Five Options For Acquiring Land And House In Thailand
How can a foreigner acquire land in Thailand?
Option # 1 - In a name of Thai company - recommended.
Foreigners, aliens, or farangs, can form a Thai company which can own land and property. The company issues shares, of which the foreigner owns 39% - and the foreigner is designated as the Director of the company.
The remaining 61% shares of the company are owned by (usually) three Thai persons (each Thai person should not own more than 19% of the shares).
The Thai persons each give the foreigner completed, signed, but undated share transfer forms. The only shareholder who can call a shareholders meeting is the company Director, and the Director is the only one who can approve any resolutions of the company shareholders.
When the property is sold, the Director (and 39% share holder) dates the pre-signed share transfers forms, enables the transaction as Director, and the sale is completed. There are, however, matters of tax reporting for Thai companies, and special rules for companies not engaged in commerce, that the buyer should be aware of - a good Thai lawyer is necessary.
Option # 2 - Lease - limited recommendation.
Foreigners can lease land on a 30 year contract which contains a clause giving the lessee first option on a further 30 years. The same contract, registered at the Land Office (Department of Lands), can be renewed every 30 years for a maximum of 990 years. The lessor's heirs are bound by law to honor the agreement, and the lessee can bequeath the lease to his/her heirs in a Last Will and Testament. A potential weakness with this solution is, for example, that the lessor can conceivably claim that the lessee is mismanaging the land to the detriment of its value, and can sue to dissolve the agreement. Of course, this point must be proven in court, but could be a serious headache for the lessee. Also, although leases may be offered by reputable and trustworthy land owners, conditions can change through the passage of years.
Option # 3 - Contract of Credit - limited recommendation.
Instead of purchase or lease, the payment for land can be registered as a loan to the seller, documented in a Contract of Credit, registered at the Land Office. The value of the loan is set at the registered value of the land plus the actual building cost of any structures on the land. The buyer's name appears on the Title Deed as creditor, which effectively prevents the registered owner (debtor) from selling the land before repaying the loan. The weakness with this solution is that as property values rise, the value of the property will in the future be greater than the value of the loan, and the debtor could conceivably buy the land back at bargain price simply by repaying the loan.
Option # 4 - Married to a Thai
In 1999, Thai property law, concerning a Thai whose spouse is foreign, has been amended for a favor of a Thai with a foreign spouse. Such couple may now legally own a land in Thailand. Nevertheless, a land must be registered under a name of a Thai. Also, a foreign spouse must sign a declaration stating that the funds using to buy a land is of a Thai spouse, so that he/she waives his/her right to the ownership of land.
Option # 5 - Investment (BOI)
A foreigner who invests 40 million Baht for no less than 5 years, for some other than ownership or real estate itself, is entitled to buy up to one rai (1,600 square meters) of land for residential purposes. Permission from the Ministry of Interior must be obtained.
Types of land title deeds
- Chanote - the Best! Allows Ownership & Possession Rights.
- Nor Sor 3 (Sam) Gor - Second Best, it is documented with (aerial) airplane photography by the government, but allows only possession, but can made directly into Chanote at the land office.
- Nor Sor 3 (Sam) - Old system replaced by Nor Sor 3 (Sam) Gor, to be made into Chanote must be made into Nor Sor 3 (Sam) Gor first.
- Tor Tor 3 (Sam) - Be Careful! Squatter's rights apply, it can not be sold by the land register office, only between persons.
OWNERSHIP RIGHTS VS POSSESION (SQUATTERS) RIGHTS
The essential difference between the Chanote and the other three documents is that only the Chanote allows both possession rights and ownership rights, while the other documents allow only possession rights. A Chanote is the best title deed to have as the property is fully surveyed, can be sold, passed onto heirs, and all the other benefits given to full title holders.
If you buy land that does not have a chanote or Nor Sor 3 (Sam) Gor, anyone may claim possession rights - if they occupy the property for as short a period of time as just one year and the title is a Tor Tor 3 (Sam) they can claim possession. A Tor Tor 3 (Sam) title deed can not be registered at the Land Office. Ownership can be contested if the Tor Tor 3 (Sam) owner does not occupy the land or does not put a fence around the land to keep out squatters who may try to claim possession. Property with title deeds that are not chanotes can be sold and passed on to heirs by a legal will or other rights.
If the title deed is a Chanote, the property must be occupied by a squatter for at least ten years, not one year as in some of the other documents, to gain possession. As long as the owner occupies or uses the property within the 10-year period, full ownership will be protected under Thai law.
However, the Nor Sor 3 (Sam) Gor is much more exact in terms of survey and measurement of the property than all types but chanotes. The Tor Tor 3 (Sam) is the weakest of the documents and is generally regarded as 'squatter's rights' land. Never accept any property for sale with a Tor Tor 3 (Sam) if you are not a Thai citizen.
Our legal services for buy Thai property
1) Title search: 18,000THB
Scope of services:
- Conducting a search on the title and relevant documents of the land.
- Ascertaining that the title document is in order.
- Ensuring that a seller is the current owner of the land.
- Confirm the lack of mortgage on the property, and the lack of further encumbrances, if any, on the land.
- Check actions against the seller in both local courts and the Central Bankruptcy Court.
- Verifying whether there is any restriction on the development of the land.
2) Prepare the sale and purchase agreement: 20,000THB
Scope of services:
- Verifying the sales agreement.
- Providing comments on clauses of the sales agreement.
- Negotiate modifications as needed to protect your interest.
3) Registration of transfer ownership 18,000THB
Scope of services:
- Preparing the application and supporting documents required for the registration of the transfer of ownership of the property for you as a foreign buyer.
- Registering, on your behalf, at the Land Department.
4) Registration of Thai limited company for land ownership:
Scope of services:
- Draft, review and registration of the Objectives and the Articles of Association.
- Obtain the Company Registration Certificate and Affidavit.
- Apply for Taxpayer Identification Number.
- Translate the company registration documents, such as the Certificate of Incorporation and the Articles of Association into English.