Land Title In Thailand
- The titles known as “Chanote”, “Nor Sor 3 Gor” or even “Nor Sor Gor” may be acceptable titles for purchase, subject to due diligence by your legal advisers. Chanote is the ultimate land title and is deemed to be ‘secure’ but an investigation is necessary to actually check if the titles preceding Chanote (the history of the Chanote) were issued legally, not subject to disputes and not in public restricted land.
- When land was first registered in Thailand decades ago, the registration typically related to a possessory right known as “Sor Kor 1” although there are other rarer types of title from which Chanote can originate. The documents relating to this original right are key to confirming the legality of the title and should be checked by an independent lawyer.
- Nor Sor 3 Gor and Nor Sor 3 land can be bought and sold without the strict need to upgrade to Chanote. Chanote means that the land is (most of the time but not always) absolutely defined in terms of boundaries and size.
- A condominium may only be registered upon and built on “Chanote” title
Land Title Due Diligence and Aerial Survey Reports
A full historical title search and aerial survey of the subject land should be undertaken by an independent law firm before any substantial sums of money are paid to the Seller or developer. The full historical title search and aerial survey should identify (amongst other matters) the following key issues:
- Whether or not the title to the land has been legally issued in accordance with the laws of the Kingdom of Thailand.
- Whether or not the Seller is the legally registered owner of the Land.
- Whether or not there are any mortgages or other encumbrances (such as leases) registered over the land.
- Whether or not the land has full and legal rights of access leading from the boundary of the land to the nearest public road. In the event that neighboring land must be crossed in order to reach the public road, a servitude right (sometimes called an easement) must be registered for the benefit of the land.
- Whether or not the land is connected to the mains utilities such as electricity and water.
- Whether or not any building upon the land has been constructed in accordance building regulations and zoning and environmental laws. In the event the potential investor is acquiring land with a view to future development, it must be established that the building regulations and zoning and environmental laws will permit the type of development that the investor is considering.
A litigation check should be undertaken to ascertain whether or not the current owner or seller is bankrupt or subject to civil litigation.
Note: The above list is a non-exhaustive list of due diligence checks which should be undertaken.
Four principal methods of purchase are available to foreign investors into real estate in Thailand:
- Purchase a direct foreign freehold condominium title (this would fall within a quota of 49% of the total area of the condominium units which are permitted under Thai law to be sold directly to foreigners).
- Purchase a freehold condominium title using a Thai company in which the foreign shareholdings have a controlling protected 49% interest through special articles of association and shareholders agreement.
- Invest in a stake of a Thai company maintaining protection through special articles of association and dividends but never owning more than 49% of the shares in the Thai company.
- Purchase a 30-year lease with two 30-year renewable options. Numerous structures exist where the leasehold owners hold an interest in the “landlord” company granting the renewals to protect the security of the renewals. This can be referred to as ‘collective leasehold ownership’.
Note: In relation to ownership method 2 – 4, a Thai Company cannot be a “nominee” company and is therefore not available to many foreigners as an ownership option. Thai authorities do look behind companies to check for compliance in matters such as paid up share capital; bona fide arrangements with shareholders (shareholders ought to receive a benefit from their commercial investment) and will look behind the purpose of the company. Furthermore, regard must be taken in respect of the Foreign Business Act (1999) of Thailand before considering any matter relating to a Thai company with foreign investors.
Potential investors should bear in mind when investing in real estate that Thai companies, as in other jurisdictions, should be compliant in respect of the accounting, tax and legal rules of Thailand. This carries an annual fee which in proportion to the typical value of investment is nominal.
Foreign exchange transaction forms should be obtained from the recipient bank account when transferring funds to purchase or invest in property in Thailand. Additionally, records of transfer from the source country should be retained and all transfers marked as being for the purpose of “investment in Thailand”. Provided the correct taxes and regulatory requirements are adhered to, monies can later on be taken out of Thailand.
Contracts and legal structures of purchase/investment
In a standard transaction, most investors expect to see a sale and purchase agreement; or a lease agreement accompanied by a management/maintenance agreement, rules and regulations of an estate and perhaps a rental or letting agreement and/or share purchase agreement to subscribe to shares in an owner-controlled management company.
Leases must be scrutinized for security of investment: termination provisions; assignment and transfer provisions (re-saleability); enforceability of renewals. Inheritance issues must also be considered and the most reliable way of avoiding such issues is to own a lease in a company so that the shares in the company which owns the lease will pass to beneficiaries, as opposed to your beneficiaries being required to attempt to re-register a lease in their name.
When buying premium class property, thorough due diligence, practical commercial and legal analysis of the contracts combined with good communication to the seller and agent comprise the ingredients for a potentially successful transaction.
Limcharoen Hughes & Glanville International Law Firm. Limcharoen Hughes & Glanville is a leading legal services provider who act on behalf of major developers, hotel groups, investment funds, multi- national and publicly listed companies throughout the world. Limcharoen Hughes & Glanville have offices located in Bangkok, Phuket, Koh Samui, Ho Chi Minh City and Bali. (www.limcharoen.com)