Obtaining Proper Legal Advice When Purchasing Property in Phuket

2020-09-30T06:57:28+00:00

THE IMPORTANCE OF SOUND LEGAL ADVICE FOR FOREIGNERS IN THAILAND

Finding a Good Lawyer in Thailand

This is touched on above, and it cannot be stressed enough—the first step when undertaking any property transaction in Thailand should be to enlist the help of a very good lawyer.

What is meant by “first step”? If someone is contemplating a real estate investment in Thailand, they should seek legal representation before they even start viewing properties. But what constitutes a “good lawyer”?

Many times it is not only their knowledge of Thai law, but their ability to explain the law in their customers’ own language. Good lawyer swill be fluent in Thai and English, but if another mother tongue is needed, it might only be the biggest firms which have the resources to help. Not surprisingly, these are likely to be the more expensive law firms.

Crucially, professional individuals don’t have time to waste. If they are flying to Thailand specifically to find the perfect property, then their limited time on the island is especially precious. Without the right lawyer, a buyer could waste their time looking at properties which don’t offer the legal ownership guarantees they want. Sound legal representation will protect their interests, save time, and ultimately save money.

 

real estate investment in Thailand

WHAT OLAF SAYS ABOUT FINDING THE RIGHT LAWYER

Here Olaf Duensing of Duensing Kippen explains what buyers should be looking for in their legal counsel:
Real estate in Thailand can, for the most part, be a very good investment. Sadly, we have encountered horror stories, and they are not as rare as one might hope. If you are thinking of taking this investment plunge, here are a few tips.

When making a real estate investment in Thailand, one of the best ways you can protect yourself is by hiring a competent lawyer. This is imperative, and you should obtain the right legal counsel right at the beginning of the process (i.e. prior to signing any agent’s or seller’s agreement).

The key word here really is “competent”. We often find ourselves dumbfounded when people relate to us what law firms in Thailand have told them. Thailand has a well-developed system of laws, which are in many respects quite similar to laws in the West. For the most part, as in the majority of fully developed nations, the laws in Thailand logically fit together. Furthermore, something which is very convenient for foreigners in Thailand, the English translations of most relevant laws are readily available.

So if something you are hearing from another Thai law firm is seemingly illogical and makes no sense, there is every chance that your skepticism is warranted. If you are uncertain, request a copy of the law so that you may read it yourself. If, with a translation of the law on the table, they are still incapable of explaining their point – or worse yet, if they actually refuse to offer a greater understanding – it would advisable to seek out new legal counsel to help you.

But there is more to “competent” advice than just knowledge of the law—a competent legal advisor will also be ethical. That is to say, they will be compliant with recognised international standards which all lawyers should follow. Every law firm has a fiduciary duty to its clients, meaning your interests are put ahead of those of both the individual lawyer and the firm. This includes putting your financial interests ahead of their own, and ensuring that the firm never has a conflict of interest when it comes to representing you.

That is why your legal representatives should never refer you to real estate developers or agents, and they should certainly not accept commissions from such parties. Your lawyers should never represent both sides in any transaction because to do so is a conflict of interests. You should be able to reasonably expect that the firm will never advance any interest which is detrimental to your interests.

It is simple enough to evaluate any prospective counsel. For starters, ask to see their legal credentials. Then enquire as to their professional code of ethics. Ask to see both, and verify their legal credentials before reading through their code of ethics. If they can’t produce one or the other, or if you are just uncomfortable with their response to your query, then you would be well advised to seek new legal counsel.

As a final point, you should not assume that Thai government officials will provide you with simple or accurate legal advice. While they may be responsible for administering the law, they are not necessarily well-versed in the law’s intricacies.

Doing the Necessary Due Diligence When Buying Property in Phuket

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 every buyer must have an understanding of due diligence and makes sure it is conducted to ensure a property is a viable and sound investment, and that the seller is legitimate and reputable.

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?

Due diligence is where the right lawyer is invaluable. 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 fate of the land (and with it your property investment) lies with the new owner.

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

Let us turn once again to Olaf Duensing to find out more about what constitutes the necessary due diligence.

WHAT OLAF SAYS ABOUT DUE DILIGENCE

Due diligence basically means doing your homework – identifying any potential legal issues which could adversely affect the purchase the property you would like to buy. The reason this is so critical is that you are not only acquiring a property, but you are also assuming any legal liabilities which may be attached to it. Due diligence is essential no matter where you are buying, but when you are investing in property overseas (e.g. in Thailand) it is especially important.

We have heard from property owners with “buyer’s remorse” on more than one occasion, and they all insist that due diligence was conducted. Their definition of this is: “My lawyer requested the title deed from the Land Office. He had it translated, and it confirmed the ownership in the name of the seller, and that the property had no mortgage against it.”

While that may be a good first step, it is not real due diligence.

When buying real estate, due diligence should comprise the following (at the very least) :

  • A comprehensive title search, including the validity of the deed itself, as well as the full history. The fact that a title deed was issued does not confirm that it was issued legally. It is possible for a title deed to appear in order, only later to be deemed invalid;
  • The legal rights of access to the property must be verified;
  • A detailed report of the laws governing land use and the regulations covering any construction on said land (if the property is a plot of land on which you plan to build);
  • If the land has an extant building (e.g. a villa), the building permit for the structure must be examined to confirm it is legally valid. The existence of a building permit is not evidence that the building is legal. If it is deemed to be illegal, it is possible that it could be ordered to be torn down;
  • If any particular licensing is required by the property you plan to buy (such as a condominium license or an additional hotel license if the development will function in both capacities), verification of said licenses is imperative. It is occasionally overlooked that a project must be built in a certain way, to qualify for condo or hotel licensing. Higher-end developments are surprisingly not immune from this oversight. A seaside development in Phuket was once sold as a condominium – even winning “best condominium” awards – only for everyone to be“shocked” later when it was revealed it did not qualify for its condominium license because the access road was too narrow. The development instead became a hotel; and
  • If you are acquiring a property by means of taking over the company which owns said property (a practice not typically recommended), it is advisable to conduct a thorough examination of all company records – legal, accounting, and corporate.

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