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Legal information to foerigners looking to buy property in Thailand

How can foreigners own property in Thailand?

Although technically you are able to own a house or structure in your own name, Thai law currently prohibits you from owning the land the building is erected on. There are ways in which you can structure the purchase so that you are the de-facto owner of the land. The following ways can be used in order to fully comply with Thai law:

  • Condominium

Thai Condominium Laws

Can a foreigner own a Condominium in Thailand?

Buying a condominium in Thailand is perhaps the simplest and easiest option available to foreigners. The only restrictions on purchasing a condominium in Thailand is that the percentage of units sold to foreigners cannot exceed forty nine percent (49%) of the total number of units in the condominium block; and that the funds used to buy the condominium have been remitted from abroad and correctly recorded as such by a Thai Bank on a “Foreign Exchange Transaction Form”.

Foreign Exchange Transaction Form

This is an official bank document issued by the receiving bank upon the receipt of foreign currency into your bank account in Thailand. You must request a Foreign Exchange Transaction Form from your bank when you are remitting funds to Thailand for the purpose of purchasing a condominium in Thailand, and the Foreign Exchange Transaction Form must specify that the remittance is solely for the purpose of purchasing a property in Thailand – Code 5.22.

Purchases of Condominiums in Thailand by foreign individuals come under the jurisdiction of the Condominium Act B.E. 2535 (1992).

The owner of each Condominium in Thailand is issued with a certificate of unit ownership. The certificate also has a statement saying exactly what percentage of rights over the common areas of the building each owner has.

  • – Thai Limited Company

Thai Limited Liability Company

If a foreigner is going to operate a business in Thailand then he may purchase the freehold of the land through his Thai Limited Company. The land will be owned by the Thai Company, not by the individual. This form of purchasing property is the most popular with foreign investors as the Articles of Association can be varied to allow greater protection for foreign minority shareholders where majority Thai ownership is required under the Alien Business Law. Thai law requires that 51% of the shares be held by Thai juristic persons, however, any company with more than 40% foreign interest that purchases land will be investigated by the Central Land Office in Bangkok (under section 74 of the Land Code) to ensure that the company has not been organized in an attempt to circumvent the prohibition against foreign ownership of land.

This results in the foreign ownership of the company being limited at 39% (only if buying land), but with the recommended changes of the Articles of Association, the foreigner can be the only director of the company, and the only person of the company who can commit or bind the company in any contractual dealings (buy or sell land and house), effectively giving the minority shareholders control over the company.

The Thai authorities have been clamping down on the use of local companies and nominee shareholders to buy and own land. More stringent measures have also been put in place by the Land Office to ensure the Thai shareholders in a company are indeed genuine.

30-Year Lease

The preferred method of acquiring land for building a home is by leasehold. The foreigner safely acquires the right to use the land and registers the right with a 30-year lease at the Land Department. A lease contract is carefully drafted to guarantee the initial 30-year lease with two renewal periods of 30 years each. In Thailand , the maximum time period for a lease registration of residential property is 30 years, hence, the need for two renewal periods in a contract to provide for a 90-year lease.

The lease contract is drafted in the Thai language (some contracts contain English language with the Thai) and is registered at the Land Department. The lease contract is attached to the title deed and maintained at the Land Department. The foreigner can construct a house on the land. The construction permit is applied for in the name of the foreigner. The foreigner will own the structure in his/her own name. The advantage of leasehold is a lower registration fee (1.1 percent on the amount of the land lease). It is recommended to include family members such as young adults as co-lessees in the contract. In the uneventful demise of the parents, the children can carry on the full term of the lease period.

Buildings can be owned

The buildings on the leased land can be owned freehold by the foreign buyer.  The foreigner can apply for the construction permit in his/her name or show proof of a sales agreement. Transfer of a building requires a posting for 30 days by public notice to see if anyone contests this ownership. The lease contract can be written stating the house is separate from the building and it cannot be seized at the expiration of the lease contract.

Superficies

Superficies may be granted to a person under Section 1410 of the CCC. It is essentially a right which can be granted to an individual, irrespective of nationality, to own on the land the ‘buildings, structures or plantations”. This right may be granted for a period of time (a maximum of 30 years) or for life of either the owner of the land or the person granted the right. The process of registering Superficies is similar to any other proprietary transfers in Thailand. All involved parties will need to attend the Land Office to register the right along with the relevant documents including, among others, the land title deed, house registration book, ID cards and passports. There is also a transfer tax of 1.5% involved.

A positive characteristic of a Superficies is that it is binding on your heirs. It is fully transferable to your loved ones unless drafted otherwise in the agreement. Like all proprietary rights, it can also be transferred to other parties but will need the consent of the land owner and requires a re- registration of the right at the Land Office with the new party. One of the most salient features of a Superficies is that it is a fully registered right giving you an inalienable right on the property for the duration of the Superficies. The key benefit of a Superficies is that there are no limitations on foreign nationals holding such rights.

Usufruct

In Thai language it is called “Sidhi-kep-kin” and it provides temporary ownership rights. This right is for the use and enjoyment of the profits and advantages of something belonging to another as long as the property is not damaged or altered in any way. The person who enters into a contractual agreement with the owner for this right is called the “usufructuary.” A usufruct may be created either for a period of time (not exceeding 30 years) or for the life of the usufructuary. The usufructuary is responsible for the expenses for the management of the property, paying taxes and duties,
and be responsible for interests payable on debts charged to it. If required by the owner, the usufructuary is bound to insure the property against loss for the benefit of the owner. He must pay the insurance premiums for the duration of his usufruct. You are registered on the title deed. The land can never be sold or transferred by the owner of the land until the servitude is terminated. A usufruct interest expires upon the death of the holder of the usufruct and therefore cannot be inherited.

An interesting feature of usufruct is that the usufructuary can enter into a 30-year lease with a third party. So if the usufructuary signed a 30-year lease contract before his death, the lessee (tenant) will maintain the rights of the lease until its expiration. Supreme Court ruling 2297/1998 states that the lessor (landlord) does not have to be the owner of the property. Therefore the usufructuary can rent out the land. Although in the event of death of the usufructuary with the lease term, only the usufruct will be terminated but not also the lease.

Moreover, the usufructuary could transfer the right of using the land to his child. However, it remains to be seen if the Land Department officials would allow a transfer of the rights to the land. There is no annual tax levied on the property compared with 12.5 percent of the assessed or market rate rental value in the case of a registered lease.