Buying Off-Plan: The Sales and Purchase Agreement

Off-plan Condominium Projects

Off-plan condominium projects are an attractive option for foreigners desiring to live in Thailand because they offer the prospect of purchasing something that is brand-new. However, several concerns will naturally arise if one should enter into an agreement to purchase a new home in a pre-constructed condominium. In the past, unscrupulous developers have been known to take advantage of customers by not holding themselves accountable should the project not be completed on time or ever.

In 2008, the Thai government stepped in and began to regulate contracts between developers and purchasers. Parliament amended the Condominium Act of 1976 to add Section 6/2, which requires contracts between purchasers and developers to follow a standard form prescribed by the Ministry of Interior. The Ministry of Interior then published government form O.C. 22. O.C. 22 is a standardized sales contract that provides consumer-protection clauses that are favorable towards the purchaser.

The O.C. 22 standard sales contract provides the following, which any sale and purchase agreement for an off-plan condominium will have to offer at the minimum:

  • The Seller must guarantee that the Seller is the owner of the land upon which the condominium project is being constructed. The Seller must provide the Title Deed information for the land and must state whether the land has been mortgaged, for what amount, and to whom. The Seller must guarantee that the Seller is the owner of the condominium building and is the owner of the condominium unit. The Seller must also state whether any mortgage also extends to the condominium building. The Seller must also warranty that the Seller has received a construction permit and that the condominium building will be registered as a condominium upon its completion.
  • In the clause detailing the terms of the actual sale and purchase, aside from the condominium unit itself, the terms must also explicitly state that the sale and purchase includes the common property. The common property must include those items that Section 15 of the Condominium Act specifically designates as common property, such as the land upon which the condominium project is built. Furthermore, the Seller is obliged to register as common property any amenities advertised in any advertising materials.
  • The Seller must promise a specific transfer date and guarantee that it shall complete construction in time for that date. The Seller must send a reminder notice of the transfer date 30 days in advance.
  • The Purchaser has the right to assign his or her contractual rights to any other person without being subject to any assignment fees from the Seller.
  • The Seller must guarantee that the condominium building will be constructed according to the government-approved specifications and that the type, brand, and quality of all materials and components will be according to plan.
  • If the construction must halt at any time due to no fault of the Seller, the Seller shall have the right to halt construction, but for no longer than is necessary. The Seller must send written notice to the Purchaser, including written evidence of the reasons for the stoppage. However, in no case can the delay in construction last longer than 1 year.
  • The Seller is required to have electricity and water installed in time for the transfer of ownership. The Seller may demand reimbursement from the Purchaser afterward.
  • The Seller is required to pay all income taxes, the specific business tax, and stamp duty related to the transfer of ownership. However, the Seller and Purchaser are required to evenly split the transfer fees.
  • In the event the Purchaser is late on a payment, the Purchaser must agree to allow the Seller to collect interest on the outstanding balance at a rate not exceeding 15% per year. In any event, the total amount of interest cannot exceed 10% of the purchase price. Furthermore, the Seller cannot immediately terminate the contract. The Seller must send a written notification of late payment to the Purchaser and allow the latter 30 days to make payment before the Seller terminates.
  • In the event that the Seller cannot deliver ownership to the Purchaser on the designated date of transfer, the Purchaser shall have the right to terminate the contract and be refunded any money already paid, including interest at the same rate levied in case of default by the Purchaser. Accordingly, the total interest cannot exceed 10% of the purchase price. Furthermore, in exercising these rights, the Purchaser is not precluded from filing a lawsuit against the Developer for any other damages. If the Purchaser chooses not to terminate the contract, the Purchaser is allowed to subject the Seller to a daily fine of at least 0.01% of the purchase price. However, the total fine cannot exceed 10% of the purchase price. Once the total fine has reached 10% of the purchase price and it appears to the Purchaser that the Seller will be unable to comply with the contract, the Purchaser will then have the right to terminate the contract.
  • In the event that the Seller cannot continue the contract due to force majeure, the Seller is required to refund any money the Purchaser has paid so far, including interest at the highest fixed-deposit rate of Krung Thai Bank.
  • The Seller is required to be liable for any defects in the construction of the condominium building. Specifically, with regards to components of the building structure, the Seller shall be liable for any defects for 5 years from the date of registration of ownership. In regards to any other parts, the Seller’s liability last for 2 years from the date of registration of ownership.
  • The Seller must attach the following documents to the end of the contract:
    • Where a Seller is a juristic person, the Seller must include a copy of its certificate of incorporation and a copy of the Power of Attorney that authorizes the Seller’s representative.
    • A copy of the Land Title Deed.
    • A copy of the construction permit.
    • A diagram of the condominium building and proof of registration as a condominium.

Details concerning the condominium unit, personal property, and any amenities. Furthermore, any advertisements by the Seller must be attached.

Any additional terms offered by the Seller are void to the extent that they contradict with the standard clauses or if they are biased against the rights of the Purchaser.

Finally, Section 6/2 provides that any contract which fails to meet the minimum provided by O.C. 22 is not valid. Section 63 subjects any Seller who violates Section 6/2 to a fine of 100,000 baht. Before paying any deposit to the developer, ask to see a copy of the Sales and Purchase Agreement. Since the O.C. 22 standard contract is usually not translated into English, the assistance of a Thai property law specialist will help determine whether the developer’s contract complies with the law. The fact that the developer follows the government standard contract is strong evidence of the developer’s reputability and trustworthiness.

 

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Siam Legal is an international law firm with experienced lawyers, attorneys, and solicitors both in Thailand law and international law. This Thailand law firm offers comprehensive legal services in Thailand to both local and foreign clients for Litigation such as civil & criminal cases, labor disputes, commercial cases, divorce, adoption, extradition, fraud, and drug cases. Other legal expertise of the law firm varied in cases involving corporate law such as company registration & Thailand BOI, family law, property law, and private investigation.

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