Generally, foreigners are not allowed to acquire or own landed property, whether it be in the form of detached houses, townhouses, shop houses or an empty plot of land. The only real estate that a foreigner is permitted to acquire and own freehold in their own name is a condominium unit. In the last few years, condominium units in prime areas of Bangkok along BTS and MRT are relatively popular among foreigners. As a starting point, if you are interested in acquiring or disposing of one, we outline below certain key legal and tax issues that may be of use to you in this matter.
There are a few major legal issues that you need to know.
First, Thai laws limit foreign shareholding of condominium units in one project at no more than 49% of all saleable unit space in that project, as such the rest must be owned by Thais.
Second, the transfer of condominium unit must be made in writing and registered at the relevant land office, otherwise it will be void. Third, Thai laws unfortunately do not mandatorily require “escrow” arrangements for real estate transactions, as such there could be a legal risk for purchasers of an uncompleted condominium unit if the property developer somehow cannot complete the construction of condominium while all those pre-completion payments (e.g. deposits and installments) have already been paid by the purchasers into the bank account of the property developer.
The legal process and documentation required for purchasing freehold condominium units differ depending upon the stage of completion of that condominium (e.g. pre-sales with no commencement of construction yet, project under construction or ready-to-move-in completely finished project) and from whom you are purchasing (e.g. from the property developer directly or from the first-hand buyer or owner). For example, if the construction has not yet started, you will typically need to sign 3 agreements with the project developer. The first two agreements, i.e. a “reservation agreement” as well as an “agreement to purchase and to sell condominium unit” will be executed prior to the transfer registration date. The last agreement, i.e. a “sale and purchase agreement of condominium unit” will be executed in front of the relevant land officer on the transfer registration date.
If you own one condominium unit in Thailand for a while and then you no longer wish to keep it or you want to make a profit from price appreciation, then you definitely sell it. Under Thai laws, there is no legal restriction on foreigners disposing of their freehold condominium units in Thailand, you just need to find potential buyers either by your own or with assistance of a property agent. The legal documents for this purpose are generally an “agreement to purchase and to sell condominium unit” which sets out the key terms of the sale and purchase, the required deposit and the scheduled date for transfer registration and a “sale and purchase agreement of condominium unit” which is a government form agreement to be executed in front of the relevant land officer on the transfer registration date. When you sell the condominium, there may be taxes payable, which will vary depending on how long you have owned it and whether you are subject to income taxes in Thailand.
Transfer Fees and Costs
Broadly speaking, there will be two major categories of fees and costs associated with the acquisition of condominium in Thailand. First, they are those fees relating to the transfer registration, for example, the transfer registration fee of 2.0% and stamp duty of 0.5%. Second, they are those fees or costs relating to the use and maintenance of condominium unit itself, for example, the common area fees which are payable yearly and calculated at a set amount of Baht per square meter and the sinking fund which is a fund set aside for future capital expenditures and calculated at a set amount of Baht per square meter.
The above is written as a general guide only. It does not contain definitive legal advice and should not be regarded or relied upon as such. Up-to-date specific advice should be sought in relation to this matter so that you will go about purchasing or selling your property in a seamless and cost-effective manner.
For more information on investing in real estate in Thailand, please feel free to contact SBC Interlaw by email or phone. SBC Interlaw is an international law firm with significant experience in serving foreigners investing or living in Thailand on real estate transactions and our teams of lawyers are committed to ensure the best quality customer services for you.