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Overview of Thai Property Laws

The following information is an overview of the property ownership question here in Thailand and is intended as an informed and researched guide for reference.

However, please note that it is not intended to be a substitution for taking professional legal advice from a qualified legal expert. Please contact us directly if you require personal advice or a referral to a qualified legal consultant.

Following recent focus in the national and local press on the whole question of property ownership, it is now more important than ever that you engage property and legal professionals that know what they are doing and can re-assure you that they have your best interests at heart.

Selecting the right ownership structure for your personal circumstances is now probably the single most important aspect of property purchase here in Thailand. For your own protection demand the answers and ensure that your professional advisors fill you with confidence. If they do not then look elsewhere!

Ownership of land in Thailand is governed by the Land Code BE 2497 (1954), the Civil and Commercial Code, Land Reform for Agriculture Act BE 2518 (1975) and the regulations set forth by the Ministry of the Interior. In brief, ownership of freehold land by non-Thais is so restricted as to not be practicably possible.

However, it is perfectly legal for non-Thais to own buildings constructed on the land and also to hold long term leases in multiples of 30 year terms. It is also perfectly legal for non-Thais to use a Thai Limited Company structure to hold possession of their land interests in Thailand as long as the company formation complies with the relevant legislation.

Any two buyer's circumstances are seldom the same and so this page is not meant to offer specific advise, but rather an overview of options that would be considered by our company as potential solutions for structuring the ownership of land in Thailand for non-Thais. Please contact us directly for case-specific advice.

In accordance with the regulations governing ownership of freehold land in Thailand by non-Thais, three main methods for structuring possession of land here have evolved. They are fully described in the relevant sections below and our views and opinions on their relevant merits have been acquired through years of practical hands-on experience.

Register ownership of land in a nominated Thai national's name.
Set up a Limited Liability Thai registered company to own the land.
Register ownership of land in a nominated Thai national's or Limited Company's name and create long term leases with guaranteed rights to renewal.

Thai Nominee

Speed, simplicity and the lack of any additional costs are the main advantages of choosing this option. Normally this method is only suitable where an existing long-term relationship has been in place and the non-Thai is totally satisfied that they will retain control and influence over the nominated Thai national.

Obvious drawback with this option is that the land is not under your control. Should you no longer have a relationship or contact with the nominated Thai national you will not be able to resell the land. For the same reasons make sure that a Last Will and Testament are in place controlling the bequeathing of the property in question on the death of the Thai nominee. It could end up belonging to someone that you had not intended it to! Only for the brave!

Company Ownership

Forming a Limited Liability company to own the land has traditionally been the most popular method of structuring land ownership. However it is important to stress that for this method to be suitable all of the regulations for the formation of a Limited Company here in Thailand must be strictly complied with. The main advantages are the protection this method affords the non-Thai owners and the relative ease with which the company formation is processed. Pattaya House does not offer such services to foreign clients.

According to section 97 of the Thai Land Law, the definition of a foreigner includes a Thai registered company or partnership in which more than 49% of the capital is owned by foreigners or of which more than half the shareholders or partners are foreign citizens. In practice it is normally advisable to restrict non-Thai ownership of shares to 39% or less in order not to attract too much bureaucratic attention. This obviously then highlights the problem of protecting the non-Thais interests.

Protection of Non-Thais' Interests In A Thai Majority-Owned Company Protection is ensured by ensuring that several safeguards are put in place:

Non-Thai land purchaser is elected sole executive director with the exclusive power to sign cheques and commit the company to contracts (i.e. Sell or buy the property).

Through the use of company resolutions and articles of association at company formation, introduce the requirement of, for example, an 85% majority of votes to approve any resolution on specified restricted subjects. i.e. Changing the purpose of the company; changing the appointment of the non-Thai as the company's only executive director with the power to sign cheques and enter into contractural agreements; the refusal of a lease extension; etc...
Thai shareholders may also pre-sign share transfer certificates so that share ownership may be changed by the non-Thai at any time.

Done this way the company option has traditionally been a very secure and practical way to structure land ownership for non-Thais in Thailand. Be aware that there are now annual accountancy requirements that will entail the payment of company tax, accountancy and audit fees. These are estimated at between 10,000 and 20,000 baht per annum dependant on property value and company structure at the current time. These ongoing costs must be taken into account.

Following a recent directive to local Land Offices from the Ministry of Interior, the source of funding for the Thai majority shareholders has now to be proven at land registration in order to ensure that the Limited Company is not being set up purely as a vehicle to circumvent existing Thai land ownership laws and regulations. Basically, if the Thai shareholders have neither the funds nor a genuine commercial interest in the business of the company then the land registration will not be allowed and the company itself may be dissolved. For this reason it is imperative that you engage property and legal professionals that know what they are doing and can re-assure you that they have your best interests at heart.

Leaseholds

An extremely beneficial method of property ownership for non-Thais, that is often over-looked, is through a leasehold structure. The overview of this method is to create a perpetually renewable leasehold ownership structure giving all of the pertinent advantages of Freehold Ownership. Namely

Security of tenure

Able to enjoy the benefits of asset appreciation Can bequeath or gift your asset when and to whom you so desire and last but by no means least that it will be yours to use and enjoy until sold or bequeathed

As the law states that non-Thais may not own the freehold title on land, the purchase of land and buildings on the land should be divided into separate contracts. The ownership of buildings may then be legally transferred to the non-Thai.

Freehold ownership of the land is then transferred to a nominated Thai national or juristic body (limited company) and several important safeguards are then put in place in order to allow the non-Thai all the benefits of freehold ownership whilst ensuring sufficient control and protection.

A lease agreement is drawn up between the two parties to include the following clauses and is registered at the Land Office on the reverse of the land Title Deeds:

The granting of right of access and abode to the non-Thai .This ensures that they are able to enjoy daily use and benefit of the land as if they owned the freehold themselves the right to convert the leasehold to freehold ownership if the laws on foreign land ownership change in the future.

The right to sell and/or transfer the property.

Full and irrevocable Power of Attorney with respect to the land is granted by the nominated Thai national to the non-Thai, effectively ceding control.

Guaranteed extension clauses granting further terms up to a maximum of ninety years before the lease must be renewed.

The freehold of the land is transferred into a Thai Limited Company under the following conditions: (see Limited Company section above for full explanation of how control of the company is secured with the non-Thai purchaser)

The original Thai developer or land owner retains the majority ordinary shares.

The introduction of a requirement for a minimum majority of 85% to approve any resolutions affecting certain restricted subjects such as changing the purpose of the company; changing the appointment of the non-Thai as the company's only executive director with the power to sign cheques and enter into contractural agreements; the refusal of a lease extension; the granting of future leases and control over disposal of assets.

A loan document is drawn up between the land holding company and the non-Thai purchaser with the following clauses:

The freehold of the property is registered as security on the reverse of the title deed document and recorded at the Land Office. This prohibits the sale of the property without the creditor's approval.

The sum of the loan agreement is set well in excess of current or likely future values of the land and is registered on the reverse of land Title Deeds at the Land Office.

A further clause ensures that the amount outstanding will increase annually in line with the increase in the property's market value.

Ensuring ownership of any buildings is in the non-Thai's name offers further protection as the nominated landowner has no right to possession of the buildings at any time. This is the reason for separate contracts.

This method is similar in many aspects to outright condominium ownership by non-Thais. You do not own any land as such but have an interest in a percentage of the entire project land through a Juristic Person (limited company) on your collective behalves.

The lease agreement and all the attendant land holding company structures need to be watertight. However, this has become a method of structuring land ownership that we highly recommend for the majority of our clients in Thailand. Being strictly within both the letter and the intent of the relevant Thai laws. Pattaya House does not currently offer any objects with leasehold options to our foreign buyers. All of our objects are freehold objects. Hence, foreigners would be allowed by purchase any of our condominium units for sale under a foreign quote. Thai’s would be able to buy either from our selection of condominium units or houses with freehold land titles.

Land Titles

Land is titled depending on its survey status. As a matter of course one of our due diligence requirements on behalf of our clients is to make sure that the land title is correctly ascertained and verified before you buy. Often prices vary greatly depending on the type of title involved.

“Chanood ti din” (or simply Chanood as it is locally known) are title deeds with land accurately surveyed, usually by GPS ( satellite). This gives you incontestable ownership of the land and is the most accurate and valuable land title you may hold.

Running in joint second place are the titles of “Nor Sor Sam” and “Nor Sor Sam Kor”. They are land title deeds where clear records of ownership are maintained, and they may be sold or leased. However, they are less accurately surveyed than Chanood titles and care must be taken to establish accurate boundaries and measurements of the land. As it stands, most “titles” outside of the developed areas are “Nor Sor Sam” or “Nor Sor Sam Kor” and so are still a very common method land title for buyers to encounter who are looking for something a little bit of the beaten track. Consequently this land also tends to offer very good value for money.

And there are more. Sor Kor Nung, Tor Bor Tor Hoc, and Tor Bor Tor Ha are essentially squatter’s rights registered at the district office for a small fee. Unlike the Chanood and the Nor Sor Sam Kor, they cannot legally be sold, nor can you build on the land if you are stupid enough to buy it. So be a prudent foreigner and ignore the Sor Kors and Tor Bors.

Oh yes, I almost forgot one, the Sor Bor Kor. These are true title deeds, accurately surveyed and pegged (like a Chanood). They can be mortgaged and developed. But, the big but, is they cannot be leased, sold or transferred. So, also ignore Sor Bor Kor.

Chanood and the Nor Sor Sam Kor are the only titles over which a registered right of ownership or lease may be registered. Pattaya House currently only offers houses for sale on Chanood titles to Thai’s.

Source: bluevisionagency.com/simple-overview-of-thailand-property-laws.html