Someone new to Thailand is usually enamoured with the “Land of Smiles”. What could possibly go wrong in a country full of wonderful smiling people, right?

Unfortunately things can and do wrong, but this is true the world over. That is why you must conduct due diligence to ensure the property you are looking at is a viable and sound investment, and that the seller is legitimate and reputable.

If you are not familiar with the term “due diligence” and would like to know more about what is it and why it is important, then you might find the following article helpful:

Understanding the Importance of Due Diligence and Exactly What Due Diligence is When Buying Real Estate in Phuket

Stock market investors often spend hours pouring over balance sheets and fundamentals before investing a few hundred Dollars, Pounds or Euros.

Why then do some of the same people fail to exercise comparable caution when spending millions of Baht in Thailand?

Having a good lawyer on your side to help with this is essential. The due diligence procedure is where the right lawyer proves invaluable.

The Importance of Sound Legal Advice When Buying Property in Phuket

If buying from a developer, especially off plan, it is important to make sure that the title deed for the plot of land is in the name of the actual development – the corporate entity, as opposed to an individual’s name – and that it definitely is not in the name of an unrelated third party.

If the land title is in the name of a third party, he/she has the legal right to sell the land whenever they wish, even after you have paid a deposit, installments or the full value of the unit.

If that third party were to die, the decision to sell might be a lot easier for the new owner to make.

A representative of the developer might claim that such an ownership structure made it easier to title the land, and that ownership will be transferred to the development company when construction is finished.

But if the true owner decides to sell the land, or encumber it by taking out a mortgage or loan against it, every investor could find themselves out of pocket.

Furthermore, if the land is encumbered, the mortgage could be foreclosed upon, or taxes might not be paid, in which case the revenue department could stake their claim to what people thought was their property.

This caution should be taken with any purchase, not just a condominium, except with condos hundreds of individuals could be affected by a single title.

Buyers of condominiums, especially ones sold off-plan, should always ask for a copy of the title.  This should be the Chanote title of land for the entire development, not merely a segment related to the unit in question.  The full Chanote title will show any liens, mortgages or loans against property.

The same information can be obtained from an individual title deed, but these are only issued upon completion of the condominium’s construction.

For this reason, purchasing a resale unit is relatively safe, and a completed development (or one that is nearly finished) might also be a consideration for a foreign investor.

If you are in the market for a property in Phuket, there are some basic checks that need to be done. Here is a brief due diligence checklist for you:

  • Are there any liens, loans or mortgages taken out against the property (these will be referenced on the title deed)?
  • Is the Seller the Legal Owner of the Land? – the name on the Title Deed will confirm this
  • Was the Building Erected on “Dirty Land”? –  a thorough title deed check will look the entire ownership history of the land, reducing your chances that the title is not sound. Any building on dirty land can be ordered to be demolished by the authorities.
  • Does the Property Have Legal Access Rights? – another piece of information which can be found on the title deed. The will show the exact location and dimensions of the land, as well as access points.
  • Does the Building Have a Permit? – whether a villa or condo it is important to establish that a proper permit to build the structure was used. The authorities can order an illegal building to be torn down.
  • Have you checked the License(s)? – you should confirm that any development being sold as condominiums has the requisite condominium license. Likewise, if the facility is promoted as having both condominium and hotel licenses, you should confirm both licenses.

This is an excerpt from the Thai Residential Phuket Property Guide 2019/20.   To download your free copy, please click here.

Read more of our related articles on the Phuket real estate market:

Condominiums Explained – What is a Condominium?

The Things All Phuket Condominium Investors Should Know About the Condominium Act

Owning a Freehold Condominium through an Offshore Company

Owning a Freehold Hotel-Licensed Condominium in Thailand

Reasons to Invest in Phuket Property for New and Experienced Investors

Illegal Home Ownership in Thailand – An Inconvenient Truth

Making a Will in Thailand

China’s Spending Spree on Phuket Real Estate

Foreign Freehold Land Ownership by Making a Prescribed Investment or Through the Board of Investment Scheme 

Buying Freehold Villas or Houses in the Name of a Thai Spouse