A growing number of expats now own properties in Thailand. Are you one of them and if so, can you confidently say that you own your property legally?
In recent years the market in Thailand has opened up somewhat to foreigners who wish to legitimately own properties. However, there are some grey areas and expats who continue with the structures they put in place some years ago might be in for a shock if they are challenged.
It is illegal for foreigners to own land in Thailand. As an expat you cannot own the land your house stands on. Strata title ownership is allowed. Most apartments and condominiums are strata title leasehold, allowing foreigners to own the units. However, the law caps ownership by non-Thais at 49% of the space in a given development. It thus does not follow that just because you find a leasehold condominium that you can automatically own a unit. The developer must obtain government approval to have a portion of the units foreign-owned and then there is a strict control over the allocation to ensure that majority Thai ownership is maintained. Developers have been known to be less than honest when it comes to this allocation. They have sometimes allocated space by means that the government disallows, and thus foreigners illegally own their units.
The maximum allowable lease term in Thailand is 30 years, which is considered short in the western world. Leases cannot be legally arranged to run consecutively, removing that option for you to secure a 60-year lease, even though in practice this is often exercised.
If you wish to own a house there is the question of land ownership. Some expats have their Thai spouses own the property. This does not give security to you as the effective owner. Joint ownership is not allowed.
Some systems have been developed for the ownership of land through a Thai company. This is allowable but does not actually give you full proof protection. You are only allowed to own the minority of shares in a local company. Thus you still only have up to 49% ownership of the property in practice. To get around this, arrangements are often made for shares to be held by nominees. Lawyers arrange for a company registration where the legal practice staff are the other Thai shareholders.
Until recently there were seven Thai shareholders required for a Thai company. This was recently reduced to three. So the fact is that 51% or more of your house is owned by a lawyer and his Thai staff; maybe a secretary, accountant and driver. If you cannot substantiate that the capital for their shares was actually paid from their individual bank accounts, then the company registrar may declare your company illegal.
It is commonplace for the company to have small paid-up capital. Once it is established you make a loan to the company in order that it may purchase the house and land. So, in a practical sense you may own say 45% of a company with capital of 2 million baht. Your share is thus 900,000 baht. You bought the house for, say, 6 million baht. So you made a loan to the company of, say, 5.3 million. The legal situation is that you own 900,000 shares in a company that you do not control and that company owes you 5.3 million baht in loans. So the other shareholders could decide to sell the house, pay a dividend to themselves and not repay the loan. You would then be obliged to start legal action against these Thai shareholders through a Thai lawyer to recover what was actually all yours in the first place.
If you are one of these owners, how do you feel about it all now?
One of the options is for you to have your Thai spouse or a trusted friend to own just the land. You could even structure a company to do this if you feel confident that you can get over any objections the government might have. Next, you lease the land for your exclusive use for 30 years. Then you buy the house. There is no law that stops you actually owning a building in Thailand. This will at least give you much more protection than the usual way foreigners are coerced into the company structure.
Many expats decide to buy their own homes here as they feel they want to spend the rest of their lives in Thailand. Others feel that an investment property will be a good opportunity for the future. Whatever your personal reason for ownership, make sure you plan well for the future and can make an appropriate exit if and when the time occurs.
There are more and more financing options becoming available to foreigners hoping to buy property in Thailand, and over the coming weeks we will be covering these in more detail.
Source : bangkokpost.com
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