Buying a condominium in Thailand is an attractive option for many foreign nationals. Though Thai Property Laws prohibits a foreigner from owning land in Thailand, there are ways to at least buy a condominium as there are less nationality restrictions under condominium laws regarding ownership. Our staff at Juslaws & Consult has walked many foreigners through the process of purchasing a condominium in Thailand and will be happy to assist you in every matter. Just contact or Bangkok or Phuket Office. Below, we did summarize the most important practical legal knowledge when it comes to purchasing a condominium in Thailand.
A condominium, usually shortened to „condo“, is a type of real estate divided into several units that are each separately owned surrounded by common areas jointly owned. Residential condos are frequently constructed as apartment buildings but unlike apartments, which are leased by their tenants, condo units are owned outright. Additionally, the owners of the individual units also collectively own the common areas of the property such as hallways, walkways, pools, gyms, laundry rooms etc. as well as common utilities and amenities such as elevators. The common areas, amenities and utilities are managed collectively by the owners through their association, such as a homeowner association, in Thailand called the „Condominium Juristic Person“. The difference between an apartment complex and a condo is purely legal.
There is no way to differentiate a condo from an apartment simply by looking at it or visiting the building. Technically, a condo is a collection of individual home units and common areas along with the land upon which they sit. Condos have conditions, covenants, restrictions and often additional rules that govern how the individual unit owners are to share the space. They are mainly regulated by their internal rules and regulations as well as the Thailand Condominium Act (currently of 2008). The internal rules regulate how the building is run, i.e. that the units can’t be used as business or company address, rental restrictions and matters relating pets.
There are two types of residential buildings in Thailand, condos registered under the Condominium Act with a condominium license and apartments not registered under the condominium Act. Only condos registered under condominium laws and registered with the LandDepartment offer full individual ownership with a government issued ownership title (title deed). The Condominium Act specifies for example the procedure and requirements for a multi-unit apartment building to be licensed as a condo. The latest Condominium Act passed legislation in 2551 (2008).
As mentioned above, there are ways for a foreigner to own a condo. There are no restrictions on nationality – every foreigner who may enter Thailand legally (there are no visa-class requirements) may buy and own a condo unit as long as he personally qualifies for ownership under section 19 of the Condominium Act. Section 19 claims that foreigners as well as juristic persons regarded by law as foreigners may hold ownership of a condo unit if they are the following:
Given a foreigner personally qualifies for ownership, he can still only buy a condo under his own name if the condo unit can be sold under the foreigner quota. That means that within a condo building not more 49% of all units can be sold to foreigners, at least 51 % of the condo building must be Thai owned. Between April 1999 and April 2004, as a temporary measure in an attempt to reduce the number of empty and newly developed condos for sale, foreigners could under certain restrictions own up to 100 % of the units in one single condo building.
This has since without any exceptions been amended back to 49 % of the total floor area. So currently a foreigner may only have full ownership in a condo unit in a proportion not higher than 49 % of the total space of all units in that condo at the time the application for condo registration is being lodged. When buying an existing or re-sale condo, the seller must supply a letter of guarantee issued by the condominium juristic person that the condo unit falls within the 49 % - ownership quota of the condo building. That does not apply to condos that are still under construction. In this case, the condominium juristic person will be established not until after the construction has been completed and then will issue this letter of guarantee. This means that during construction, the seller/developer is not obliged to issue such letter.
To avoid the restriction of the Foreigner Quota one could come to the conclusion to have a Thai Company own the condo for oneself. But since the initial 2006 Land Office Regulations issued by the Land Department and Ministry of Interior preventing the misuse of Thai nominee shareholders by foreigners and a series of new regulations, this practice is less common. A company set up just to circumvent foreign ownership restrictions and dormant holding companies is not allowed under Thai Law. Even though it is generally considered illegal, this structure is often still pushed to sell the remaining units to foreigners in the Thai side of expensive condos, especially in the tourist resort areas of Thailand.
When the condo is registered in a Thai wife’s or husband’s name or both names as joint ownership between husband and wife this will still count as full foreign ownership of the unit. A condo unit purchased by a Thai national married to a foreigner falls within the 49% foreign ownership quota of the condo unless there is a legal document stating that the money expended on the condo is personal property of the Thai national. In this case, the condo falls within the Thai side of the condo.
In case the foreign freehold ownership in a condo has reached the limit of 49%, the remaining units may be leased to foreigners under a 30 year lease agreement. One of the major disadvantages of Thai property Law is that Thailand does not know lease or leasehold laws as a real property right but only lease as hire of property contract with limited real rights associated with it. Under the hire of property laws a condo leasehold purchaser becomes a tenant with a pre-paid tenancy contract and has a personal right to use and possess the unit for the registered term of the contract. A lease contract is not freely transferable during the term of the lease and the leasehold purchaser has no vote in the joint owners meeting and matters relating to management of the condo. Furthermore, as a personal tenancy, a leasehold contract is under Thai law terminated upon death of the leasee and not automatically transferable to the heirs of the lessee. So to buy a leasehold is an option to avoid the 49% quota but it will never get you true ownership with full rights and is legally not regulated in Thailand.
FET means Foreign Exchange Transaction Form, previously known as „Thor Thor 3“. The FET – form is substantial to registering the ownership at the Land Department. An authorized financial institution inside Thailand dealing with the exchange of foreign currency exceeding $ 50.000 (or an equivalent in any other currency) must under BOI banking regulations prepare a FET – form and report this transaction to the Bank of Thailand. For foreigners buying a condo, an original copy of this form with their name either as the receiver or the sender of the foreign currency is a required document for registration of the ownership at the Land Department as it is the proof of the compliance by the foreigner with section 19 of the Condominium Act.
For the exchange of a foreign currency in amounts less than $ 50.000 the bank does not need to prepare a FET form and therefore will not issue one. In this case foreigners can request a confirmation letter for the transfer of foreign currency and exchange into Thai Baht from the bank. This letter contains the same information as the FET-form and can also be used to register at the Land Department.
Foreign juristic entities can register ownership within the 49 % foreign ownership quota just as any natural foreign person. To fulfill the purchase, the company’s documents of incorporation must be prepared, notarized, translated and submitted with the land office together with documents such as foreign exchange transaction form – generally speaking the same procedure as when a foreign individual is buying a condo in Thailand.
Buying a condo off-plan / preconstruction
The most common problems foreigners encounter when buying a condo off-plan in Thailand are that the developer goes bankrupt or becomes short of money or the project takes longer to complete and finish than originally planned. In off-plan property developments, the developer usually requires that during construction all payment under the sale and purchase agreement is made directly into his bank account and not into a third party escrow account. In fact, escrow arrangements are very uncommon and property developers in Thailand are free to require deposits and installments from consumers without offering any protection or guarantee for these payments. Usually that carries some risk for the buyer and is not recommended.
The sale and purchase agreement for a condo specifies in detail the responsibilities of the buyer and the seller of the condo. It covers among others the agreed price and payment schedule, transfer date, exact details of the condo, responsibilities for the transfer fees and taxes, warranties and matters relating to due diligence. It is a contract controlled business and the standard sale contracts must comply with the Condominium Act and consumer protection laws. Transfer of the ownership takes place at the provincial or local Land Department’s branch office and at the time of transfer a second official Thai script land office sale agreement is signed and transfer fees and taxes must be paid.
After working out all the details, the question is: “How to pay for my condo?“. Price per square meter is one of the key elements to determine the value for money and is the basis to compare affordability of projects within a certain area. In case of an existing condo, the price of the condo is usually paid at the time of transfer of the condo at the land department by cashier’s check. This check is issued and guaranteed by a bank in Thailand, i.e. the bank that also issued the FET form.
In case of off-the-plan condos, the purchase price is usually paid to the developer’s bank in Thailand in installments with a final payment at the time of transfer. The foreigner buying the condo has to comply with a purchase payment schedule during the construction of the project. Payment terms in the contract are negotiable. A common payment schedule is to first deposit 10-20% of the total purchase price on the execution date of the sale agreement and periodical monthly installments during the construction with a final payment of maybe half or less the purchase price upon completion and registration of the ownership.
There are a variety of taxes and fees involved when transferring a condo unit in Thailand. For example transfer fee (ownership registration fee), stamp duty, withholding tax and if applicable specific business tax. How these costs are divided between the buyer and the seller in a re-sale depends on what they agreed on in the sale and purchase agreement and can vary from buyer pays it all to seller pays it all. When buying a condo in development, the seller (developer) can due to consumer protection laws only pass on up to half of the 2% ownership registration fee to the buyer. There are no general property taxes in Thailand. There is a very low local maintenance tax and a land and house tax. Land and house tax does not apply to condos. There are however approved plans to introduce a more general yearly property tax rate of 0,1% of the appraised value if a condo unit is used for residential purposes.
After the ownership has been registered, the new owner will get a condo unit title deed. Each apartment unit in condo building has an ownership title deed issued by the Land Department. The title deed must among others contain the following information: position and location of the land and area of the land of the condo, position and location, area and plan of the apartment showing the width, length and height, ratio of the ownership of common property and voting rights, name and surname of the person having the ownership of the apartment unit, index for the registration of rights and juristic acts, signature, position and seal of the Competent Official. The transfer of the ownership of a condo and the title deed always takes place at the Land Department.
When buying an existing or re-sale condo the seller must supply a letter of guarantee issued by the condominium juristic person that the condo falls within the 49% foreign ownership quota of the condo and a letter that there are no outstanding fees for the unit to the condominium juristic person. Other documents required at the transfer are the FET-form, the ID-cards or passports, a marriage or divorce certificate (if applicable) and a Land Office „Tor Dor 21‘ power of attorney if you are not going to the land office yourself for the transfer of ownership.
Owning a condo bears rights as well as obligations. Condos are regulated by its internal rules and regulations and externally by the Condominium Act. The internal regulations (set of bylaws) regulate how the building is run. They are amended by voting of the unit owners in the condo general meetings. Every condo shall have at least one manager who is appointed in the general meetings of the joint owners. In addition to that, every condo must be maintained and managed. For this, each owner pays condo fees which are based on the square meters of each apartment. The fees/expenses of a condo are paid in advance according to the condo regulations. Condo maintenance fees are usually charged monthly or two-monthly. Condos can also have a special reserve fund for repairs and upgrades of the building. Condo management and management fees, the size of the reserve fund and possible future major repairs could be an additional financial burden to consider before buying a condo.
Every condo has a „house book“ or „blue book“, which is a residential address registration book issued by the local government municipality. It states the location and apartment address and registers the Thai persons having their legal residence at this address. For foreigners a house book is not an important document and, unless a foreigner resides in Thailand, foreigners are not registered in it. Unless restricted in the bylaws of the condo, a foreigner is free to rent out his unit. Only if it is considered operating business of renting out properties in Thailand by a foreign investor, the foreign owner would be restricted by the Foreign Business Act and possible the Foreign Employment Act. If the received rent is over THB 50.000/year, it is subject to personal income tax.
When re-selling the condo taxes must be paid at the Land Office at the time of transfer. This includes transfer fee, business tax or stamp duty and income withholding tax. With the land office tax-receipt, sale documents and documents confirming the previous transfer of foreign currency into Thailand, the bank is allowed to transfer the full amount received from the sale of a condo by a foreigner out of Thailand without any deductions. Problems could occur when passing on the ownership onto children as the right of foreign ownership of a condo in Thailand is granted to the individual foreigner and not also to his foreign successors. Any foreigner who receives a condo in Thailand by inheritance or though a gift must again individually qualify for ownership of the condo under section 19 of the Condominium Act 2008 or he must sell the unit within one year of acquisition by inheritance.
After having purchased a condominium, Juslaws & Consult also offers you to take care of the maintenance and accounting regarding the condo. We will be happy to talk about the details as you can contact our staff at the Bangkok or Phuket Office.