Many foreigners arrive in Thailand and are attracted to the culture and its people. It seems like 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 of the important things you need to know.
Beware of Buying Land Illegally
It is illegal for a foreigner to own land in Thailand, and it is illegal for a foreigner to set up a company with the sole purpose of purchasing property or land. It is especially precarious to use Thai shareholders who could viewed as “straw men” by the authorities, i.e. nominee shareholders, or shareholders in name only.
Buyers need to be aware that there may come a time when a strict enforcement of the law is applied. It has happened before, and we see no reason why it couldn’t happen again.
Such an enforcement action could see any Thai company structure (set up purely to circumnavigate Thai law) be forced to dissolve, and the land in question be sold. There would also be penalties/fines for violating the law in the first place.
Depending on the seriousness of the violation, the authorities may at some stage hand out prison sentences to the foreigner offenders – something they are already doing with the Thai nominee shareholders who have been caught.
Leasing Land in Thailand
If the attraction of living in Thailand in a luxurious villa is too strong to ignore (but the idea of potential fines and imprisonment for using a Thai company is not appealing), a foreigner 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, whereby one might legitimately feel a sense of ownership. Hardly the feeling you get from a 30-year contract.
In Thailand, the 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.
Land Offices across Thailand are currently under severe scrutiny. That means anyone with a lease expiring may find it difficult to register a further 30 years at the Land Office with no payment being made. Nominal payment amounts are not likely to be accepted.
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 possible that the value added to property (i.e. the lovely villa) could be viewed favorably as payment for enforcing a new 30-year lease.
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 so that a Thai national married to a foreigner may own landed property. The foreign spouse must give up any claim to the property. A foreigner is not even allowed to co-own the villa or land 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
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. Would-be land owners should not get bogged down in the complexities of the various titles, but rather should focus on finding land that has a full Chanote title.
If you are determined to buy land in Thailand, then at the very least, you need to know exactly what is being offered. Throughout Thailand, a great deal of the land may never have been surveyed properly. This is because it often sits with private land owners for years before a member of the family ever decides to sell.
Would-be investors need to have a thorough understanding of the land market if they are to enter into any land venture. As always, it is necessary to obtain the best legal advice and do the proper due diligence when purchasing any property in Thailand, but especially when purchasing 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 of ownership of the land in question issued by the Land Office.
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.