The process of land tenure in Thailand follows a rich history of legal tradition and culture where all land and resources once belonged to the King. The continuum of land law and ownership go as far back as the 13th century when King Mangrai would bestow ownership to his subjects if they cleared and cultivated land for the benefit of the people for a period of three years. They could pay a small fee and register the land as their own.
In fact this custom of defacto ownership by occupancy continued until the reign of King Rama V in 1901. Known as the Royal Buddha this powerful monarch was credited with social reforms, innovation of government and territorial cessation of the British Empire.
The monarch’s reform to land tenure was also a defining moment in his reign as he introduced the idea of modern ownership as being legally distinctive to occupancy. Utilization of the land under the new system no longer gave protection of tenure occupancy once enjoyed. Real rights and security of tenure were only granted under the notion of ownership.
While this customary practice remains to this day, confusion and conflict ensued until the introduction of legislation in 1936 and The Land Code Act in 1954. With the latter remaining the most important land ownership legislation in Thailand, the act expressly states the steps that must be followed for the issue of title deeds, land protection and land allocation. In spirit it recognised the three different stages of acquiring land initiated by King Rama V: occupancy, utilization and legal possession.
Consistent with these principles the act proscribed the powers of the Director General under section 8 to “supervise and carry out acts for purpose of protection and prevention, as it may think fit, of all land which is the domaine public of State or the States property.”
Title by Registration
Innovation in the administration of land ownership came in the form of land registration. The concept of title by registration of land in Thailand was influenced by two powerful forces. Customary underpinnings of land tenure, and the rapid expansion of the Torrens system around the world, first established in South Australia in 1958, found its way to Thailand at the beginning of the 20th century.
In the common law jurisdictions of the U.K., Australia and America, “the register” was created at a time where the veracity of title could only be ascertained through documents or the “chain of title” collectively known as the Title Deeds. For a property buyer, a central system of property registration with the local authority meant he would enjoy an inalienable right to title that was once the domain of uncertainly and fraudulence.
Enshrined in Thai law, the concept of title by registration is expressed in the guiding principle of the Civil and Commercial Code by virtue of section 1373. The provision states “[w]here the property is an immovable entered in the land register, the person whose name is on the register is presumed to have possessory right over it”.
Over time the Thai version of the register gained prominence, enabling a buyer or any person to gain valuable information on the history of the land. This includes classification, previous and current ownership, zoning, servitudes rights, encumbrances by mortgage or if the land is subject to development by local government. More importantly it provides a convenient, reliable and accurate system of title by registration administered by officials at the Central Land Office or, if need be, the district lands office.
Land Classification and Rights of Ownership
In simple terms there are two types of rights to private land in Thailand, the right of possession and use of the land and, secondly, ownership by title deed. By and large traditional land claims (normally bestowed on Thai only) vary, including Por Bor Tor 5, Sor Kor 1, Tor Bor 5, Sor Por Gor 4. The common feature of these claims is they give the occupier possessory rights and rights of use only.
Yet this type of land blankets much of the Thai landscape, including the popular tourist destinations of Samui, Koh Tao and Koh Phagnan. On the whole it is used for farming and cannot be conveyed, rented or leased to another party. Neither can ownership be registered with the Land Office, other than notification filed with the district office. In addition, Thai farmers have traditionally built their homes on this land without official permission or even a building permit from the relevant authority. Overall the process of conveying this land is governed by no more than local custom, with a gentleman’s agreement handing over the notification form of possession and use with a hand shake to follow. More importantly there is no real right attached to sell or transfer it particularly to foreign buyers.
The Issue
With opportunism rife for quick money in the Thai property sector, some developers trumpet the ease of upgrading this type of land to full title rights. More poignant examples of this practice have occurred on land with Por Bor Tor 5 (PBT 5) title on Samui and Koh Phangnan. Classified as farm or forest land, it offers no more than proof that the holder has paid tax, been issued a tax number to exploit the benefits of the land and a right to occupation. Although it has been upgraded to Sor Kor 1 in the past, the next tier in Thai land classification, SK1 title has not been issued since 1972.
Under Thai land law land the process of upgrading land has to follow each tier up the chain to the strongest title – the Chanote. It cannot be finessed to the top of the chain by jumping any of the successive tiers. It has to follow process, if any. In substance the only titles offering a real right to a lease, sale, usufruct, superficies or a right of habitation are Chanote or (Nor Sor 4 Jor), Nor Sor Sam (N.S.3) and Nor Sor Sam Gor (N.S.4.G).
Conclusion
Commercial reality dictates that land with these titles has a greater market value than land without title, for the simple reason they enable the buyer good title by registration. A developer can make a killing on deals involving this type of land, yet the investors inevitably loose their money for the very reason that transaction of this nature are illegal. With legal recourse proving onerous and costly, many buyers give up and leave bitterly disappointed with the outcome. The real moral of the story is to have the land investigated by a reputable law firm before you sign off on the deal.