Suan Pakkad House is now a museum, but you can still find ways to get one of your own

(Note: Also read WoWasis post about construction scams in Thailand) Many Westerners who fall in love with Thailand have expressed a desire to own property there.  Although the process is probably more complicated than in your own country, it is doable, as thousands can attest.   Here are some of the basics, and remember to consult a lawyer when considering any property transaction in Thailand. 

What properties can a foreigner own? 

A farang may own the following types of properties:
1)  a condominium, in a complex where over 50% of the units are owned by Thais
2)  a house as a structure, having no interest on the land on which it sits
3)  one rai (or less) of land, provided at least 40 million baht is brought into the country, and permission is obtained from the Minister of the Interior. 

Acquiring a condominium 

In terms of a condominium purchase, price must be paid in full through payment to a Thai bank, in a process known as Tor Tor Sam.  For the payment, you need to open new account in a Thai bank and transfer the money in your own currency directly to that bank.  You will need to list the purpose of the transfer, e.g. “To purchase a condo in Bangkok.”

You will need to show the bank your passport, as well as a marriage certificate (if any).  The bank with then issue a Certificate of Transference, which will be part of the recording process at the Land Department. 

Mortgages are not available to individual foreigners, but are available to foreigners married to Thais. Mortgages are also available to Thai companies (see below) where the principal is under age 60.  Upon purchase, the owner will receive a certificate of ownership, detailing the percentage of rights over common areas.  It will also list the floor area of the condo in square meters, the percentage of common property acquired through ownership, which also represents the voter interest in the homeowners association.  

If your offer is accepted, a contract is drawn up, and you’ll be asked for a non-refundable “earnest money” down payment, typically 10% of the purchase price.  The contract will stipulate when the remainder must be paid, typically in 30-45 days. 

Before buying, be sure to determine the following: 

1)   Monthly maintenance costs. Get the amount in writing, on the contract, as well as  a line-item breakdown of how they’re disbursed.  It is unfortunately common that you’ll be charged for garbage disposal, street lighting, and pool use, even though it’s not stipulated in the contract.  Ask about everything.  How much have all maintenance costs risen in the past two years?

2)   Management company.  How many other condominium complexes do they own?  How long have they managed yours?  Arrange to visit one of their other managed properties, to see how the future of your building could play out.

3)   Is your project unfinished?  If so, there’s some degree of risk, as they could be over-mortgaged, or run out of funds to finish the job right.

4)   What percentage of units in a newer building have been sold?  If it’s only a few, they’ll all be paying more in monthly fees than if the complex is fully bought-out. 

Condominium prices in Bangkok

 As in other parts of the world, prices vary on location.  Along the desirable Sukhumvit central area, prices as of today are in the 45,000-80,000 baht-per-square meter range.  Recent construction (within the last 2-10 years) can be a good investment, due to better grade construction materials used in that era.  For better resale value, consider at least a 2 bedroom, 2 bath configuration. 

Monthly management fees typically run 30 baht per square meter.  If you’ll be renting out the property, figure on paying 7% of the monthly rental to your Thai rental management company. 

If you wish to buy property in your Thai wife’s name

 Your Thai wife may buy property in her name, but only if she guarantees that the money was hers originally, with no foreign claim on the money.  You (the farang husband) will be asked to provide a legal document stating that the money belonged to your wife prior to marriage. 

Some additional ways to own a house, with land 

1)   Form a Thai company, then buy the house and land. The Thai company must be primarily owned by Thai nationals, with the exact figure set by municipalities.  Figures between 51% and 61% are common.  For a limited company, shareholders must amount to at least seven individuals, and the director may be a foreigner.  In the event of the foreigner owning 39%, let’s say, the remaining six shares may be equally divided, meaning the foreign director is nominally in charge of deciding who lives in the house.

Caveat emptor: if the director is out of the country, the shareholders may hold a meeting, declare the director missing, then vote in a new (Thai) director, leaving the old director (you) out in the cold. There is a workaround, involving preferred and normal shares.  Getting the advice of a good attorney is recommended for this and all transactions involving ownership of property in Thailand.

2)   Have a Thai friend buy the house and land, then lease it to you (many foreigners do this based on a 30-year lease) 

Taxes 

There are two tax structures that you’ll need to be aware of, taxes due upon sale of property, and ongoing property taxes.   

Taxes due upon sale of property 

In Bangkok, three types of taxes are due upon sale of property, Witholding Tax, Transfer Fee, and BusinessFee/Stamp Fee Tax. 

1)   Withholding tax is is determined by a complex formula, but typically is between 1% and 1.5% of the sale price,  typically borne by the seller.

2)   The Transfer Fee is 2% of the appraised value, determined by the Lands Department, and is typically shared 50-50 by seller and buyer.

3)   If property is held fewer than five years,  a Business Tax of 3.3% is applied.  If over five years, a Stamp Fee tax of ½% of the selling price is paid, typically shared 50-50 by seller and buyer.

Ongoing property taxes

Two types exist in Thailand, Land Tax, and Structures Use Tax. 

1)      Land tax is levied on land ownership, and consists of a few baht per rai each year.  It is rarely collected, but may be eventually collected after multiple years. Anecdotal evidence suggests the amount to be negotiable.

2)      Structures Use Tax is applied to property being rented, at the annual rate of 12.5% of gross rentals.  This amount is often collected directly from the company you’ve hired to manage your property and collect your rent. 

Building your dream home

 If you’re determined to build rather than buy, and you’ve got the land, start with hiring an architect who understands both materials and the culture and needs of the workers who’ll be building it.  There are loads of good materials in Thailand, but even more shoddy ones (like our toilet seat, which cracked in half on the first “sitting”).  Always insist on top-ranked fixtures, and ask your architect how he’ll guarantee that best quality concrete will be used.  Work with the architect to select a builder who understands the concept of durability and quality, and that, as a farang, you’ll be checking the work constantly, and will insist on keeping to schedule. 

It is a wise precaution to hire a building engineer who will visit the site every week, and make inspections to ensure the work is up to snuff.  You absolutely must specify what you want the engineer to check, and how often he or she should do it.  If you need a weekly written report, with recommendations, put it in print.  Verbal contracts do not hold up in Thai courts! 

Insist that both the engineer and the architect be licensed, which gives you added protection, as if there is an issue, the licensing body may assist you before the matter ends up in court.  Finally, resist paying up-front fees, and adopt a “pay-as-you-go” formula, with both the builder and the engineer.  If you meet resistance, it could be wise to get your lawyer, who may be more persuasive, and savvy to local custom, involved. 

Choosing a lawyer

 T’would be folly to engage in a real estate transaction without the advice of a lawyer.  When choosing a lawyer, ask the following: 

1)   Ask if the lawyer has a conflict of interest, i.e, does he or she also represent the party from whom you are buying the property?

2)   Does he or she have a lawyer permit?  If this cannot be produced, call (02) 629-1430, x 100 or 107, and ask if the lawyer is registered.

3)   Be clear about describing the task you’d like the lawyer to do, then ask the amount of the fee for the service.  Typically, three different courts can be involved in property matters, and you should be charged for only one.

4)   Make a contract with your attorney, spelling out the service required, and fees.  Ask for a copy in your own language.  Any disputes with the lawyer will of course, be adjudicated based on the Thai-language original.

5)   If engaged in a dispute with the individual or company from which you’ve bought property, turn over all pertinent documents to your lawyer, and ask for a receipt.  This will allow your attorney to act on your behalf in timely fashion.

6)   Follow up on the case.  The squeaky wheel gets the grease.  Ensure that your lawyer is one his or her toes.

7)   Don’t miss your court date.  If you do, a default judgment could be entered against you.

Land measurements in Thailand

 Land is measured in talang wah, ngarn, and rai.
1 talang wah = 4 square meters
100 talang wah = 1 ngarn = 400 square meters
4 ngarn = 1 rai = 1600 square meters
2.529 rai = 1 acre 

Does all this seem a bit complex?  It needn’t be, if you adhere to the above advice, secure a good lawyer, and insist on quality above all.