OWNING REAL ESTATE IN PHUKET
How can foreigners own real estate in Phuket? What are the law’s requirements? One of the best ways to answer this question is to classify Real Estate into four categories land, house, villa, and condominium. Also, what about the sale and purchase process? Below is the information in brief.
Sections 86 to 96 ter of the Land Law Code of Thailand set forth that foreigners may acquire land for residence, commerce, industry, agriculture, burial, public charity, or religion under the conditions and procedures prescribed in ministerial regulations and with the permission of the minister as the following.
If a foreigner is a statutory heir of the deceased according to the Civil and Commercial Code (CCC) Section 1629 which classifies the statutory heir into seven classes of a statutory heir (1) Descendants; (2) parents; (3) brothers and sisters of whole blood; (4) brothers and sisters of half-blood; (5) grandparents; (6) uncles and aunts. and (7) the surviving spouse.
An inheritor as an heir by will doesn’t allow land ownership. In this case, the estate administrator must manage the land sale within at least 180 days but not more than one year and give the money to the heir under the will. (Land Law Code section 93). Read more >
A foreigner who has invested at least forty million baht in a business such as buying Thai government bonds, Investing in a property mutual fund, a property, or Investing in the stock capital of a juristic person who has been promoted under the investment promotion law, investing in a business that the Board of Investment has announced as an eligible business Investment promotion under the investment promotion law. The investment must remain for 5 years (Land Law Code sections 96 bis and 96 ter). Read more >
A Thai limited company can own the land because a Thai company has the same right as a Thai citizen, a Thai corporation means a maximum of 49% of the share of foreign shareholders and a maximum of 50% of foreigners (Land Law Code sections 97 and 98). The articles of associations of the company may classify two types of shares with different voting rights and/or rights to receive the company’s dividends. Read more >
Foreigners are allowed to own a house in Thai law, the right way to have full legal protection is not only to register the sale and purchase with the land office but also to register the superficies’ right to have full real right protection.
Register sale and purchase contract makes the contract legally binding between the contracting parties but registering the superficies right makes the completion of acquiring immovable property which binds everyone in this world according to CCC sections 144, 146, 456, 1299, and 1410. Read more >
Villa comes together with land and house. These will be the same rules mentioned above as land and house. Keep this fact in mind, when someone owns the land he/she automatically owns the house above the land. However, land and house can be owned by a different person by registering the superficies right. Read more >
Foreigners can own 49% of a unit of a licensed condominium according to Condominium Act Section 19.
The original document of Credit Advice. (important that after the exchange, the Thai baht must have an amount of money not less than the purchase price, the original document of the bank certificate with details of transactions including subjective transfer, and the original document of the proportion of foreigner ownership are required to register the ownership of a condominium unit. Read more >
PROCESS OF SALE OF REAL ESTATE
1. RESERVATION AGREEMENT
A reservation agreement is the first written contract between buyer and seller after they are satisfied with the offer and the response to the offer. The reservation agreement is to ensure that the property will be reserved for the potential buyer. Also, to give the buyer time for property due diligence, usually 1-6 weeks. A deposit payment of the amount agreed will be made.
The due diligence result may be positive or negative. In case of a serious legal matter such as a land title deed or a building is not legal, the deposit payment plus legal cost shall be refunded in full. If the buyer fails to complete the transaction without cause, the deposit shall be forfeited.
2. PROPERTY DUE DILIGENCE
In some Western countries, during the process of real estate transactions, the law obliges the parties to use the services of a public body or representative to protect the buyer by making due diligence compulsory. But, in Thailand, the parties can directly go to the competent administration to register the transactions or rights in an immovable property. Consequently, some buyers take the risk of engaging without performing competent and comprehensive due diligence and lose a lot of money.
The due diligence shall be made by professional services to verify that the property complies with the relevant law such as Land Law Code (B.E. 2497), Build Control Act (B.E. 2522), Office of Natural Resources and Environmental Policy and Planning (B.E. 2553) and condominium Act (B.E. 2551). Read more >
3. SALE AND PURCHASE CONTRACT
When the buyer is satisfied with the due diligence report, a sale and purchase agreement shall be made to set forth the terms and conditions, e.g., the final payment date, payment method, registration date, the date of handover of the property and its document, keys, and accessory, liability of defect of the property whether the hidden defect of not, penalty and remedy, the share proportion of costs of the transaction.
4. CLOSING AND REGISTRATION
In Thailand, real estate law uses the registration system which your right will be recorded with the land department. The law obliges the parties of real estate transactions to respect strict form conditions (Sections 152 and 456 of CCC). For a sale contract of immovable property, the contract must be made in a written contract and registered with the due administration.
The registration process should be prepared by the representative of the parties and the parties may have the same representative. Final payment and handover of the property shall be made on this day and after the registration of the transaction is done, the buyer’s name shall be recorded and shown on the registration list at the back of the title deed that to confirm your rights above the property.
5. RELEVANT COSTS
Four kinds of costs are involved in the real estate transaction: broker fees, lawyer fees, transfer fees, and taxes. Thailand law allows the contract parties to agree on these costs. If the parties have not agreed on transfer fees, the transfer fees shall be shared 50/50 between the parties and the taxes shall be paid by the Seller who makes a revenue.
The fee and taxes for registration of real estate transactions at the land office, in case of capitalizable, the maximum fees and taxes is about 5% of the actual value of the property. Registration of real estate which can be registered without capital, the fee is only 50 baht.
It is important to plan the settlement of your estate/assets to assure that the legacy goes to the people you love most. This is especially important if there is property involved as it is with many foreigners who choose to own real estate in Thailand. It is equally important to make a last will in Thailand as the legal requirements in every country are different. It is more practical and easier to enforce if your Last Will is drafted by a lawyer here in Thailand. Read more >
Foreigners may legally own real estate in Phuket, especially houses, villas, condominiums, and even a plot of land for investors and inheritors, as mentioned above. Owning the land through a Thai company is possible when the company structure meets the law’s requirement; anyway, a nominee is prohibited.