Thailand Law Online

Real estate laws in Thailand for foreigners

Real estate property law in Thailand is the area of Thai law that governs the rights of use, possession and various forms of ownership of immovable property. The system of Thai real estate laws are similar to Western countries as it is based on the Western European civil law system, except foreigners are not allowed to own land in Thailand.

In this article a brief introduction to the most common real estate laws and restrictions for foreigners in Thailand.

CONTENT: Thailand Real Estate Laws Overview

1- Land ownership for foreign nationals
2- Foreign freehold ownership of condos
3- Apartments not registered under the Condominium Act
4- Leasehold interests in real estate
5- House ownership separate from the land
6- Land ownership by a Thai married to a foreigner
7- Usufruct
8- Superficies
9- Habitation
10- Servitude
11- Partly foreign owned Thai company
12- Land Titles
13- Transfer fees

1 - Land ownership for foreign nationals

A - Foreign nationals are not allowed to own land in Thailand

The Thai government created one exception to the rule in the Land Code Amendment Act B.E. 2542 (1999) (section 96 bis Land Code Act) allowing foreign individuals to acquire 1 Rai (approx 1600 sq.m) for residential purposes. Under the amendment Act granting permission is subject to the permission of the Minister of Interior and among other rules and restrictions (location) requires the foreigner to remit not less than 40 million Baht into Thailand for specific investment purposes approved by the Board of Investment (BOI approval) beneficial to Thai economy for a specific period of time (in addition to the investment in the real estate property). This is not a viable option for foreign individuals and the exception to the rule was invoked to enable foreign embassies and multinationals to purchase large houses for their ambassadors and CEO's). This type of ownership is not inheritable.

B - Foreign companies with very substantial investments benefiting the Thai economy may have special privileges and exemptions for land ownership granted under section 27 of the Investment Promotion Act, Under section 44 of the Industrial Estate Authority of Thailand Act or section 65 of the Petroleum Act (only for the duration of their business in Thailand).

C - The foreign controlled Thai company with a majority Thai shareholding (in number of shareholders and percentage of shares) is the only vehicle available for foreigners to control their investment in land in Thailand. Even though land ownership by a partly foreign owned Thai company is as such not illegal under Thai law the Thai government is restricting and discouraging the misuse and illegal use of Thai companies to circumvent foreign property ownership restrictions in Thailand. The Thai government has issued guidelines and regulation that must be applied by the local land offices when they are dealing with a partly foreign owned company, primarily aimed at preventing the misuse of nominee structured Thai companies as a front for foreign land ownership. 

D - According to section 93 of the Land Code Act, a foreigner who acquires land by inheritance as statutory heir can have an ownership in such land upon a permission of the Minister of Interior. Section 93 refers only to ownership of land by foreigners under a treaty, not for example to foreigners married to a Thai national. There is currently no treaty in place allowing foreigners to own land, therefore no foreigner who acquires land as a statutory heir will be given permission to own land in Thailand by the Minister of Interior. They can inherit land, but cannot register ownership and have to sell the land within one year from the date of acquisition.

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2 - Foreign freehold ownership of condos in Thailand

Foreigners, natural and juristic persons, can obtain individual freehold ownership of a unit in a condominium registered under the Condominium Act. This includes co-ownership in the common areas, such as hallways and land. The main document of ownership is the condominium unit title deed issued and administrated by the local Land Office. The main requirements for foreign ownership under the Condominium Act are:

1. not more than 49% of the total floor area of all apartments added together in a condominium or apartment complex can be foreign owned. The remaining 51% must be owned by Thai persons. In case of 100 equal apartments in a complex 49 can be foreign-owned.
2. foreigners must qualify for ownership under section 19 of the Condominium Act. Generally foreigners qualify by bringing in foreign currency into Thailand at least equal to the total purchase of the condo and exchanging it into Thai baht inside Thailand.

Inheritance of a condominium

A foreigner who acquires a condominium unit by inheritance, either as statutory heir or inheritor under will, must also qualify under section 19 of the Condominium Act to register ownership. Generally foreigners who acquire a condominium by inheritance do not qualify and must by law dispose of the condo unit within 1 year from the date of acquisition of the condominium .

Leasehold condominiums

In case foreign freehold units in a condominium project are no longer available, the remaining units in the Thais side may be leased by foreigners from the Thai owner under a 30-year registered lease arrangement. Normal hire of property laws, as for land or house, apply on condominiums. There is no separate law issued regulating the lease or rent of condominium units by foreigners as opposed to buying a condominium freehold in Thailand. Voting rights in the condominium juristic person should preferably be part of the lease agreement. As an important note; a lease or rental agreement is not an inheritable right in Thailand.

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3 –Apartments not registered under the Condominium Act

Registered licensed condominiums in Thailand must comply with a legal system in the Condominium Act built around individual unit ownership, joint ownership in the common areas and joint managed by all the unit owners of the building. Common in the tourist areas are apartment buildings not registered under the Condominium Act. These apartment buildings are basically like any other building and the owner can rent out parts of his building under his own terms and conditions.

In a registered condominium the whole legal structure is set by the Condominium Act and built around ownership and democratic control over the building by and in the interest of the unit owners. There are various legal structures under which unregistered apartments are sold which vary from merely apartment leases to leases combined with shares in a holding company. Purchasers of leasehold apartments do not find protection in the law, such as tenant or consumer protection, therefore the contracts involved and intention of the developer should be triple checked before signing any contracts or handing over money.

Fractional ownership in Thailand's tourist resort areas

These unregistered apartments in Thailand's tourist areas could for example be sold as fractional ownership, a kind of time sharing in which the apartment is sold through leases and participation in a limited company to many different parties and each having a specified block of time during which they may use the apartment.

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4 – Leasehold interests in real estate

Foreigners are under Thai law allowed to lease real estate property for up to 30 years and the law is applied in the same manner if the lessee is a foreign or Thai national. Leasehold or lease in Thailand is a normal hire of property governed by the section hire of property (sections 537 to 571 Civil and Commercial Code).

Confusion often occurs because the term lease agreement is used instead of rental contract. Lease or leasehold under Thai law is basically a rental contract.

In many jurisdictions around the world leasehold or land lease is a real property right (a fixed asset, mortgageable and inheritable right attached to the property) governed by a separate section of the law (separate from normal hire of property laws). In Thailand lease is a normal hire of property, meaning among others that it is not an inheritable right. As a prepaid rental it can be terminated prior to the expiration term (breach of contract, death of the lessee) and cannot be mortgaged.

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5 – House ownership separate from the land

In a standard situation a real estate sale involves land and house, but ownership over a house in Thailand can be transferred separate from the land it stands on. Land and house could have different owners. In case ownership of a house is transferred separate from the land the transfer procedure must also be in writing and registered with the competent authority (i.e. the Land Department's branch or provincial office). The rights to possess and use the land must be created separately. As an important note; the right to own a building upon another man's land always relates to the term an right to use and possess the land (i.e the term of the land lease and/ or the right of superficies term).

A Ta.Bian.Baan or Tabien Bahn is the document which gives the address of the house and states the persons who live in it (it could state the name of the owner but not necessarily). There are 2 types of Ta Bian Baan: 1 The blue Ta Bian Baan (Thor.Ror.14) for Thai nationals and 2 the yellow Ta Bian Baan (Thor.Ror.13) for foreigners.

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6 – Land ownership by a Thai married to a foreigner

Foreigners married to a Thai national can't own land themselves but the Land Department will allow transfer of ownership of the land to the Thai national who is married to a foreigner after a joint statement 'letter of confirmation' by the couple stating that the money expended on the land is personal property of the Thai spouse. This procedural requirement is based on a regulation issued by the Ministry of Interior (March 1999), which is based on the principle of section 1472 of the Civil and Commercial Code that if personal property has been exchanged for other property during the marriage (in this case land) that property becomes and remains a personal property, and not a joint marital property between husband and wife. This way the foreign spouse does not obtain ownership rights in the land based on Thai family laws, ‘property between husband and wife’ .

7 - Usufruct

Usufruct contract refers to the agreement and the right to use or occupy another person's real property for one's life or up to 30 years. under sections 1417 1428 of the Civil and Commercial Code. A right of usufruct in Thailand gives the right to use and manage a real estate property during a person’s life time. The right in the real estate property exists so long as the usufructuary (the holder of the usufruct right) is alive. After his or her death the real estate property reverts back to the owner. A usufruct is often given to a family member such as a foreign spouse with the idea that a foreign spouse is protected in the event of death of the Thai spouse (registered owner). The usufruct gives the right to the foreign spouse to remain in the property upon the death of his or her Thai spouse.

The usufruct interest in the real property in Thailand must be recorded in the official land registry of the local land office. By registering the usufruct agreement the public is put on notice of the recorded usufruct burden on the land and therefore is enforceable against any third parties such as a transferee owner. The right of usufruct is not complete unless registered with the Thailand land department.

The usufructuary is not allowed to sell the property during his right of usufruct without agreement of the registered owner of the property. The usufructuary under Thai Law has the obligation to maintain the property and take normal care of the property. If the usufructuary fails to do so and the property would lose value and become in a poor state of repair the owner has the right to terminate the right of usufruct. The usufructuary is liable for loss of value or destruction of the property unless he can proof that damages are not caused by his fault. The creation of a usufruct could in certain circumstances be an effective option to protect a foreign spouse during his marriage in Thailand and upon death of his or her Thai spouse, however in some case a usufruct is not the best option read more...

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8 - Superficies

Right of superficies (sections 1410 to 1416 Civil and Commercial Code) in Thailand is a civil law real estate right. In France it is called 'droit de superficie', in Germany it is called 'Erbbaurecht' and in the Netherlands it is called 'recht van opstal'. The principle of the right of superficies in these countries is the same; it grants the superficiarius (meaning the person granted the right of superficies) the right to build and own buildings, structures or plantations upon land belonging to another person. With the right of superficies the owner of a plot of land grants to another person the right to use his land for building.

The superficies agreement specifies the terms under which the right is granted and by registration at the Land Department's provincial or local branch office it legally separates ownership over the land and ownership over the building. The right of superficies in Thailand is limited to a period of time of up to 30 years or for the life of the owner of the land or the life of the superficiarius. The right of superficies must be registered on the land title deed to be complete and enforceable. A superficies can be registered as a separate right or as a supporting right (i.e. in combination with a land lease agreement). The person in the agreement granted the right of superficies obtains ownership over the building without obtaining or having ownership rights in the land. A superficies in Thailand will be allowed before construction or during the construction of a building, generally not for an existing building.

9 - Habitation

The right of habitation under the civil and commercial law of Thailand refers to the right of a person to live in the house of another gratuitously. The right of habitation differs from a usufruct contract that the person granted a usufruct is allowed to transfer the exercise of his rights to a third person (not the actual usufruct), where the right of habitation grants only the use of a property for the residence of the grantee himself and family. A habitation contract refers to the right of dwelling in a house.

The right of habitation is granted gratuitously, otherwise the matter would become 'hire of property'. A right of habitation can be created by last will in Thailand (the owner grants the right of habitation in his last will or testament) or by gift from the owner to a third party. A right of habitation is complete upon registration and endorsement on the title deed at the land office where the property is located.

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10 - Servitude

Servitude as a right of way is the Thai legal equivalent of an English easement. It is s a non-possessory interest in land. Servitude is governed by the Civil and Commercial code sections 1387 to 1401. Section 1387: 'An immovable property may be subject to a servitude by virtue of which the owner of such property is bound, for the benefit of another immovable property, to suffer certain acts affecting his property or to refrain from exercising certain rights inherent in his ownership'. Servitude usually involve two or more separate properties/ plots of land, one of which is burdened and the other benefited by the servitude. The burdened parcel is called the servient property and the benefited parcel the dominant property.

Servitude can involve several kinds of benefits and burdens, but usually it involves the use of neighboring well, the use of an access road over adjoining land plots, laying irrigation ditches, laying pipelines or utilities over neighboring plots. A registered right of servitude is an important right in case a plot of land is surrounded by other plots without direct access to a public road. In this case a right of servitude registered over adjoining plots guarantees uninterrupted access to dominant property.

11 – Partly foreign owned Thai company

Up to the May 2006 Land Office guidelines it was common practice for foreigners to purchase land or condominium beyond the foreign ownership quota through a majority Thai owned but foreign controlled Thai limited company. As long as the company had majority Thai shareholdings there were no restrictions when purchasing a property and the partly foreign owned company was treated as any other Thai company. Currently the government is restricting the misuse of Thai companies by foreigners by enforcing laws that previously were not enforced. Under these laws they specify the procedures for the officials to follow when dealing with partly foreign owned companies registering land or rights over land. In this case the Thai shareholders in the company will be investigated to determine if they are not acting as nominee shareholders on behalf of foreigners.

Holding companies formed for property purchase by foreigners are currently much less common. In case a foreigner chooses to own property in Thailand through a Thai company the foreigner will generally not appear on the company formation documents (Memorandum of Association) or on the shareholder list when the land is transferred to the company. After the property has been transferred to the 100% Thai company up to 49% of the (preference) shares will be transferred to the foreigner. Real estate holding companies are not allowed under Thai laws. A company that owns a real estate property must appear to be a normal company and file yearly balance sheets and correct accounting.

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12 – Land Titles

The first and most important part of a real estate investment and buying a house in Thailand is the land title deed. Does the land have a suitable and proper title deed. The land title deed is the official a document administrated by the Land Department which states and proves a person's legal right to own or possess a piece of land, its survey status, as well as rights, obligations, or mortgages on the property as well as the right to dispose or encumber the land.

13 – Transfer fees

In a sale and purchase agreement of a new condominium unit or a property in an official housing development the law specifies that the developer may ONLY pass on the transfer fee for a percentage of up to 50% of the total transfer fee to the buyer. In other situations the parties are free to divide the transfer fees and taxes and it could vary from purchaser pays all to seller pays all. The following conveyancing taxes and transfer fees are involved with transfer of real estate in Thailand, including recommended responsibilities for payment to be arranged in the sale and purchase agreement:

The above tax rates are the general tax rates that apply on the transfer of ownership of land, land and house, condominium or the transfer of a house separate from the land. The above taxes and fees are charged at the time of transfer of the property read more...

Sample tax and fees indication based on the transfer of a condominium unit in Thailand with an appraised value of 5 million Thai Baht after 3 years of ownership by the current owner.

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Article source: http://www.samuiforsale.com

The information in this page is meant as an introduction to Thailand property laws and is not intended to be comprehensive nor to provide specific legal advice. The information should not be used as a substitute for legal advice (author Robert Spelde)