Even the Land Code B.E. 2497, Sections 86 and 87, has exemptions for foreigners to buy the land freehold, but the exemptions don’t apply to most foreigners. However, it is possible to buy land freehold 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 legal basics when buying land in Phuket or somewhere in Thailand. In case you are looking for a clear idea about how to buy a land freehold or leasehold in Phuket.
Step 1: Get to Know the Land and Things to Be Considered.
A: Type of Land.
The first legal fundamental you should learn when purchasing land in Phuket is how to sort out land titles. The Land Code and Civil and Commercial Code (CCC) classify 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 the CCC. It stipulates that, within the limits of the law, the owner of the 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.
Possession rights are mostly the same as ownership rights. The big difference between ownership rights and possessory rights is the right to recover them from any person not entitled to detain them. 10 years for the land with ownership rights and 1 year for the land with possessory rights (sections 1382 and 1375 of the CC). It is known as ‘Usucapion’.
You may see that there are many sorts of land titles that 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.
Access is a second legal requirement when buying land in Phuket, which you should know. Thai law divides the access road into two main categories:
The plot is connected to the public road, so there will be no problem with the right of use of the road. Above all, the public road is public property that is very strongly protected for public benefit, including your benefit under Sections 1034 to 1037 of the CCC.
2-Private Road (Easement or Servitude),
Keep in mind that the easement or servitude that arises with the consent of the owner of the land surrounding it 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 full protection and are transferable to all assignees of both easement or servitude land and your own land. That under Sections 1299 and 1387 of the CCC.
In our common mind, we think that servitude concerns only the right of access to cars, water, or electric supply. But in Thai law, servitude includes another right of use, such as limiting the height of buildings that may block the view. Of course, this servitude is limited to the area concerned and not to other parts of the plot or adjacent ones.
Finally, the easement or servitude may arise by the law of easement or servitude rights. In case the right of way is being blocked by the private land surrounding, the way of necessity could be applied. The easement is one of the important things to be considered before buying.
C: Type of Community.
How should the community be one of the legal basics when buying land in Phuket? The community relates to the utility and common area, management, and fees. The real estate market in Phuket may divide the community into three 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 into 10 plots or more. The developer must have a land development license. Also, provide all necessary utilities and common areas. In the beginning, the utility and common areas will be undertaken and controlled by the developer. Then handover to the Villa Juristic Person (the “VJP’) for their control when half of the plot owners have registered the VJP with the Land Department. That is according to Sections 4, 21, 22, 23(5), 44(1), and 45 of the Land Development Act, B.E. 2553.
VJP will have the right to set the community regulation in relation. In other 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 Sections 46 to 53 of the said law. These sections of the law lay out how to manage the utility and common area together with the member. In conclusion, in relation to duties and rights in relation to utilities and common areas, the owner will be bound by the VJP’s regulations.
It means land development without a land development license, whether the developer has divided the land for sale into 10 plots or more or not. Utility and common areas will be under the control of the developer or a Thai company, which may be established by the developer, the owner, or both. In this case, duties and rights in relation to utilities and common areas will be governed by the management agreement between the developer and the owner.
Step 2: Get to Know the House and Things to be Considered.
All houses (buildings) in Phuket are under construction control. It needs to have a building permit. Important note: the building permit is not the ownership document. It only takes permission from a government agency to allow a person to build a 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 sections 144, 146, 1299, and 1410, house freehold, or ownership of the house, always belongs to the landowner on which the house is built. House purchasing registration at the land department is only valid to avoid the void of purchasing immovable property under Section 456 of the CCC. Then, in case of litigation between the purchaser and the seller in a dispute over who owns the house, other acts and facts shall be brought to the court, such as the building permit holder, construction agreement, lease, etc. But if the seller transfers the land to a third party and there is a dispute over who owns the house, the purchaser may lose or win the case under the sections of the CCC that depend on many factors.
In practice, all points about Land and House and things in relation 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 a right of use for a period of time, but the ownership right belongs to the landowners. Freehold is always the base from many points of view, as you may see from the big difference point mentioned above. There are more differences between Leasehold and Freehold. (Freehold means both land freehold and house leasehold; leasehold also means house leasehold and house freehold.)
For freehold land, if you have a business that is run by a Thai company, land ownership 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, due to the difference in the voting rights of each shareholder, 49% of shareholders can have 75% of the 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.
Step 4: Get to Know the Contract in Thai Law
In practice, there will be two relevant contracts.
You will be bound by essential provisions like the purchase price, sinking fund, next steps in the purchasing process, and 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 on your leasehold or freehold right. For example, if the land title history is not enough to say the land title is legal because of an incorrect building permit, the condominium building may not be 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, and registration date. Also, default and penalty are dispute solutions. It is good to know that the brochure and all marketing advertising are part of the S&P under the Consumer Protection Law (supreme judgement no. 851/2544).
However, the Consumer Protection Law protects only natural persons, not juristic ones, 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 properties must be registered with the land department. It is a condition of validity under Thai law. The leasehold land and/or house (more than a 3-year lease period) must be registered with the competent land department under Section 538 of the CCC. The freehold land and/or house (purchasing an immovable property) must be registered with the competent land department under Sections 456 and 1299 of the CCC.
This registration system is aimed at recording your rights to the public document. Your name will be shown on the title deed to declare your rights to the public.
This article is already too long. But there is more to understand. The required documents, taxes, and fees There is also an option to avoid taxes and fees by taking over the company. either a Thai company or the BVI. These matters are mostly the same as in the condominium article. You may read it there.
In conclusion, these legal basics are important when buying land, whether in Phuket or somewhere else in Thailand. I hope you see the reason why you should consult and use the services of a lawyer before any purchase. It is imperative to clearly know what you are doing to save your investment in real estate in Phuket. If you are in need of a real estate lawyer or for more information, feel free to contact us at any time.