Buying Off-Plan Properties in Thailand

Buying Off-Plan Property in Thailand

In Thailand, "buying off-plan" is when you acquire real estate that’s still in the pre-construction stage, typically to lock in a lower price early at the expense of not seeing the finished product. This method is becoming more common with the rise in Thai condominium and housing developments, but in spite of the benefits it offers, buying property in Thailand in this way without professional assistance can be challenging and risky.

Continue reading to learn more about off-plan properties in Thailand, how to acquire property during the pre-construction phase, and the risks to be aware of.

Buying Pre-construction Property in Thailand

Pre-construction investments attract buyers by offering lower early prices. Later, they can resell the property at a higher value to turn a profit. Property developers often sell unfinished properties to finance the development, while buyers benefit from the property’s appreciation once the real estate is subdivided and all infrastructures and amenities are finished.

However, buying off-plan properties in Thailand is not as simple as buying a condo off a listing. You must prepare carefully to ensure you get a fair price and don’t get scammed, including:

• Carrying out proper due diligence on the pre-construction development
• Reviewing the developer’s history and background to check their financial status and previous projects they have worked on to determine their credibility
• Making sure the developer has the appropriate licensure required for the development and has carried out an environmental impact study on the project
• Verifying the values and costs of the property before making a purchase

In addition to the potential benefits, buying a pre-sale property project also comes with risks, such as reduced property value, delays, and a finished product that does not meet expectations. The developer can also go bankrupt, default on payments, or fail to complete the project, leaving you with an unfinished property that you just invested in.

Due to the difficulties of navigating the law in Thailand and the expertise required to perform due diligence, it is important to retain the services of a Thai property lawyer before committing to a purchase. A bilingual lawyer who is well-versed in all aspects of Thai property regulations can perform all the checks on your behalf, review the sale contract for legality and fairness, and more.

What to Look for in Pre-construction Contracts

To minimize risks, it’s essential to have your lawyer review the property contract before signing and paying anything. There are fundamental elements that should be included in every pre-construction agreement that must be examined before it’s safe to sign. These include:

Timeframe of the Pre-Construction Project

Each agreement should have an established timeframe for the project that clarifies the start and end dates for its construction. The contract should also include any extension clauses allowing the developer additional time to complete the project without incurring penalties.

Price of the Property

The cost, payment terms, and method should clearly be listed on the contract in a schedule format, calculated by units such as per square meter or wah (the unit of land measurement in Thailand). Be wary of additional charges that you have not discussed with the developer.

Payment Penalties

Late payments and defaults can result in penalties, which should be outlined clearly in the property contract. It’s important to review the agreement to ensure that the resulting penalties are not unfair to you. In case of a default, there should be a period allowing you to remedy it, which is highlighted by terms such as ‘immediate rescission of the contract’.

You should also confirm if you have the right to a full refund if the developer does not complete the construction due to insolvency or other reasons.

Late Completion

If the project is completed late, certain penalties will be imposed on the developer. As the buyer, a deduction will be made from your final payment upon completion. Penalty rates vary in Thailand, although if you are buying a condo, there is a daily minimum penalty of 0.01% of the total unit price. For houses and villas, this fee is around 3,000 - 5,000 baht per day.

Building Specifications

The contract should have a comprehensive list of all materials used for the building’s construction. You should also keep an eye out for substitution clauses, which allow developers to replace certain materials with "similar or better quality" items should their prices increase.

Building Floor Plan

Along with specifications of the building, the contract also needs to have the floor plan attached to the document. The agreement should also reflect any changes that have been made to the floor plan, regardless of whether they are minor or major. You should also be careful of clauses that allow the developer to modify the floor plan, but keep it similar to the plan agreed upon.

Recitals

In legal terms, a recital includes a list of facts regarding the property, its owner, and the title deed, and it's important that this information is accurate. For instance, the first page of the agreement should clarify that the developer is the rightful owner of the land in question. If the developer does not currently hold the title, the agreement should state that the buyer has the right to rescind the contract and receive a full refund.

Assignment

To prepare yourself in case something goes wrong in the future and to make it possible to rent out your property, the contract needs to have an assignment clause. Also known as an exit clause, this allows you to transfer your obligations to a third party. This clause should highlight the administration fee and give you the option to resell the property once market conditions are favorable.

Alternative dispute resolution

Disputes can arise between you and the property seller or developer, regardless of how good your relationship with them is. To make it easier to settle any sudden disputes and avoid high costs, you should make sure your agreement has an arbitration clause. This is a term that outlines a process for resolving disputes outside of court, which can help save time and reduce legal expenses.

Professional Assistance in Buying Property Off-Plan in Thailand

Before proceeding with off-plan property purchases, it's best to have your contract reviewed by legal experts in Thailand, even if it’s drafted in English and Thai. To avoid unanticipated problems with pre-construction acquisitions, reach out to Siam Legal’s property team for further assistance. As a full-service law firm with over 20 years of experience helping foreigners buy property in Thailand, our Thai property lawyers have the skills and knowledge to help you secure a property off-plan with minimal risk.

We will do this by conducting due diligence on the project and reviewing the necessary agreements on your behalf before moving forward with the purchase. We will inform you whether the property is safe to acquire and advise you of any potential issues to expect, so you will be in a better position when deciding to invest in it.

Contact Siam Legal and book a consultation with our property lawyers today to get peace of mind and minimal risk for your next off-plan purchase.

Purchasing Thai Off-plan Properties FAQs

Why is it Important to Review a Contract Before Purchasing Property?

It’s essential to familiarize yourself with Thai contracts as they are forged and treated differently compared to other countries, particularly in the West. While Thailand has started to adopt a more comprehensive type of document, most contracts traditionally consist of 2 to 3 pages that only outline the major principles. If your relationship with the seller or developer is good, they will generally be open to amendments if needed. Despite this, some sellers can create contracts that are biased against the buyer and largely favor them instead.

Are Lawyers Mandatory for Off-plan Property Purchases?

No, property lawyers are not a hard requirement under Thai law if you want to buy property that’s during the early construction phases. However, it is recommended that you consult a lawyer beforehand, as purchasing off-plan properties alone increases the likelihood of problems appearing, such as delays, possible disputes, and more.

Can You Rent Out Property You Purchased Off-plan?

Yes, you can rent out property that you acquired, even when it’s still in the development phase. This is a common tactic that investors use as it costs less to secure a property off-plan, leading to higher yields that result in quicker Return on Investments (ROI). If you want to generate higher yields from this, it’s important to check the rental fees within the surrounding areas of the property.