Buying a Condominium in Thailand – Key Issues for Foreign Buyers to be Aware of

Under Thai law, foreigners (which includes natural persons, foreign registered companies or foreign majority owned Thai registered companies) can own up to forty-nine percent (49%) of the space of all units in a registered condominium. In this article we shall discuss several key matters which foreign investors should be mindful of before purchasing a condominium unit, including the sale & purchase contract, applicable fees and taxes, due diligence, and documents required to register the transfer of ownership at the Land Department. Foreigners should also be aware that there are two types of residential apartment buildings in the Kingdom, these are:

  • condominiums registered and licensed with the Land Department, these offer ownership over the separate condominium units [Freehold]; and
  • Apartment buildings which are not licensed as a condominium thus not offering individual ownership over the units within them [Leasehold].

Foreign buyers should be careful of the second category and in the writers opinion should only focus on Condominiums registered and licensed with the Land Department as these must comply with the Condominium Act B.E. 2522 (1979) which provides more safeguards and benefits to buyers including joint control of management of the building by all condo unit owners and joint ownership of the condo’s common areas.

Due Diligence Before Purchasing a Condominium in Thailand

Before a foreign buyer proceeds to enter into a sale and purchase agreement with a seller for a condominium unit, it is advisable to have a lawyer undertake a due diligence investigation into several matters relating to the unit and the seller(s). In the writer’s opinion the following issues should be investigated:

1. Check that the person(s) or the juristic person (i.e. company) trying to sell the unit is the actual owner of the property. To do this it is necessary to obtain a copy of the title deed of the condominium unit to see who is/are the current legal owner(s) of the condominium unit and ask for a copy of the seller’s Thai National ID card or passport or its company registration[1] documents if the owner is a company, in order to verify if they are the same.

2. Check to see if the title deed is subject to any mortgage, encumbrance or charge and if so what the details are. If there is a mortgage, then it shall need to be released to the seller on or before the date of transfer of the property so that the seller can legally transfer the property to the buyer.

3. A litigation search should be undertaken to see if the seller(s) are subject to any civil or criminal litigation or any proceedings in the Bankruptcy Court.

4. Engineer and pest inspection to ensure that the property is structurally sound and not subject to any termite or water damage/ vermin infestation etc.

5. Investigating the financial position of the Condominium Juristic Person to see its assets, liabilities and co-owner equity to ensure that it is in a satisfactory financial position to keep up with ongoing expenses related to maintenance and building upgrades.

6. Check to see what the current foreign ownership quota for the building is (is it at or below the required 49% foreign ownership cap) to determine if it is legally possible for a foreigner to purchase the unit being sold.

7. Check to see if the condominium unit being sold corresponds to the description in the title deed that represents it.

 

Protecting the Buyer in the Contract for the Sale & Purchase of a Condominium Unit

Before signing a contract for the sale & purchase of a condominium unit, the buyer should ensure that the contract contains necessary information and clauses which safeguard their legal position, some of these include the following:

a. The property being sold must be accurately identified in the contract including the size of the unit being sold. It would be prudent to include a copy of the title deed (front and back pages) as an attachment to the contract too. If the condominium unit includes parking spots, then these should be specified in the contract as well.

b. The sale price must be clearly mentioned as well as all installments to be made by buyer to the seller. In Thailand, normally a deposit is made upon signing the sale & purchase contract with the balance paid upon registration of transfer at the Land Department. The writer recommends that the deposit should not exceed 10% of the sale price[2] with the remaining balance payable upon registration of transfer.

c. The contract should contain a clause covering what shall happen in the case of default/breach by the seller or the buyer such as forfeiture or return of the deposit money etc.

d. The contract should specify when the transfer registration date is scheduled for or must occur by. It is often good to allow for an extension of up to seven (7) days just in case a last-minute hiccup arises and more time is needed by either party in order to be prepared for the registration of transfer.

e. The contract should be clear on which party shall be responsible for paying applicable fees, duties and taxes.

f. The writer also recommends that the contract should contain several representations and warranties from the seller to the buyer, including:

     i. The seller has the lawful right and power to enter into the condominium sale & purchase agreement;

     ii. The seller will comply with its conditions and that the contract is legally enforceable against the seller and is not in conflict with any contractual obligations under which the seller is bound;

     iii. The condominium unit is not be subject to any lease or future sale to a third party;

     iv. Upon the registration of transfer, the condominium unit is not subject to any claim or litigation, nor a servitude, obligation, encumbrance or mortgage;

 

Key Information on the Condominium Act B.E. 2522 (1979) for Foreigners Wishing to Purchase a Condominium

Foreigners Owning a Condominium: Section 19 of this Act is vitally important to foreigners given that it stipulates that foreigners (aliens) and juristic persons regarded by law as aliens (foreign) may hold ownership of a condominium unit in certain cases. Arguably the most common way used by foreigners is covered under subsection (5) which allows for ownership where Aliens (foreigners) or juristic persons regarded by law as aliens have brought in foreign currency into the Kingdom for the purchase of the condominium.

To rely on section 19(5) at the date of transfer registration, section 19/3 (ter) (5) of the Act states that the foreigner must present evidence [to the Land Dept of bringing foreign currency into the Kingdom[3] in the amount of not less than the price of the apartment/condominium unit to be purchased.

49% Cap Restriction for Foreigners: A foreign ownership percentage cap is provided under section 19/2 (bis) of this Act as it states that each condominium building shall have aliens (foreigners) or corporations (as indicated under section 19) holding ownership in the units collectively not exceeding forty-nine percent (49%) of the space of all units at the time of making the registration of such condominium. Hence, foreign buyers must be aware of this and should investigate it before purchasing the property (see the due diligence section above).

 

Documents Required from Buyer (Natural Person) for Transfer Registration at Land Department (if the Transfer occurs under s.19(5) of Condominium Act)

Upon the registration of transfer of the condominium unit at the Land Department, the buyer (if they are a natural person) will need to have certain documentation ready, this includes:

1. Certified copies of Buyer’s passport (including visa page to Thailand),

2. Foreign ownership quota letter issued by the condominium’s juristic office (this letter is normally prepared and provided by the seller). This letter confirms that the condominium building does not have foreign (non-Thai) ownership exceeding the 49% cap specified under section 19/2 (bis) of the Condominium Act.

3. Debt clearance letter issued by the condominium juristic office. This letter confirms that the owner of the condo does not have any debts with the juristic person such as outstanding common area fees, unpaid water fees etc.

4. Foreign Exchange Transfer Form (FET Form).[4] This form is issued by the Thai bank receiving the purchase monies from an overseas bank account. The transfer instruction must state that it is for the purchase of the condo and must mention the condo’s address too. The monies sent from overseas must arrive in the buyer’s Thailand bank account in foreign currency and must be converted into Thai baht only after they arrive and not before.

5. Certified copy of Marriage or divorce certificate and Thai certified translation (if applicable) and the names of their parents (these names will need to be translated into Thai).

 

Documents Required from Buyer (Foreign Registered Company) for Transfer Registration at Land Department (if the Transfer occurs under s.19(5) of Condominium Act)

If the foreign buyer is a juristic person, such as a foreign registered company, then it can also purchase a condominium unit in Thailand subject to the 49% quota limit & it providing the other required documents such as the FET form. However, foreign registered companies will need to submit different types of documents to the Land Dept. upon registration of transfer, including:

1. Board of Director’s meeting minutes with the necessary resolution to approve the company’s purchase of the condominium unit;

2. Notarized and legalized company registration/incorporation documents such as articles of association, certificate of incorporation, foreign equivalent of the affidavit of company registration (i.e. an official company extract), other documents as may be required by the relevant Land Dept. office.

3. Notarized and legalized copies of passport ID page of the authorized directors of the Company.

 

Taxes on Registration of Transfer:

When purchasing a condominium in Thailand the buyer should also be mindful of the following taxes, duties and fees. Apart from the transfer fee which is normally equally shared between the buyer and seller, the other fees are normally the responsibility of the seller however this apportionment of responsibility for taxes can be otherwise agreed between the parties.

Transfer Fee: This fee is based on 2% of the official government “appraised value” of the condominium unit. As noted above, normally in Thailand this fee is shared equally between the buyer and the seller.

Withhold Tax (WHT)/ Income Tax: In relation to this tax, the Land Department shall withhold a prepayment of the seller’s gain from the transfer of the condo. The rates differ between natural persons and juristic persons as follows:

  • If the seller is a juristic person (company) the withholding tax is 1% of the actual sales price or 1% of the Government appraised value, whichever is the higher amount.
  • If the seller is a natural person then the WHT shall be made as follows:

     (a) In respect of an immovable property acquired by inheritance or by way of gift, tax shall be calculated in accordance with the rule in Section 48 (4) (a) of the Revenue Code and withholding tax shall be made at such mount.

     (b) In respect of an immovable property acquired by any means other than
     (a), deductions shall be allowed as prescribed by a royal decree, tax shall be calculated in accordance with Section 48 (4) (b) of the Revenue Code, and withholding tax shall be made at such amount.

Specific Business Tax (SBT): This tax is payable by natural persons who have owned the condo for less than five years. This tax is calculated at the rate of 3.3% of the government appraised value of the condo or the agreed sales price, whichever is the higher amount.

Stamp Duty: This is only payable by natural persons if SBT is not applicable. The fee is equivalent to 0.5% of the Government appraised value or the actual sales price, whichever is the higher amount.

 


[1] If the seller is a Thai registered company, then the buyer should ask for a recent copy of its affidavit of company registration which is an official document issued by the Department of Business Development (DBD) that provides a summary of key details relating to the company including its legal name, registered address, names of authorized directors, signing authority of the authorized directors etc.

[2] If a deposit is paid, then the buyer should insist upon getting a written receipt from the seller confirming this. Ideally the deposit should be made by cashiers cheque handed over upon the signing of the contract and the buyer should be sure to retain a copy of such cheque for their records.

[3] In practice this is evidenced through a Foreign Exchange Transfer (FET) Form which is issued by the Thai bank where the overseas remitted funds are received.

[4] A copy of the FET form should be kept by the buyer as it will be useful if in future the foreigner wishes to transfer this money back overseas if they later sell the condominium unit (the transferring bank may wish to see this form).

 

Legal Support in Thailand for Purchase of a Condominium

Should you require any legal support relating to purchasing a condominium in Thailand then please contact us at
Dharmniti Law Office Co., Ltd.
2/2 Bhakdi Building 2nd Floor, Witthayu Road, Lumphini, Pathumwan, Bangkok 10330
Tel: (66) 2680 9777
Fax: (66) 2680 9711
Email: ryan@dlo.co.th or info@dlo.co.th
Website: https://www.thailandlawoffice.com/ or https://www.dlo.co.th/