Everyone knows that a land title deed should always be examined before proceeding with any property purchase in Thailand. But it is not only villas or houses for which this is necessary.
In fact, with a condominium, any problem with the title would affect every unit owner in the development, which is potentially hundreds of people.
Questions about a title deed are always serious, but they do not necessarily have to be critical. Occasionally, however, the issues raised by an examination of the title deed are not only critical – they are calamitous.
If a condominium project is found to have been built on government land, any investor in that development will be faced with losing everything – their condo unit, as well as all the capital they invested in it.
The development boom in Phuket, which really took off 30 years ago, led to great improvements in housing and infrastructure on the island.
Unfortunately, wherever there is a lot of money being made, there are always those who also seek to profit illicitly.
It was at this time that a number of land titles began finding their way into private hands, even though the land itself was not for sale. Known as “Dirty Land”, some of that land was used for residential development.
As a result, there have been condominium developers who have, either wittingly or wittingly, constructed a development on land which was not legally theirs. And the issuing of some of these titles (some issued more than 30 years ago) became part of notorious land corruption cases.
In almost every instance, the land was (and is) owned by the Thai government, often on one of Thailand’s national parks.
No Statute of Limitations on Dirty Land
The government’s ability to reclaim this “dirty land” is not subject to any statute of limitations, and it is widely expected that the government will, at some time in the not so distant future, be reclaiming dirty and encroached land. (This is not merely a personal opinion; on the contrary, many lawyers are convinced this will happen.)
When this land returns to government ownership, all illegal buildings will be demolished. The land will bulldozed, and then they will plant new trees. And anyone who was under the mistaken impression impression that this was their dream home could potentially lose their entire investment
There are other threats to a property owner’s investment (e.g. a rescinded building permit or a project lacking EIA approval). But such cases are not necessarily lost causes. A fresh assessment by the relevant government department may still result in the developer being given a green light for their project.
Owning a condominium unit in a resort constructed on Dirty Land offers no such light at the end of the tunnel. This is definitively the worst possible position for an investor to be in.
Phuket’s Problems with Land Encroachment
The problems of land encroachment are extensive throughout Thailand, and Phuket has certainly not been immune to this problem over the last three decades.
In fact, there are many mountain side areas on the West Coast, close to the shoreline, which were once national forest lands (or technically still are). The land was never for sale and the true owner is the Department of National Parks, Wildlife and Plant Conservation (DNP), a sub agency of the Ministry of Natural Resources and Environment.
Some dirty or encroached land plots have also been sold to foreigners, who used company structures with straw men (nominees) as shareholders. This adds an extra few layers of illegality onto the practice.
Projects built on Dirty Land and encroached land in Phuket are not commonplace, but they certainly do exist. Good developers have usually done the necessary checks to ensure this is never a problem with their own projects.
But the chance to acquire quality land cheap, possibly coupled with poor legal advice, could spell disaster for hundreds of people whose developer was less cautious.
The practise is now very closely scrutinized by the authorities in Bangkok, so is much less common today.
But as the Bangkok Post reported in 2012, the stricter enforcement was not before an estimated 1,000 Rai of land was involved in corruption cases in Phang Nga and Phuket provinces alone.
Make Sure Your Phuket Lawyer Does Thorough Due Diligence
Buying land that still technically belongs to the government or a unit on a condominium built on government land is something you really want to try and avoid.
This is a prime example of the importance of obtaining sound legal advice in Thailand and why that lawyer should always be involved in conducting the necessary due diligence on every property purchase.
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
Is Recovery Imminent? – Don’t be Naive
Some naive investors or agents might believe that the Thai government will never reclaim land due to the negative publicity that it would generate. But experience suggests that the government does not back down when they see a flagrant violation of the law.
It is nonsensical to believe that an investment in dirty land is safe, and that enforcement of this illegal activity would ever be addressed with a soft touch.
If you buy stolen property anywhere in the world, the real owner will always have the right to reclaim their possession. The law is the same everywhere. Stolen goods are always returned to the rightful owner.
And you can put your money on the fact that the Thai government will not look at the effective theft of their land any differently.
The land that has been used for some developments is government owned.
With no statute of limitations, the government can reclaim this land whenever they choose. And it is highly unlikely any compensation will be forthcoming because the development was illegal to begin with.
There is really is no excuse for scrimping on due diligence costs.
What’s an extra thousand dollars paid to a lawyer if that thousand dollars potentially saves you a few hundred thousand if you end up making the wrong investment!?
This is an excerpt from the Thai Residential Phuket Property Guide 2019/20. To download your free copy, please click here.
Please see some of our other related Phuket real estate articles:
A Comprehensive Summary of the Risks Associated with Buying Real Estate in Phuket
The Risks of Buying a Phuket Condominium Off Plan
Why Developer Reputability is Important When Buying Real Estate in Phuket
The Risks of Placing a Reservation Deposit When You Buy Phuket Real Estate
The Pitfalls of Buying a Condominium Leasehold Unit
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
What Exactly is a Leasehold in Thailand?
Owning a Freehold Condominium through an Offshore Company
China’s Spending Spree on Phuket Real Estate
Reasons to Invest in Phuket Property for New and Experienced Investors
An Overview on Phuket Property Prices
Foreign Freehold Land Ownership by Making a Prescribed Investment or Through the Board of Investment Scheme