Buying property in Thailand – What you should consider

Although the purchasing process in Thailand is not particularly difficult, it is very important to pay attention to the details. If you do everything correctly—and I am here to help you with that—you will enjoy your little paradise forever. If things go wrong, there is a risk of losing everything.

This article is not a substitute for a conversation with a qualified and experienced lawyer. It is intended to provide you with an easy-to-understand overview of the various options for acquiring property in Thailand without any complications.

Ownership Rights for Foreigners

Many foreign property buyers in Thailand purchase an apartment in a so-called condominium, which is registered in their own name. According to the latest constitutional amendment on the purchase of condominiums in 2008, a maximum of 49% of the residential area in any building can be owned by foreigners. Buyers receive a corresponding percentage of co-ownership of the entire residential complex—just as you would at home.

If you buy a house, whether ready-to-move-in or still under construction, you will be registered as the homeowner at 100%. However, you will acquire the land as a leaseholder—I will elaborate on this below.

Due to the security and transparency, it is not surprising that most foreign buyers choose this form of ownership, even though purchasing property through a company established in Thailand may offer lower prices and more attractive payment terms from developers in some cases.

While lawyers debate the proper interpretation of different ownership options, many believe that acquiring property through a Thai company carries some risks.

But what options are available if you are not interested in acquiring property this way just to enjoy better conditions? There are several alternatives, though they come with their own advantages and disadvantages.

Become a Major Investor

Thailand is a country where money can solve most problems. Suppose you want to purchase a plot of land for exactly 40 million Thai Baht. If you are able to bring this amount into Thailand in foreign currency (currently equivalent to about one million Euros), you can buy a plot of land of the corresponding size and have it legally registered in your name. To handle this and procure all necessary documents, you will definitely need a good lawyer before bringing any large amount into the country.

Buying Property in the Name of a Thai Spouse or Partner

Many single men who come to Pattaya eventually take a Thai woman as a girlfriend or even as a wife. In such cases, it is tempting to buy property in the wife’s name to circumvent the ownership restrictions on land acquisition for foreigners. If you are 100% sure that your happy partnership will last a lifetime, then this option poses no problem. However, be warned: if your relationship breaks down, the property belongs solely to your girlfriend, and you risk losing everything in case of separation.

If you are married, the situation is more favorable (although “favorable” might not be the right term here), as it is considered a joint property unless otherwise stipulated in a contract. If you divorce, the rules you know from home apply: all assets are split 50/50. You both decide who stays in the house or on the land, and the departing partner is entitled to 50% of the value. Of course, individual circumstances must be considered, and we cannot cover these in detail here, but they can be resolved cleanly with legal support, ideally before marriage.

For a Thai wife to be able to acquire land in her name, the foreign husband must gift her the required amount before the purchase, which is officially documented. The property deed then carries only her name, and she can do whatever she wants with it. Any side agreements are not legally valid in Thailand and offer no way to salvage the situation through other means.

In summary, most lawyers will advise against this form of property acquisition for your own protection. If you still choose this route, you should at least use a lawyer to establish a usufruct contract with your partner, granting you usage rights to the property and legally preventing you from ending up on the street.

Land lease for 30 Years and Beyond

Although foreigners cannot acquire land, they can lease it for a period of 30 years. Many buyers who have invested in a property and expect to be in good health after 30 years are reluctant to be left without ownership when the lease expires and therefore wish to lease the land for a longer period.

There is an option to extend the land lease contract for another 30 years in the 29th year, and even after that for another 30 years. However, pay attention to the details. As with most cases in Thailand, there are different interpretations and solutions. In extreme cases, the law regarding land lease agreements is handled differently from province to province. The local Land Department in Hua Hin accepts these extension clauses, so you are on the safe side.

The important point is: when you buy a house and lease the land, you pay the agreed total purchase price as a sum from the house purchase contract and a separate land lease contract. There are no monthly or annual payments for the land lease, as you might be familiar with from leasehold arrangements back home. Only minor fees are payable for the 30-year extension.

In Summary:

Ownership

Even though foreigners cannot buy land in their own name, they are at least allowed to become owners of a house—right down to the last brick and mortar—for an unlimited duration.

Do you want to lease land from a private individual?

According to the law, any extension of a 30-year land lease contract is not legally binding. Such agreements are only valid if they are a) stipulated in the contract, or b) agreed upon in writing within the last three years before the original lease term expires. In this case, the possibility of extending the contract is entirely dependent on the good will of the lessor—if they still exist. It is entirely possible that they might sell the land or transfer it to their heirs, who might have completely different plans rather than extending your lease.

A skilled lawyer can draft a contract that leads to a stalemate at the end of the 30-year lease. While the lessor can reclaim the land at the end of the contract, they have no legal claim over the building you have constructed on that land. At that point, you could do whatever you want with your house and would be within your rights to demolish it on the last day of the lease.

Are you buying a house and land from a commercial developer?

If you, like most house buyers, purchase a villa from a commercial developer who offers you a house and land in their village project, the situation is different. It is common and accepted practice to include an extension option for another 2 x 30 years in the contract, immediately upon concluding the house purchase contract and the land lease contract with a 30-year term.

Additionally, if you sell your house during the lease term, even to a family member, and transfer the land lease contract as well, the 30-year lease period can start anew.

Purchasing Property through a Company Established in Thailand

Another popular option for property ownership, especially for land acquisition, is to establish a company in Thailand, where the foreign shareholder can hold a maximum of 49% of the company shares. This method is often debated and frequently misunderstood.

For a long time, establishing a company was the only way for most foreigners to acquire property without leasing it. As a result, thousands of property owners have chosen this route.

“Is it advisable and safe for foreigners to acquire property by establishing a Thai company?” is the most frequently asked question to real estate agents and lawyers in Thailand. Anyone who quickly answers “yes” or “no” fails to present all the facts, as there are no black-and-white answers to this question.

When establishing a Thai company, the foreigner can hold a maximum of 49% of the shares, while the remaining 51% must be held by at least two Thai citizens or Thai companies. Many potential buyers fear that the Thai majority partnership shareholders might collude to take the property from the company for their own benefit.

However, this is not the case. Although foreigners can only own a maximum of 49% of the company, they can still have a higher number of voting rights than company shares with preferential voting rights, allowing them to maintain sole control over the company. A good lawyer can include additional provisions in the company agreement to ensure that the Thai side have no say in the company and can be quickly replaced if necessary.

What is the potential risk of this type of ownership?

The risk lies in the fact that a Thai citizen is not legally allowed to act as a “nominee shareholder” for a company established for the purpose of acquiring property by foreigners. The Thai side must explicitly confirm in writing and with counter-signature that they are not joining the company as “Nominee = silent partner.” They are informed that if this statement is false, they face significant fines or even imprisonment. Investigations can also be initiated to examine the financial background and benefits. Authorities will ask the Thai company partners where they got the money to pay the share capital. This can be problematic.

Furthermore, the tax authorities may ask you, the foreign director, why there are no debit and credit movements in the annual balance sheets if the company is supposed to operate a registered business purpose with income and expenses. If your company only shows the property as an “asset,” it will quickly be declared a shell company. This can end badly.

It is strongly advised that anyone wishing to purchase property this way seek the assistance of an independent lawyer who represents the buyer’s interests—and only their interests—and is capable of structuring the company as securely as possible.

Conclusion: Do not hesitate to make a land lease agreement for “only” 30 years plus extensions instead of establishing a company or transferring your property to your partner.

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