apartment payment terms
for a resale or off-plan condo in Thailand
In case of a resale condo unit/ apartment in Thailand the purchase price for the unit could be paid by cashier's check to the seller at the time of transfer of ownership of the unit at the land office (standard practice). In this case the buyer of the condo must obtain a cashier's cheque and the foreign exchange documents (FET-form) from his bank inside Thailand required for registration of foreign ownership under Thai condominium laws.
The conditions under which a seller will complete a sale of a condominium usually stipulates that a deposit as part of the total purchase price is paid directly to the seller at the time of signing the sale and purchase agreement. As deposit payments are usualy unsecured payments, unless payment is made in a thrid party escrow account, it is recommended to keep this holding deposit to a relatively small amount, say to up to 1% of the total purchase price. Sample clause in the sale and purchase agreement:
TERMS OF PAYMENT (CASHIER CHEQUE)
- On the execution of this agreement, the buyer agrees to pay a holding deposit of __ numbers _____ (__writing___) Thai baht (the ‘deposit’) to the seller to secure the purchase of the condominium unit.
- The remaining balance of the purchase price in the sum of __numbers_____ (__writing___ ) Thai baht will be paid by the buyer to the seller by a cashier cheque on the settlement day at the Land Department at the time of registration of the transfer of ownership.
In some cases the purchase price is paid into the condo seller's bank account prior to transfer of ownership procedure (not recommended). In this case the seller is responsible for obtaining the foreign exhange documents for the buyer. The clause in the sale contract would be something like:
PAYMENT TERMS (REMITTANCE AND PAYMENT)
The buyer shall pay the purchase price to the seller by 2 installment payments as follows:
- Upon the execution date hereof, the buyer shall pay a deposit as part of the purchase price in the sum of baht___.- (__ thousand baht) to the seller.
- The balance of the purchase price of baht__.- (__ million __ hundred __ thousand baht) shall be paid by the buyer to the seller within 30 (thirty) days following the execution date of this agreement.
- The buyer shall make payments to the seller by remitting funds from abroad into the seller’s designated bank account in Thailand, with details as follows:
- Account Name:
- Account No. :
- Bank :
- Branch :
- Address :
- Swift Code: ___
- Message : “Purchase of Condominium Unit No. ____ in _____ Condominium by ________purchasers name____".
- The name of the remitter must be the same as the buyer as indicated herein. The buyer shall fill in full name and address of the remitter and the beneficiary. The purchase price shall be transferred as foreign currency. The buyer shall not to convert the purchase price into Thai baht before making funds transfer. The conversion into Thai Baht will be done only by the beneficiary bank in Thailand.
- The buyer shall be liable for any remittance fee associated with the transfer of funds.
- The seller or its representative shall issue a receipt for each and every payment made under this agreement by the buyer.
- In the event payment of the purchase price has been made by the inward remittance of foreign currency into the seller’s designated bank account as above-mentioned, then it is agreed that the seller shall be responsible for obtaining evidence representing such inward remittance issued by the bank and provide the same to the buyer immediately upon request.
- The parties agree that as long as no payment of the purchase price has been made in full as required herein, the ownership and various rights over the condo unit shall continue belong to the seller, regardless as to whether or not the buyer has access to and resides in the purchased condo unit.
Purchase of an off-plan or pre-construction condo unit
Foreigners buying an off-plan condo under the condominium law in Thailand will usually have to comply with a purchase payment schedule during the construction of the project. A common payment schedule in a condo project is a first deposit of 10 to 20% of the total purchase price on the execution date of the sale agreement (less the reservation fee, if any) and periodical monthly installments during the construction with a final installment of maybe half or less of the total purchase price upon completion and registration of ownership of the unit. The payment schedule for an off the plan apartment unit could be:
PAYMENT SCHEDULE FOR CONDOMINIUM
The buyer shall pay the purchase price of the unit as follows:
- On the execution date of the reservation agreement, the buyer paid a deposit to the seller in the amount of ___ baht. Such amount is deemed as part of the purchase price.
- On the signing date of this agreement, the buyer agrees to pay the seller the amount of ___ baht. Such amount shall, after including the deposit under clause 1, equal to twenty percent (20%) of the purchase price.
- During the construction of the condominium, the buyer shall pay the seller another thirty percent (30%) of the purchase price, or ___ baht, in 12 equal monthly installments, each of which shall amount to ___ baht and shall be made on the ___ day of each month. The first installment payment shall be made on ___________.
- For the remaining amount (50% of the purchase price) of ___ baht, the buyer shall pay such sum to the seller on the date of the registration of ownership transfer of the condominium unit.
Payments under this payment schedule are made directly into the developer's bank-account. By paying directly to the developer in Thailand the buyer puts himself in a much weaker legal position and he takes a greater financial risk than would be the case if payments were made under an escrow arrangement under the Thailand Escrow Business Act 2008. In Thailand only authorized financial institutions are allowed to offer escrow services.
Final unit floor area and contract price
An ignored aspect of the price payment terms for an off-the-plan condo purchase is the possible price differences between the price in the contract and and the final price of the condo unit purchased upon completion. The sale agreement will usually state that the final price of the condo unit will be based on the final floor area of the condo upon completion, as measured in the official land office survey and as will be stated in the unit title deed. The final sizes of the completed building does not always match with the measurements of the original plans of the building and significant price differences could occur. A standard clause in a condo unit sale agreement is:
'In the case where the area of the unit to be sold varies from the saleable area shown in the relevant title deed, the parties shall continue to be bound by this agreement and shall in no case terminate the agreement on the grounds of such variance. In addition, the parties agree to adjust the purchase price to correspond to the increased or decreased area at the rate of the purchase price per square meter as mentioned above.'
Developers in Thailand are very quick in demanding the price difference according to the final floor area as measured by the official land office survey upon completion of the building when this is in their advantage. If the purchase unit contract price decreases they usually do not refund or not easily refund the price difference to the customer. It is possible to negotiate a limit to a possible increase in the price based on a larger final floor area.
Payment and escrow terms
In Thailand it is common practice that property developments aimed at foreigners are financed by the buyers who pay prior to completion and transfer of ownership a substantial part of the purchase price to the developer. The purchase price payments start in an early stage of the development and are used by the developer to finance the project. The off-the-plan buyers in fact finance the project and take the financial risks, and, unless payments are made into an escrow account, they could lose all payments in case the developer goes bankrupt or cannot complete the project when he becomes short of money because of failing sales. Escrow services in Thailand means the services of a licensed escrow business service provider (an escrow agent or financial institution licensed under the Thailand Business Escrow Act). The risks for buyers of off-plan property would be greatly reduced when payments are made in a separate third-party escrow account held by a escrow service provider, but unfortunately most developers tourist areas cannot afford to finance projects themselves and rely for the financing and completion of the project on the income generated from sales during the construction.
samuiforsale note; 'as there is for developers no legal requirement to establish escrow accounts for deposits and payments made by their customers in Thailand, buyers in off-plan condos are often very much at the mercy of the developer. Not only could the customer lose all payments made for the condo in case of default by the developer, the buyer will also lose all his leverage in case of breach of contract by the developer and poor workmanship. The best advice for buyers of condos in Thailand is to buy in a well managed existing condo or, in the case of pre-construction or condominium under construction, demand that payments are made in an escrow account, however such arrangements in property developments in Thailand are generally not offered' (source).
Tags: real estate law