, what to verity?

Key Points to Verify

Most importantly, due diligence is not only to be made basically on the title deed, the building, the owner or holder of the immovable rights. But it also certify the legal relations between them and third parties. In order to this matter, there is more to understand. In our point of view, 10 Key Points have to be at minimum checked

Sorts of Land Title Deed

The land title deed allows certain private use and grants certain rights to use, possess, own or transfer rights by freehold and leasehold. There are 4 Titles to be considered. First, the Nor Sor Si Djor (Chanote). Second, the Nor Sor Sam Kor (N.S.3.Kor). Third, the Nor Sor Sam Gor (N.S.3.Gor). And the final one, the Nor Sor Sam (N.S.3). 

Property Due Diligence Example Issue 

The Land or Building Due Diligence report towards the title deed will show all historical transactions. For example the encumbrances as servitude or mortgage. If some real rights exist but are not duly registered. As a new owner you have the right to dismiss these invalid rights (Section 1299 paragraph 1 of C.C.C).

The building has also to be free of any debt, charge. As well as other restrictions of private or public law other than the usual easements. To avoid future legal litigation, the construction must correspond to the permit issued.

In the presence of Condo projects, rules and regulations are stronger. Surprisingly, some developers use the word “condominium” only for marketing purposes. And at the end, not only the condominium license won’t be issued. But also the unit unregistered under your name as a condominium freehold or leasehold.

In the presence of land and building, the owner of both can be different. In this case, every asset and every owner shall be subject of due diligence and deep investigation. On the judiciary side, for example, we have to check for each owner his criminal and civil information that could impact the legal process of acquisition.

Incase of a Thai Holding Company

A Thai company can also be the owner of the whole asset. In this case, the buyer can purchase some shares under his own name and become director of the company. The control of the others shares is not to ignore. In addition, the due diligence will request specific verification in accounting and tax domains. To clearly understand the importance of shares and right of vote attached please read our article regarding Thai Company.

Conclusion

For all these reasons, the first step of your ‘Real Estate Investment In Phuket Thailand’. It has to be the property Due Diligence. And better to use competent and experienced law firms who offer full legal services in Phuket. Professionals to make this. Contact us.

Article by
Frederic Retif, Master in Business law, French Lawyer and Thai Legal Advisor

Department of Land