FINANCIAL CONSIDERATIONS

Property Management, The management of a development varies in scope from the maintenance of the site and common areas, to the servicing of each unit, depending on what the developers and owners want. The property managers will also be responsible for security and administration of the estate. The management of a development can be handled by either the developer, an entity attached to the development, or an independent property management company.

You should be comfortable that the appointed party will deliver the quality and scope of services you expect, and be aware of costs incurred. Financing Generally, Thai banks do not lend to foreigners for land or property purchases. However, some institutions such as Bangkok Bank’s Singapore branch and the Thai affiliate of Singapore’s United Overseas Bank are now starting to offer mortgages of up to 70% of the price of the property to foreigners. Some developers also offer funding assistance, but you need to be aware that the vast majority of purchases are on a 100% equity basis.

Tax
At present, there is no tax in Thailand on the occupation of property or ownership. There is a proposal to bring in a property tax on ownership at the rate 0.1 of 1% of the government assessed value of the property, which is historically below current market value. On the rental or the sale of the property, depending on the status of the owner an individual, resident or non-resident in Thailand, or a corporation various taxes on the actual sale proceeds or on the assumed income based on assessable value may be levied. This is a specialist area, on which you should seek legal advice. As a guide, these may include:

- Transfer fee: 2% of the official appraisal price
- Special business tax (SBT): 3.3% of the higher price between the official appraisal price and the sale price (although this is exempt if the individual seller has owned the property for more than 5 years)
- Withholding tax (corporate): 1% of the higher price between the official appraisal price and the sale price
- Withholding tax (individual): Specific calculation based on the appraisal price
- Stamp duty: 0.5% of the higher price between the official appraisal price and the sale price (but exempt if SBT has been paid)

LEGAL CONSIDERATIONS

1. Condominium title:
49% of the registered title may be owned outright by foreign nationals with freehold condominium title: the condominium must be registered with the Land Office and, as the purchaser, you need to be sure you are buying within the foreigner quota.

In order to be able to realize any subsequent sale proceeds you must also remit 100% of the purchase price in foreign currency from abroad, and obtain the correct Bank certificates.

The owner of a condominium unit will be named on the title deed of the unit, which will also show the common elements of the condominium located outside the unit, e.g. parking space, private garden area.

2. Leasehold:
A foreigner may register ownership of a 30-year lease with the Land Office. This may be a lease of a condominium or freehold land provided the title against which the lease is registered is freehold or “Nor Sor 3 Gor” which is a form of good quality title just below that of chanote. By this structure, a foreigner can effectively
own land.

There are no restrictions on foreigners owning a building outright. Therefore, the foreigner may own the building erected on the land over which they have a 30-year lease.

By contract with the developer or a special purpose company, the buyer can have a series of options for further terms of 30 years, but these options cannot be registered against the land title. This structure is transparent and is fully in accordance with the Thai law.

3. Thai Companies:
July 2007 – In the light of the proposed amendments to the Foreign Business Act, we do not recommend foreign purchasers to acquire freehold Thai properties through the establishment of a Thai company at this time.

The establishment of a Thai company and the law relating to foreign ownership of landed property is a specialist area and it is recommended that purchasers consult legal professionals who are well experienced in this area.

The purchase of either a foreign quota condominium unit or a 30-year lease with options to renew from a reputable developer with pre-committed professional property management of the development on completion remain the preferred route. This complies with existing and proposed Thai law and offers the best chances of capital appreciation.

Land Registration

Thailand has a sound system of land registration, and an effective land office network throughout the country. Land registration is done by a combination of aerial mapping, site surveys and historic investigation into ownership. This Torrens land registration system has been operating since the Second World War, with the support of the
Australian Government, which advised Thailand on the setting up of the current system of land registration.

Areas of prime activity such as Bangkok and luxury resort areas such as Phuket and Koh Samui are priority areas for accurately mapping and registering all title deeds.

- Land Title – There are different grades of land title in Thailand and buyers must ensure that the development in which they intend to buy owns the property through effective title, and that the land they wish to acquire may be developed. There are various levels of title in Thailand enjoying differing levels of security.

- Chanote title – equates to freehold title. This means that the land has been surveyed by the authorities and physical boundaries are clearly defined. It is the ultimate certification of land ownership. Holders of this type of title deed, i.e.
people whose names appear on the title deed, have full rights to transfer the property. The title deed must be registered at the Land Department in the province in which the land is located.

- Nor Sor 3 Gor title is often treated as virtual freehold. The owner of the land can apply to upgrade the title to Chanote. An official aerial photograph has been taken and the land positioned in it. There only remains for the land department to attend the land and physically delineate the boundaries. Nor Sor 3 title is similar to Nor Sor 3 Gor, but there has been no official survey of the land, hence no established boundaries and measurements. The obvious weakness of this title is that there could ultimately be variations to the boundaries. Land bearing Chanote, Nor Sor 3 Gor or Nor Sor 3 titles may be used by Thai entities as loan collateral, and can be developed, sold or leased. There are several grades of lower title that might form part of a development site such as Sor Gor 1, a notice of possession, or Por Bor Tor 5. Typically these are poor quality rights for use, and cannot be sold or leased. As amenity land to a development, this lesser title may be acceptable but you should be aware that this is a poor form of title?? merely a tax receipt acknowledging use of the land. The weakness to this title is the very real danger of 3rd party claims to adverse possession.