Many foreigners arrive in Thailand and are attracted to its people and the culture. Even on first glance, they find it an ideal place to buy some land and build the perfect dream home.
But if you are thinking of buying or leasing land in Thailand, here are some important things you need to know.
Is Land a Good Investment?
It may seem too difficult for us to comprehend today, but land in Phuket was once incredibly cheap. But when an island in Phang Nga Bay was prominently featured as a James Bond villain’s hideout in 1974, hardly anyone in the world had ever heard of Phuket.
One old-timer we know jokes that a Rai of land cost about the same price as a baseball cap when he first arrived on the island 40 years ago.
It’s safe to say land is little bit more expensive than that today, and certainly the last 20 years has seen land prices increase appreciably. But there is still great value to be found in Phuket.
The West Coast has the most expensive land because this where get the sunsets, and also some of the best beaches are here. Not surprisingly, there is also a heavy concentration of amenities to support residents and tourism on this side of the island.
Generally speaking, the further you move away from the West Coast, the cheaper land becomes.
Buying Land Legally
It is possible for a foreigner to buy land through a Thai company, and to do so perfectly legally. The problems arise when people cut corners and accept self-serving advice from individuals who are only interested in making a sale, not ensuring that the buyer is following the law.
Using a holding company and/or nominee shareholders are both patently illegal, but these are far too often the recommendations being given to unsuspecting foreign investors in Thai real estate.
So how can things be done properly?
To start with, the foreigner must acknowledge two key points:
- The land will not be titled in their own name, but rather in the name of the company, and
- They will also not have 100% ownership of the company because Thai law limits foreign share ownership to 49%.
If you establish a Thai Company Ltd. it must be run as a legitimate business. Once you find shareholders you can set up a property rental business, with your home being used as the headquarters for your company. And the company can own and rent the house or villa (or multiple villas).
Provided you adhere to all applicable corporate laws in Thailand – including filing accounts, paying taxes, and compensating your directors and shareholders – you may continue to occupy the property your company owns. And if your company owns multiple properties, you may be earning a healthy return from your legitimate corporate set-up.
Leasing Land in Thailand
If the attraction of living in a luxurious Thai villa is too strong to ignore, but you do not have the energy to operate a legitimate Thai company to get one, you may choose to lease the land for a 30-year period. This is perfectly legal.
There are attempts in Thailand to spin the 30-year lease as “leasehold ownership”, but this is not strictly true. In many European countries, for example, a leasehold might run 999 years, a timeframe which might legitimately offer a sense of ownership. Hardly the feeling you get from a 30-year contract.
In Thailand, a lessee is effectively renting the land for 30 years. So to avoid any confusion, it should simply be referred to simply as a “lease”, rather than leasehold.
For anyone interested in a 30-year lease, it is advisable to enlist the help of the very best lawyers. While the rights of the lessee are pretty clear, there are elements of a well-structured agreement which can further strengthen the foreigner’s position.
Sadly, lease agreements offering an automatic extension, effectively promising the lessee they can live in the villa for 60 or 90 years, have been shot down by the courts. Therefore, any guaranteed extension clause is technically illegal.
Lease extensions written on paper are currently under severe scrutiny. The courts have already, on a number of occasions, ruled that lease extensions violate the “Spirit of Thai Law”. Worse still for lessees, if a “30+30” lease were to come to the attention of the authorities, it might also invalidate the original 30-year lease, in which case the foreign lessee would lose everything.
The option to renew, on the other hand, is something every lease should have. A lease agreement should be structured in a way that a renewal is possible after the initial lease expires.
This is especially important if a foreigner built their own house on leased land. It is even possible that the value added to the property (i.e. the lovely villa) could be viewed favourably as payment for enforcing a new 30-year lease. (This is called a Special Reciprocal Contract, and you can read more about it here -LINK).
Buying in A Thai Spouse’s Name
If you have a Thai wife then you are allowed to purchase any land, villa or house in your wife’s name. Twenty years ago, a Thai woman married to a foreigner was not allowed to own land. That law has since been changed, but the foreign spouse must give up any claim to the property. A foreigner is not even allowed to co-own a landed property with his or her Thai spouse.
When land or a villa is purchased in a Thai spouse’s name today, a joint declaration must be signed stating that the funds used to buy the property were the sole possession of the Thai spouse, and that the foreigner gives up any and all future claims to those monies. This means that the property may sold or mortgaged by the Thai spouse without the permission or consent of the foreign spouse.
Land Titles in Thailand
The recognition of private land ownership in Thailand dates back to 1872 during the reign of King Chulalongkorn. But it was not until 30 years later, in 1901, a system land titles was created, and a Department of Land Registry was established to oversee and administer private land ownership.
During the last 100+ years, the department has undergone a few changes in name and subordination. Originally falling under the Department of Agriculture, it was moved to the Department of Interior in 1932, and the name was shortened to Department of Lands, which the name it retains today (a few changes between 1932 and 1941 notwithstanding).
The basis of most current laws regulating land ownership are found in the Civil and Commercial Code (which was first enacted in 1923), as well as the more recent Land Code (1954). But even people who get their heads around the law are often confused by the sheer number of land title designations found in the Kingdom.
If you are new to Thailand then the different types of land titles, like the land measurement units, can be confusing. It is not wise to try buying a piece of land if you or your Thai spouse are not familiar with the various titles that exist.
If you are determined to buy land in Thailand, at the very least you need to know exactly what is being offered. Throughout Thailand, a great deal of land may never have been surveyed properly because it was held by private land owners for years (sometimes generations) before a member of the family decided to sell.
Would-be land owners should not get bogged down in the complexities of the various titles. It is not necessary to have a thorough understanding of the land market because the sole focus should be finding land with a full Chanote title.
As always, it is necessary to obtain the best legal advice and do the proper due diligence when purchasing any property in Thailand. This is especially so when purchasing land because a detailed title search must be undertaken to ensure the true history of ownership, and that there are no liens or mortgages against the land.
As a foreigner, you should be looking only at a Chanote title, commonly referred to as a true title deed, which is the most secure form of land ownership.
The official name is a Nor Sor 4 Jor, and it is a certificate issued by the Land Office to confirm freehold ownership of the land in question.
One thing which separates a Chanote from other title deeds is the fact that they the land has been properly and officially surveyed, and has been plotted to a national survey grid using GPS coordinates. Land designated under a Chanote is also “staked” using numbered concrete marker posts.
Chanote titles are printed on yellow paper, and bear the familiar red Garuda emblem on the top, which is found on almost all official government documents in Thailand. This document will also feature a map of the of the land and confirm if it has ever been subdivided. It will also state any loans, mortgages or encumbrances against the land.
Except in extremely rare circumstance, a foreigner will not be allowed to register a Chanote title in their own name, nor can it be jointly registered with a Thai national (e.g. a spouse).
Some foreigners might also have an interest in well-priced Nor Sor 3 or Nor Sor 3 Gor titles, although neither is as solid as a Chanote title. These titles are also issued by the Land Office, and although legal documents, the land boundaries have not been as accurately surveyed as with a Chanote title. (There are other titles which simply establish a claim to use the land, but do not confirm the actual ownership of the land. We do not recommend those to any foreign purchaser.)
Transferring Building Ownership
Building ownership, as opposed to ownership of the land that the building sits on, does not have or require the use of a title. However, any sale or long-term lease may be registered at the Land Office. As foreigners may own a building independently of the land, they may (and should) register this ownership.
If they were involved in the building’s construction, the proof of construction is sufficient to register, otherwise the Land Office will want to see sale agreements and documents from the purchase of the building.
Do You Have The Best Lawyer?
We will close with the obvious, and a regularly ignored reason why people wind up making big mistakes: they chose the wrong lawyer.
As always, we recommend that you use only the very best lawyer. If your lawyer is telling you to set up a Thai company, and they will take care of the shareholders, and don’t worry about anything, and nothing can ever go wrong, then they are probably not the best lawyer.
The authorities know every trick in the book which have been used in the past to hide foreign ownership. Find a lawyer who explains all the pitfalls clearly and concisely so that you know the risks that you are taking. It will be a reliable lawyer who does that.