Buying Real Estate in Thailand; Steps of Transactions

In a previous post we have been overviewing the general information concerning real estate in Thailand, and the different ways for foreigners to acquire an apartment, a house or villa and a piece of Thai land.

Today I would like to be more specific and go a little bit further into the details, and guide you through the different steps of transaction any buyer will have to go through when he will decide to buy a property in Thailand, whether it is buying a Condo from the developer, buying a condo from the owner or buying a house and the land going with it.

First part of any purchasing process of a condo or a villa will of course be the research of the property of your dream.

This can be done through a real estate agency, on your own looking around or a kind of love at first sight that will make you want to invest. Choosing an agent can be considered a good initiative as you will be looking for properties in a foreign country. Agents will offer you there expertize and are familiar with the area and the market. This will save you time and efforts, as you will be shown only properties corresponding to what you are looking for and within your price range. Moreover, an agent will be a liaison between you and the seller, whether it is a developer or an owner.

This is merely the only common point to any kind of property purchase. Then, the processes will slightly vary depending the kind of property you want to buy, and who you want to buy it from.

Buying a Condo Unit from the Developer

So you have found the ideal property in a condo which is in construction or freshly built and you decide to buy a unit in this condo, directly from the developer.

Negotiation

Conducted between the two parties, they concern the price, the amount of the deposit, the date of transfer of ownership and registration, the way taxes will be shared… You will sign a reservation agreement and have to make a first ‘reservation’ deposit usually up to 30% of the purchasing price of the unit. Unless you add in the contract a ‘subject to clear title’ or a ‘subject to agreement on the contract term’ clause, this deposit is non-refundable.   

Checks and due diligence

To check that everything is ok with the unit you want to buy, the best to do for this is to hire a lawyer to make ‘due diligence’ of the property. The lawyer will review in details all the terms and conditions to ensure that your interests are guaranteed during the buying process. He will ensure you will get what you expect, he can alert you about hidden pitfalls in the contract, ensure that you will received a clear title deed. A copy of this agreement is then given to the Land Dept. Here the lawyer will compare the one you received from seller and the one received by the Land Dept. to verify they are the same

Sales and purchase agreement

The seller will reserve the property for you and the process continues with the seller drafting the contract for the purchase (sale and purchase agreement).                                                                                                                                                                                                                                                        You’ll be given a draft of the sale and purchase agreement and a copy of this agreement is then given to the Land Dept. It should be written in Thai and English. The sale and purchase agreement must detail the property and specify the responsibilities of the buyer and the seller in the sale and buying process: the detailed characteristics of the unit; the agreed price of the unit, the schedule of payments; the responsibilities for transfer and taxes; the warranties regarding due diligence; the transfer date… All this complying with the Condominium Act and the Customer Protection Laws.

Signing the final agreement should be done within 30 days after the reservation agreement.

Payment and transfer of money

The payments must be done according to what is stipulated in the sale and purchase agreement. You already paid a first deposit as a reservation fee, and now have to complete the payment.                                                                                                                                                     

The full purchase price must be transferred in foreign currency directly to the bank of the seller. The bank will then convert this money into Thai Baths and issue a Foreign Exchange Transaction Form (FET Form) as well as a confirmation letter of the transferred amount. FET Form attests that the payment is made in foreign currencies transferred to Thailand. These documents must mention the amount transferred in foreign currency, the amount exchanged in Thai Baths, the name of the sender, the name of the receiver and the purpose of the money transfer. Note that these two documents will be necessary for the registration of ownership in the name of a foreigner by the land office.

If you buy an off plan condo unit, installments (also agreed when signing the sale and purchase agreement) are paid monthly during the construction, and a final amount has to be paid at the transfer of ownership. We advise you, if possible, to pay the monthly installments to an escrow account and not directly to the developer’s bank account. This way your payments are protected and you can avoid problems (if the developer go bankrupt for example). However payments through escrow accounts are not often used by developers (in fact very uncommon) as they need money to finance the project.

During the sale and purchase agreement, both parties pre-calculated and agreed the amount of taxes to be paid at the land department on the date of the transfer of ownership.

• transfer fees (2% of the appraisal value of the condo unit) can be paid by the buyer, the seller, or split half/half  (depending on how it was negotiated and agreed in the sales and purchase contract)
• income tax (1% of the higher value between appraisal value and purchasing price / Under Consumer Protection Act, seller should be responsible for this tax (when you buy from developer)
• business tax (3.3% of the higher value between appraisal value and purchasing price / Under Consumer Protection Act, seller should be responsible for this tax). The Seller and the Buyer must prepare in cash the amount necessary to pay the taxes and government fees due on the date of the transfer.

Other payments are sinking fund, common area maintenance fee (based on the surface of the unit (section 18 Condominium Act), water and electric meter installation fee, telephone installation fee… all of them should be agreed and written up on the sales and purchase contract.

If you are looking for a way to finance your project, be aware that obtaining a mortgage in a Thai bank as a foreigner is something not to think about, as Thai banks are reluctant to lend money to foreigners.

Preparing the documents for the transaction

The buyer will have to provide to its lawyer the following: copies of the passport including the visa page showing the date of latest stay in Thailand (necessary to prepare a Power of Attorney the buyer can grant to his representative if he is not attending); copies of the marriage certificate and copy of the passport of the spouse (If the buyer is married but purchase the condominium unit under his name solely, a letter of authorization allowing the buyer to purchase the unit is needed); name and first name of the buyers’ parents and of the parents of his spouse (if they purchased the unit jointly).

The seller will have to provide the following: a letter from the juristic person of the condominium attesting the foreign ownership ratio, the FET Form issued from his bank.

Registration of the sale and purchase agreement and transfer at the land office

The buyer and the seller had previously scheduled the date of the transfer at the Land Dept. Finalizing the buying process, you will have to go to the Land Office to register the title of ownership of the condo unit.

The seller and the buyer (or their representatives) will sign the sale and purchase form prepared by the land officer. All the required documents for the transfer of the unit must be remitted to the land officer at that time.

The Land Officer will give the original duplicate of the title deed mentioning the name of the buyer as the owner of the unit to the buyer (a copy will be kept at the Land Dept.), and both parties will pay the taxes and costs due for the transaction.

Each condo unit must have an ownership title deed issued by the Land Dept. This document is the certificate of true ownership. It must mention:

• The position and location of the land and area of the land of the condominium
• The position and location and a plan of the apartment showing the width, length and height
• The name and surname of the person having the ownership of the apartment

Buying a Condo Unit from the Owner

The process of transaction is very similar to the process of buying a condo unit from the developer. However, some slight differences exists and it is better to know them.

Negotiation

Conducted between the two parties, they concern the price, the amount of the deposit, the date of transfer of ownership and registration, the way taxes will be shared… You will sign a reservation agreement and have to make a first ‘reservation’ deposit usually up to 30% of the purchasing price of the unit. Unless you add in the contract a ‘subject to clear title’ or a ‘subject to agreement on the contract term’ clause, this deposit is non-refundable.

Checks and due diligence

As when you buy a condo unit from the developer, it is also recommended that you hire a lawyer to check that everything is ok with the unit you want to buy. The lawyer will make a ‘due diligence’ of the property. As you are buying from an owner, some more checks have to be done.

• check of the copy of the title deed given by the seller and of the original one kept at the Land Dept. to ensure that the information given by the seller are correct
• check that the seller is the owner of the unit
• check that there is no mortgage (or other charges) registered on the unit
• check the size of the unit
• check the court to ensure that there are no legal procedure against the seller
• check the assessed value of the unit (some taxes will be calculated based on the sale value of the condo unit)
• check the previous transaction to know at what price the owner bought the unit
• check the ratio of foreign ownership of the condominium
• check a copy of the Tabien Baan (Property Registration Certificate)
• check if the owner registered the unit as its personal address

Sale and purchase agreement

You’ll be given a draft of the sale and purchase agreement written in Thai and English, specifying the responsibilities of the buyer and the seller in the sale and purchase transaction to come (detailed characteristics of the unit; agreed price of the unit, responsibilities for transfer and taxes, transfer date…) Of course the contract, its terms and conditions must be done according to the Condominium Act and the Customer Protection Laws.

Your lawyer will review this sale and purchase agreement to ensure you will get what you expect, he can alert you about hidden pitfalls in the contract, ensure that you will received a clear title deed. A copy of this agreement is then given to the Land Dept. Here the lawyer will compare the one you received from seller and the one received by the Land Dept. to verify they are the same

Signing the final agreement should be done within 30 days after the reservation agreement.

Payment and transfer of money

As a foreigner buying real estate in Thailand, you will have to purchase your property in foreign currency and prove that the amount of the transaction is to be paid in foreign currency transferred to Thailand. The full purchase price must be transferred in foreign currency directly to the bank of the seller from an account under the name of the buyer and mention that the funds are transferred to purchase a condo unit. The bank will then convert this money into Thai Baths and issue a Foreign Exchange Transaction Form (FET Form) as well as a confirmation letter of the transferred amount. FET Form attests that the payment is made in foreign currencies transferred to Thailand. These documents must mention the amount transferred in foreign currency, the amount exchanged in Thai Baths, the name of the sender, the name of the receiver and the purpose of the money transfer. Note that these two documents will be necessary for the registration of ownership in the name of a foreigner by the land office.

If you already have or can open an account in Thailand, the money can be transferred in foreign currency to an account in Thailand under the name of the buyer, then you can pay with a cashier check equivalent to the amount of the purchase price. A copy of the check must be sent to the seller so that he can verify that the check is real (note that this is very very unusual, but it can be)

If the unit is mortgaged, it is necessary to pay the bank. The buyer should transfer the amount equivalent to clear the debt. In this case, the buyer will pay the purchase price of the condo unit balanced with the payment of the mortgage.

During the sale and purchase agreement, the amount of taxes to be paid at the land department on the date of the transfer of ownership have been pre-calculated.

• transfer fees: 2% of the appraisal value of the condo unit, can be paid by the buyer, the seller, or split half/half (depending on how it was negotiated and agreed in the sales and purchase contract)
• income tax: 1% of the higher value between appraisal value and purchasing price. This tax is collected under a specific formula, thus it is better to consult a lawyer to deal with the payment of this tax. It can also be paid by agreement with the seller, negotiated prior to the signature of the contract.
• business tax: 3.3% of the higher value between appraisal value and purchasing price in the case the owner owned the unit for less than 5 years;
• 5% stamp duties based on the higher value between the appraisal value and the purchasing price If the owner owned the unit for more than 5 years. Once again, the payment can be agreed when signing the contract.

The Seller and the Buyer must prepare in cash the amount necessary to pay the taxes and government fees due on the date of the transfer.

Preparing the documents for the transaction

The buyer will have to provide to its lawyer the following: copies of the passport including the visa page showing the date of latest stay in Thailand (necessary to prepare a Power of Attorney the buyer can grant to his representative); copies of the marriage certificate and copy of the passport of the spouse (If the buyer is married but purchase the condominium unit under his name solely, a letter of authorization allowing the buyer to purchase the unit is needed); name and first name of the buyers’ parents and of the parents of his spouse (if they purchased the unit jointly).

The seller will have to provide the following: a letter from the juristic person of the condominium attesting the foreign ownership ratio, the FET Form issued from his bank as well as the title deed of the property.

If the unit is mortgaged, the seller must request the bank to calculate the amount due to clear the mortgage. An officer must attend the transaction at the Land Dept. to clear the mortgage before the transfer of ownership.

Registration of the sale and purchase agreement and transfer at the land office

The date of transfer being agreed during the negotiation, both the seller and the buyer (plus the bank officer if the unit is mortgaged), or their representatives, must attend the registration at the Land Office. Buyer and seller will remit the needed documents (letter from the condo juristic person stipulating the percentage of foreign  ownership in the condo, FET Form, seller’s title deed…) to the Land officer and sign the final sale and purchase form, as well as all the forms required for the transfer. The land officer will give the buyer the original duplicate of the title deed (mentioning the buyer as the new owner) and both parties will pay the taxes and transfer fees for the transaction.

After purchase formalities

The seller is remitting to the buyer the keys and the Tabien Baan. He must also prepare the necessary documents for the transfer of electricity and water meters.

Buying a House with Land

We have previously learnt that a foreigner can only own in his own name a unit in a condominium or a building without the land.

In this case, what are the possibilities for a foreigner to ‘buy’ a piece of land and a house?

Acquiring land

In Thailand, Land is measured in Rai, Ngan and Wah. Land prices are usually expressed in Baht / Rai or Baht / Wah.

• 1 Rai = 4 Ngan (or 1600 Sq.m.)
• 1 Ngan = 100 Wah (or 400 Sq.m.)
• 1 Wah = 4 Sq.m.
• 1 Acer = 2.5 Rai
• 1 Hectare = 6.25 Rai

Another important point concerning acquiring land in Thailand is the title deed attached to this land. There are 4 different types of title deeds existing: 

• ‘Chanott ti din’ is a title deed with land accurately surveyed, giving incontestable possession of the land.
• ‘Nor Sor Sam’ or ‘Nor Sor Sam Kor’ are the most common title deeds you will find in Thailand. These are clear title deeds as far as records of ownership are maintained but tend to be less accurately surveyed. You can sell or lease land under these title deeds.
• ‘Sor Kor Nung’, ‘Tor Bor Tor Hoc’, and ‘Tor Bor Tor Ha’ are titles registered at the district office guarantying occupant’s rights. They cannot be sold, and the owner of such a title deed cannot build on the land.
• ‘Sor Bor Kor’ are not to take into consideration. They are true title deeds, accurately surveyed, but cannot be leased, sold or transferred.

‘Chanott ti din’ - title deed

Considering the land, a foreigner has 2 secured options to acquire a piece of land, obtaining a long term lease of the land or buying it through a Thai Limited Company.

Land Lease

The most common and easiest way to ‘acquire’ and secure land in Thailand is to sign a long term lease of 30 years, with an option to renew the lease for another 30 years. This solution is called the ‘2x30 way’. It is recommended to add certain clauses to the contract, such as the possibility to reassign the lease to another person (in case you decide to sell your house), the possibility to sublease or a purchase option of the land. Note that taxes must be paid if you are leasing some land, equivalent to 1.5% of the value of the lease.

Creating a Thai Limited Company

Another option is to create a Thai Limited Company which owns the land (or the land and the house), as long as a foreigner doesn’t own more than 39% of the shares of the company and that foreigners’ ownership of the company doesn’t exceed 49%. As 61% of the share will be owned by Thai associates, you will want to guarantee your control over the company. In order to do that, you will select trusted associates and multiply, to a certain extent the number of shareholders. You can also use a legal power of attorney handing control of the company to the foreign director (you). Another possibility to keep control of the company is to assign greater voting rights to the foreigner partner (you).

Setting up a Thai Limited Company

The first step is to reserve a company name by submitting 3 different names to the Register of Partnerships and Companies, Business Development Department, Ministry of Commerce.

Then you have to file a Memorandum of Association. This document details the reserved name of the company, its location, its objectives, its registered capital, the number and value of shares, information and signatures of the shareholders and the number of shares subscribed by each one of them.

A statutory meeting must be organized with the shareholders to adopt the articles of association, ratify the shareholders’ contracts and expenses, establish preference shares and their rights, fix the number of shares to be fully or partially paid up, appoint the directors and authorized director (you) and appoint auditors and agree on their remuneration.

The director have then to ensure the payment of the shares as agreed during the statutory meeting.

Now the company must be registered. The application must be filed, signed and handed over along with the statutory meeting report and the articles of association. An official fee is to be paid at the registration and the certification document will be issued.

Finally, you have to register for taxes at the Revenue Dept. where a tax registration card and number for the company will be remitted.

Creating a limited company will cost about 35,000 Baths plus 7% VAT.

Controlling the company

First, remember that the ratio of ownership must be 49% of foreign ownership and 51% of Thai ownership. Second, know that the minimum number of shareholders is 3, two Thai and one foreigner.

Foreigner has to be nominated director of the company.

Foreigner can be assigned greater voting rights (counting for 10 votes while ordinary voting rights count for 1 vote). This way if you own 49% of the share, your voting rights will represent 490, while the voting rights of other shareholders will represent 51.

Then, the land can stay the property of the company or the company can lease the land to an individual (you).

Buying under your husband’s / wife’s name

A third way can be considered if you are married with a Thai. In this case, your husband or wife can own the land (or the whole property) in his / her own name. This solution is suitable as long as your couple doesn’t have problems. To avoid hypothetical problems, you can then sign a leasing contract with your husband / wife.

Buying a house or villa

Now the acquisition of the land is secured through one of the three options described above, the next step is to acquire the house or villa which stands on it.

If you leased or bought a piece of empty land, you will have to build your dream house on it. You should apply for a construction permit on your own name in order to own the house.

If you leased or bought a piece of land on which a house or a villa is built, you will want to buy this house or villa.

The process is the same for any kind of real estate in Thailand and you will have to go through all the different steps we have seen above.

Negotiation

Conducted between the two parties, they concern the price, the amount of the deposit, the date of transfer of ownership and registration, the way taxes will be shared… You will sign a reservation agreement and have to make a first ‘reservation’ deposit usually up to 30% of the purchasing price of the property. Unless you add in the contract a ‘subject to clear title’ or a ‘subject to agreement on the contract term’ clause, this deposit is non-refundable.

Checks and due diligence

As when you buy a condo unit from the developer or from the owner, it is also recommended that you hire a lawyer to check that everything is ok with the house you want to buy. The lawyer will make a ‘due diligence’ of the property. If you are buying from an owner, some more checks have to be done.  

Sale and purchase agreement

You’ll be given a draft of the sale and purchase agreement written in Thai and English, specifying the responsibilities of the buyer and the seller in the sale and purchase transaction to come (detailed characteristics of the property; agreed price, schedule of payments, responsibilities for transfer and taxes, transfer date)

Your lawyer will review this sale and purchase agreement to ensure you will get what you expect, he can alert you about hidden pitfalls in the contract, ensure that you will received a clear title deed. A copy of this agreement is then given to the Land Dept. Here the lawyer will compare the one you received from seller and the one received by the Land Dept. to verify they are the same

Signing the final agreement should be done within 30 days after the reservation agreement.     

Payment and transfer of money

As a foreigner buying real estate in Thailand, you will have to purchase your property in foreign currency and prove that the amount of the transaction is to be paid in foreign currency transferred to Thailand. The full purchase price must be transferred in foreign currency directly to the bank of the seller from an account under the name of the buyer and mention that the funds are transferred to purchase a house. The bank will then convert this money into Thai Baths and issue a Foreign Exchange Transaction Form (FET Form) as well as a confirmation letter of the transferred amount. FET Form attests that the payment is made in foreign currencies transferred to Thailand. These documents must mention the amount transferred in foreign currency, the amount exchanged in Thai Baths, the name of the sender, the name of the receiver and the purpose of the money transfer. Note that these two documents will be necessary for the registration of ownership in the name of a foreigner by the land office.

Preparing the documents for the transaction

The buyer will have to provide to its lawyer the following: copies of the passport including the visa page showing the date of latest stay in Thailand (necessary to prepare a Power of Attorney the buyer can grant to his representative); copies of the marriage certificate and copy of the passport of the spouse (If the buyer is married but purchase the property under his name solely, a letter of authorization allowing the buyer to purchase the house is needed); name and first name of the buyers’ parents and of the parents of his spouse (if they purchased the property jointly).

The seller will have to provide the FET Form issued from his bank as well as the title deed of the property.

If you are buying the property through a company the following documents are also required:

• Certified copy of the certificate of incorporation
• Certified copy of the memorandum of association
• Notaries certificate
• List of shareholders
• Minutes of directors’ meetings with resolution to purchase the property
• Letter of advice regarding specific signature
• Free debt letter
• Certified copy of IDs of authorized director(s)
• Certified copy of the house registration of the authorized director(s)
• Power of attorney if the director will not be present in the transactions
• Foreign co-owner letter (if any)

Registration of the sale and purchase agreement and transfer at the land office

The date of transfer being agreed during the negotiation, both the seller and the, or their representatives, must attend the registration at the Land Office. Buyer and seller will remit the needed documents to the Land officer and sign the final sale and purchase form, as well as all the forms required for the transfer. The land officer will give the buyer the original duplicate of the title deed (mentioning the buyer as the new owner) and both parties will pay the taxes and transfer fees for the transaction.

Buying real estate, whether it is a condo unit or a villa, whether it is for your vacations or for your retirement, is always a serious investment and you have many different aspects to take into consideration.

The law regarding real estate in Thailand changed quite recently and the buying process has been considerably eased for foreigners to own apartments, units in condos, houses or villas.

However, it is greatly advised that you contact a lawyer. He will help you with all the legal advices and checks that need to be done on the property and the contract and will guide you through the entire process of being the new owner of the property of your dream in a paradise country.