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Pattaya Daily News

28 July 2006 :: 14:07:26 pm 20595

Owning Property in Thailand

This article mainly covers ownership of property by a foreign individual by himself or by a company he sets up. It does not cover ownership of properties by large companies.
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The property ownership laws of Thailand are somewhat nationalistic, whereby foreign individuals can legitimately secure property only in certain ways. The main issue is real estate, but similar laws cover other items. If you are not legally established in Thailand and following procedures, then you will take risks.

   Foreigners can buy some things outright. Other things must be leased or bought properly. The most common methods of properly securing property are:

•     Be the largest shareholder of a domestic company, and have the company own the property (see details below, as you will own less than 50%, usually 39%); or
•     Sign a 30-year (or less) lease with a domestic company or Thai individual, with an automatic option to renew for another 30 years. This is called the 2×30 (“two times 30″) way.

   Many people follow these proper procedures and don‘t have problems.

   There are other ways that people have gotten property, but these are often questionable, unnecessary in view of proper ways, and sometimes cause problems. Businesspeople and lawyers often assert their own tactics in a very self-confident manner, but second opinions should be sought before you commit a large sum of your savings. It has amazed me at how many people have not sought independent and professional second and third opinions. Some of these have had serious problems later.

   It‘s notable that foreigners have received different opinions from different Thai law offices, and indeed sometimes from different lawyers within the same law office. Thus, I‘ve listened to a LOT of opinions, and challenged some lawyers‘ opinions when they differed from others. Apparently, I‘m a lot more careful in what I say and do than some lawyers and many businesspeople! Nonetheless, over time, I have found out what the most informed and careful professionals do, case after case, independent from each other, and based on laws cited from the multiple respected authorities, to secure property properly.

   There are many improper ways which have worked for other people in Thailand, and continue to work, but which I would advise you not to follow. Just because it‘s worked for someone else so far doesn‘t mean it would stand up in court if challenged. Many ways appear to exist simply only as long as they are not being prosecuted.
There are guys who have lost property to wives and associates, fallen victim to outright scams, and experienced extortion for rectifying vulnerable arrangements. In every case, it was clearly avoidable from the start, if they had only researched independent additional opinions and followed standard procedures.

   The proper ways are simple and straightforward. You should avoid both convoluted ways and shady shortcuts.

Foreign Ownership of Real Estate

   Due to the 1997 economic crisis, caused by a real estate glut in Bangkok‘s office, condo, and housing estate markets, the IMF applied pressure to relax laws restricting foreign ownership of property. This was an effort to bring in foreign investment, particularly to the nonperforming real estate investments which were causing the liquidity crisis.

   The present situation is likely to continue as a natural state of political affairs as long as foreigners are much richer and have far more buying power than Thais. The argument is that if the property market were opened wide to foreigners, then the prices would skyrocket out of the reach of the vast majority of indigenous Thais, and foreigners would take over too much of Thailand whereby the Thais would lose significant sovereignty and cultural integrity, instead being exploited in colonialist fashion.

   Foreigners in the press commonly argue that Thais are free to buy property in the U.S. and other countries, and thus the reverse should be allowed as well, instead of continuing “outdated anti-colonial” and “xenophobic” policies. The same argument could be made regarding travel visas, whereby any poor Thai prostitute could skip going down to the US Embassy for a visa rejection and instead just take a plane flight to the U.S. and get a visa-upon-arrival at the U.S. airport, just like Americans can come to Thailand without a visa. The reality is that the U.S. would soon become about 10% Thai in the form of illegal workers, who would in turn far outnumber immigration officials and police forces after their one month visa-upon-arrival expired. So major relaxation of laws regarding foreign ownership of property will probably occur around the time that Thais are given “fair treatment” as regards travel visas. (I‘ve never seen this counterargument acknowledged when foreigners and their government representatives argue for greater property ownership rights in Thailand, of course.)

   These are general problems that people run into when dealing in any country whose language they cannot read. (At least the Thai language is phonetic, not hieroglyphic.) Even in one‘s own country, people usually depend upon their lawyers rather than read the law themselves. The problem in Thailand is dealing with the nationalistic laws.
There are some great deals on inexpensive and abandoned luxury houses out here, but you‘d better know the laws and procedures.

   In short, here is a summary of the current status of foreign real estate property ownership in Thailand:

•     A foreigner can own a condominum as long as less than 40% of the condos or apartments in the building are owned by foreigners. (This is an old law.)
•     A company can own property such as land and a house (and hence the foreigner can buy land and a house via their company) as long as no one foreigner owns more that 39% of the company (recently amended from 33%) and total foreign ownership of the company does not exceed 49%.
•     The Thai wife of a foreigner can own property (a recently changed legal status due to gender equality in the new 1997 constitution revision), in her name only. This is fine as long as you don‘t have marital problems. (The same, of course, goes for a Thai husband, but the law was changed recently for Thai wives due to the new constitution guaranteeing equal rights.)
•     A foreigner can lease land for 30 years, with an option for another 30 years, according to articles in the press and as confirmed by every lawyer I‘ve asked. (If you live longer than 2×30 years, consider yourself lucky in another regard.) This is referred to as the 2×30 (“two times 30″) option.

Set Up A Company To Buy Property?

   It is a commonly advised tactic to set up a company for the sole purpose of buying property, e.g., a majority Thai-owned company with “nominee” directors, whereby some of the directors are strangers unaware of what their name is on (to prevent a conspiracy) and/or provide signed documents selling their shares which are held by the foreigner as security (again, against a conspiracy of shareholders).

   You should be aware, however, that bogus companies for the sole purpose of property ownership and nominee directors are not legal. People will point out that they are rarely prosecuted, but prosecution is possible.

   The way this is often pitched is as follows:
“Put a few hundred dollars worth of baht in your pocket. Get all the forms for shareholders in your company. Go onto the street and find some strangers. Pay them some tens of dollars to sign a shareholder document, sign another document selling their shares (leaving the date blank), and go photocopy their ID card. These are your six Thai shareholders. They don‘t even know what company they are shareholders in. Even if you get a big problem and someone traces down these shareholders based on their ID card, you already have their signed document selling their shares so that you can immediately backdate and transfer these shares to a trusted person.”

   Another way this is pitched is by lawyers who say “Leave it up to us, we will handle all of the above”.

   The option, of course, is to find trusted shareholders who know exactly what they own (say, 61% of your company split among 6 shareholders). These shareholders may be a combination of employees, relatives, friends, other associates, shareholders of other companies you are involved in, whatever. This is not a sham company, but it‘s a company you must set up carefully and manage.

   A hybrid option is that the latter company owns the property and issues a 2×30 lease to you.

   To many, the main benefit of company ownership of property is that a company can own or lease a lot more property than can an individual.

Get a Mortgage?

   If you decide to buy property one way or another, then you will discover that the banks in Thailand don‘t have the same attitude as the banks in western countries as regards new mortgages. In fact, the banks in Thailand have nearly stopped offering new mortgages on real estate. The banks have suffered heavily from mortgage defaults, and in today‘s property market, as a matter of their official policy they just aren‘t going to take the risk of taking on still another dead piece of property. Most of the property on the market is viewed as grossly overvalued anyway, whereby the price doesn‘t come down to the post-1997 market value of their property because the owner is unwilling to take a heavy loss in the end.

   Given the heavy burden of nonperforming loans (NPLs), the banks don‘t have much money to lend out, and they prefer to lend it to other entities. Thus, if you want to buy property in Thailand, then you‘re going to either need to pay cash or else get a loan from a foreign bank. Especially to a foreigner who could skip the country any time. The Thais who are successful in getting a mortgage are those who keep enough money in the same bank as collateral (e.g., savings for retirement or childrens‘ future college education, totalling at least as much as the property is worth), have a strong financial track record, and have an established salary more than enough to pay for the mortgage. Others are usually wasting their time in trying to apply.

   To buy a condo or another property on a loan, you‘re going to need to get a loan in your home country and then transfer the money to a Thai bank account. But before you do this, you‘d better thoroughly check with your bank and your lawyer, of course, to make sure everything‘s going to work. You should be able to line up your ducks clearly in advance.

Leasing Land

   It has been said that a foreigner can lease land for 30 years, with an option for another 30 years. If so, then the laws pending in parliament have been passed. However, you should verify this first.

   If the laws indeed permit you to lease land, and if your spouse is Thai, then you may want to buy the land in your spouse‘s name and then lease it from your spouse. This way, even if your marriage becomes rocky, you can‘t get kicked out of the house, especially if you‘re paid for the entire 30 years and have a formal receipt tucked away in a safe place. Your spouse inherits it after the 30 years.

   All leases longer than 3 years must be registered. The good news is that it helps verify the legitimacy of your lease. Also, a registered lease doesn‘t die with ever the lessor or the lessee. (Don‘t make your wife‘s family want to kill you!) The bad news is that you pay more in taxes.

   If you are leasing land, then you must pay taxes on the lease amount. One source states that, for example, if you lease land for 30 years and pay for the entire period in advance in order to get a receipt, then you must also pay 1.5% of the total value of that lease for the entire 30 years … in advance. If this is true, then buying the land in your wife‘s name and then leasing it from her means you pay more in taxes.

Reporter : PDN staff   Photo : Internet   Category : Legal

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