Purchasing land, land and house or condominium in Phuket, Thailand is popular for foreigners. In most cases, the purpose of the purchase is an investment or a residence. Often, both investment and residence at the same time.
One of the important steps for the Purchase of real estate in Phuket Thailand is ‘the Land and building Due Diligence’. We have already the pleasure to introduce you to this matter. It is an investigation of the key points information before the purchase to determine, to prevent a legal problem and to protect your investment Of course, the due diligence shall be validated by 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 Due Diligence are as below;
1-Land Deed; If we see that the type of land is important, the Land shall be investigated in the deep detail, as the land deed history to ensure that the land deed is legal and 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; the land bordering can be a serious issue after the purchase, this due diligence shall be made by a survey together with a lawyer. Encroachment on the neighborhood land is not the best way to introduce yourself to them.
3-Access Way; You know that way and road are legally different . So you have to ensure that the land has an access way, directly to the Public road is the best but a Private way with the servitude registration is acceptable. Be aware that 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 have to be verified.
4-Limit of Construction; due to City Zone and Environment law for example, in Phuket, since 2010 a building permit can not be issued 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.
5-Ownership Right; 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, so legally two different persons and you shall ensure that the sellers have the right to sell, lease or liens without third consent. To be director of the company doesn’t mean that you have the right to sell its assets without acknowledgement and authorization of the shareholders board. The Director has a liability towards shareholders and third parties.
6-Building; 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; in case of purchasing a Condominium, many times the purchase contract and payment are made before approval of the Condominium license, and the risk is that the buyer can’t register the freehold to the unit. Also, a leasehold registration with non acceptable management standard problems comes up often later.
8-Outstanding Tax; this is very important notably in case the ownership of the land belongs toThai Company Limited and the buyer takes over the Company Limited, an accountant analysis and advice will be required for this case. Also, if a B.V.I. company is involved as shareholder in the Thai Company Limited, the Certificate of Incumbency and the Certificate of Good Standing shall be investigated. This to avoid tax problems after the purchase.
9-Management Structure; to understand Maintenance fees; Management Agreement need to be clarified in case of purchase of the real estate in a development project or 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.
10-Utility Services; 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.
These 10 key points are the minimum to verify, but many other points are interesting to be checked and can have consequences in your choice. As they are not only legal, we don’t explain more in this article.
- Deep detail of land title history is not checked perfectly and some points are unclear or unseen.
- Land bordering is not validated by a land surveyor to know exactly the reference mark and the boundary mark (GPS).
- Access Way is not validated by cadastral map to ensure that the simple mention to public road is connected to the public road.
- Building permit is 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.
- Limitation of use of land is 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.
The Land and Building Due Diligence is an important step to prevent a legal problem and to protect your investment. Hope this article helps you to understand the necessity of real estate due diligence and please do not hesitate to contact us to work together for your protection.
Akenarin Thongplod & Frederic Retif
Thai Lawyer & French Lawyers