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.
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 be engaged without performing a competent and comprehensive due diligence and unfortunately lost a lot of money.
In Phuket the land and/or building use restrictions are under the laws listed below with the relative Ministerial Regulations:
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
Due diligence is to be made basically on the Title Deed, the building, the owner or holder of the immovable rights and on legal relations between them and third parties.10 key points have to be at minimum checked.
The title allows certain private use and grants certain rights to use, possess, own or transfer rights by freehold and leasehold. There are 3 Titles to be considered, the Nor Sor Si Djor (Chanote), the Nor Sor Sam Gor/Kor and the Nor Sor Sam.
The due diligence report towards the title deed will show all historical transactions and any 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 or other restriction 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 condominium projects, rules and regulations are stronger, and some developers use the word “condominium” only for marketing purposes and at the end the condominium license won’t be issued and the unit unregistered under your name.
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.
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 be ignored. 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 5 Keys when Setting up a New Thai Company.
For all these reasons, the first step of your ‘Real Estate Investment In Phuket Thailand’ has to be the due diligence and better to use competent and experienced professionals to make this. Contact us.
Article by Frederic Retif
French Lawyer and Thai Legal Advisor