Buying a condo in Thailand is an attractive option for many foreign nationals, although Thai property law prohibits a foreigner from owning land in Thailand, there are legal ways to at least buy a condominium as there are less nationality restrictions under the Condominium Act regarding ownership and Juslaws & Consult can show you how.
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. 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.
Property Law - 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 Land Department 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 2008.
Regarding Foreigners buying a condo in Thailand 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 meet the following criteria:
Usually foreigners fall under Section 19 (5) which means, that the purchase price for the condo must have been transferred into Thailand as foreign currency and changed into Thai Baht by a licensed financial institution inside Thailand.
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.
FET stands for, Foreign Exchange Transaction, previously known as "Thor Thor 3". The FET form is required to registering the ownership at the Land Department. An authorized financial institution inside Thailand dealing with the exchange of foreign currency exceeding $50,000 USD (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.
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. 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.
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.
If you want more information on buying land in Thailand, buying a villa in Thailand, or on real estate due diligence please do not hesitate to contact Juslaws & Consult at our Bangkok or Phuket office to learn more.