Purchasing a condominium in Hau Hin, Bangkok or Pattaya in this tropical paradise is a dream for many foreigners who wish to escape the cold winters and the high cost of living in their home country.  Thailand offers the foreigner many benefits including beautiful beaches, tasty food, friendly people, world class health care and inexpensive property.  Many foreigners come to Thailand to purchase a condo for various reasons:  for their retirement, as a second residence or for investment purposes.  For those who desire to stay longer in Thailand, the ability to acquire property is an important issue.  Many foreigners prefer to reside in a condominium since there is less maintenance involved for the owner.  You can simply close and lock the door until your next stay.  Projects in Thailand offer 24 hour security so you can feel safe that everything will be as it was when you left.  From the perspective of a Legal Advisor, I would like to share with you the process so you'll feel secure of your purchase of a condominium in Thailand.

In Thailand, a foreigner may own a condominium 100 percent in his/her own name.  Freehold title for the condominium purchase is the most secure method of ownership for the foreigner. If the project is over the 49 percent quota for foreigners, you may need to draft a lease contract for your transaction.  In Hua Hin we do not find this problem since Thai owners are the majority in most condominium projects.

Before you sign any deposit agreement or contract, you should sit down with a lawyer or solicitor to discuss the legal process.  You need to know the correct legal process in Thailand for the foreigner to purchase a condominium.  Remember that you are spending part of your life savings to acquire this property and you must carefully plan your steps in the process.  Some banks will offer up to 70 percent financing to foreigners for purchasing a condominium.  The repayment term can be as high as 20 years.  Siam Legal offers free legal consultation to potential property buyers.  You should get the legal facts of the property and contract laws in Thailand before you deposit any money.

A comprehensive examination of title deed recorded at the Land Department should be done.  You need to verify that the Seller has clear and legal title of the land before you enter into a contractual agreement.  The title search will trace the land to its first possession.  Don’t take the word of anyone who tells you it has been checked before.  The lawyer conducting the title investigation will provide you a full report and a copy of the title deed in English language.

Every financial transaction requires some sort of due diligence on behalf of the purchaser to verify that it is a sound investment.  When you purchase shares of a company listed in stock market or a mutual fund you will generally research the profile and performance of the company or fund.  The same is true when you purchase a property from a developer.  You should check with the previous buyers to see if they are satisfied with the quality and time frame of construction.  If you don’t have the time to spend on checking the history of the developer, a local lawyer near the development will know or can check the project, its directors and their reputation.

When you feel satisfied with the property and it meets your expectations, you will be asked to make a deposit to show your good faith to continue the process.  In return, the Seller will reserve the unit for you and start the process by drafting the contracts for purchase.  Unless you write specifically a “get-out” clause in the deposit agreement, for example “subject to clear title” or “subject to agreement on the contract terms,” the money deposited is non-refundable.

There are some fundamental elements which should be included in every contract. These are, among others:

1. Time frame

An agreement should have a time frame which stipulates clearly the starting date for construction as well as its completion date. Check for any extension clauses which normally give the developer a few extra months to complete without incurring any penalties.

2. Payment Penalties

Check that the penalties for default of payment are not too burdensome on you. Terms such as immediate rescission of contract and retaining the money you have already paid are not uncommon but there should be a period given to you to remedy this default.

3. Developer’s Default

Ensure that you have some recourse to a full refund in the event that the developer does not complete the construction due to insolvency or for any other reason.

4. Late Completion

Penalties should be given to you if the completion is late. This is normally deducted from the final payment due upon completion. Penalty rates vary greatly in Thailand although for condominiums there is a daily minimum penalty of 0.01% of the total unit price.

 

5. Assignment

Many things can happen in the future so it is useful to have an exit clause should your plans change. An assignment clause allows you to transfer the obligations of the agreement to a third party. Note the administration fee due to the developer for this action. An assignment clause may also allow you the option to ‘flip’ the property should the market be conducive.

You will transfer funds into Thailand from overseas for the purchase.  The funds transferred will be in foreign currency and converted by the Thai Bank to Thai Baht.  A British couple for example will transfer Sterling from their London bank and wire to the bank in Thailand. The Thai bank will convert the funds into Thai baht and deposit it into local bank account.  The Thai bank will issue a Foreign Exchange Form to confirm the transaction.  The bank will only issue this form if the transaction is over $20,000 USD.  When you wish to repatriate the funds back to your home country, you will need to show the Foreign Exchange Form and supporting documents.  Your lawyer or solicitor in Thailand can act as an escrow agent and disperse the payments to the Seller per your instructions.

The pre-construction real estate acquisition is the practice of buying a property very early on in the construction process.  Developers are selling these future condominium units to customers in order to finance the development itself.  The customers, on the other hand, are banking on the appreciation of the property once the infrastructure and amenities have been put in place.  There are distinct advantages to buying during pre-construction such as the relatively discounted price, the choice of selecting a more appealing unit within the project or other added incentives offered by the developer to the early buyers.

Some condominium projects can sell out very quickly upon the launch if the condominium units are reasonably priced and in a good location.  For example, Baan San Pluem condos by SanSiri Plc. which is located beachfront opposite Hua Hin Market Village, reportedly sold 80 percent of the units in just a few weeks from the Grand Opening earlier this year.  The local Thai buyers saw this project launch as a great opportunity to purchase beachfront condos at the attractive pre-construction prices.

See also:

Pre Construction Investment

At the conclusion of the construction period, you will receive notification from the Seller that your condominium is ready for inspection.   You or your representative will go to the property site and conduct a thorough inspection for any defect in construction or materials.  Once you have accepted the condition of the property, you will go to the Land Department for the transfer or registration process.  If you are not able to appear in person, a lawyer or third party can represent you by means of a Power of Attorney.

When we buy a property back home, one of the fist things we would think of is financing. Even for those who have sufficient funding and liquidity for an acquisition, financing is often seen as a means of leveraging our investments. For buyers with less access to funding, financing is an indispensable vehicle they use to own that dream home. In this instance, Thailand is the same as any other country. Most of the financial institutions in Thailand provide loans for real estate purchases to local Thais and Thai companies based on similar criteria we are used to in our home country. However, the similarities do end there for most foreigners buying property in Thailand.

See also:

Financing For Foreigners in Thailand

Bangkok Bank Procedures

UOB Bank Financing Procedures

 
Around the middle of 2005, Thailand saw the emergence of a new financing service offered by Bangkok Bank’s Singapore branch. At this time we saw Bangkok Bank starting to offer offshore financing for foreigners wishing to purchase real estate in Thailand. Up to 70% of the property’s value was made available to foreigners who did not qualify for a local loan. This gave many foreigners access to finance for their dream homes even if they did not reside in Thailand. Up until this time, there were only a handful of private offshore firms offering lines of credit of this kind and often at rather stringent and unattractive terms.

Bangkok Bank in Singapore still offers such loans to foreigners and the demand for this is increasing. They are able to tender loans in several currencies including US and Singapore Dollars (SGD). Currently, the interest rate for SGD loan stands at 6.00%. A processing fee will also be incurred upon application. Bangkok Bank does insist on meeting the applicants in person and this means you would usually have to travel to Singapore to apply for this.

Bangkok Bank was the first bank in Singapore to offer such financing services. However, this year we saw the introduction of United Overseas Bank (UOB) in Singapore jumping on the band wagon and offering similar lending services to foreigners wishing to purchase real estate in Thailand. It is a relatively new scheme for UOB and it was introduced largely as an alternative to Bangkok Bank’s hold on this lucrative market. It is a good thing that we are starting to see some competition in this area and in the future this will hopefully create an environment that would improve the consumer’s position with various banks trying to outdo each other with more competitive rates. At the moment, the terms for a UOB international loan is still very similar to Bangkok Bank with their interest rate currently also at 8.75% for USD and 6.00% for SGD. However, it appears their processing fee may be slightly higher but offers the advantage of applying for the loan locally in Thailand without having to set foot in Singapore. UOB’s entrance into this niche market is a welcoming sign to the area of financing to foreigners in Thailand.

Many investors target a condo project when the development first launches.  They are keen to purchase the plum units in the project as an investment.  Later, the investor will resale or “flip” the unit typically before the legal interest is registered at the Land Department.  The value of the unit increases prior to the completion or title transfer.  These investors will capture their profits without their names ever appearing on the title deeds.  Care and caution should be exercised if you are “flipping” the unit since some developers will not allow assignment of the unit to another person.  Some developers will allow this option but they will charge a very high administrative fee or even a percentage penalty.

Living in Thailand should be an enjoyable and relaxing experience.  If you plan and prepare in advance for the acquisition of your property, you will be rewarded for your efforts.  Those who take short cuts in the recommended process above will save some money but in the end it will not be worth it if something goes wrong.  Property is a solid investment in Thailand as well as a great place to live while enjoying life in paradise. 

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