Defrauded in Thailand!
by Jason Armbrecht

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Thailand is a destination of choice for second homes, retirement homes, investment and expatriate living for a variety of reasons.  Compared with other popular expatriate location, such as Costa Rica, or Spain, Thailand is relatively affordable, safe and has a low cost of living.  Bangkok, and other metropolitan areas such as Chiang Mai provide cultural and shopping opportunities comparable or even exceeding those of Western cities.  Then there is the allure of the tropical and exotic:  As one expat put it, “Ever since I saw the movie South Pacific I have been dreaming of a tropical existence.  Now that my company has made me redundant I can relocate and retire in Thailand.”

As interest in Thailand as a vacation and retirement spot has skyrocketed over the past decade, so has the price of land, especially in the tourist hotbeds of Koh Samui, Phuket and Pattaya.  In 2006 alone, the price of one rai (1600 sqm) of sea view land on Samui doubled from two million to four million baht.  Beachfront land in Thailand has commanded up to 70 million baht a rai for choice areas. What began a decade ago as foreign tourists building small vacation homes has morphed into foreign development companies, drawn by ever increasing land prices, buying large tracts of land and dividing them into smaller plots for sale, half of which are bought by foreigners.  Many people purchase for the investment potential alone as pundits predict a consistent upward appreciation of land values in Thailand resort areas.  As the price of land rises, so do potential profits.  Unfortunately, along with legitimate land developers, business people and builders, these potential profits have also attracted groups of unsavory elements sometimes leading at best to substandard finished products and at worst, to outright fraud.

Title Deeds with Wet Ink

One of the most infamous cases of fraud in Thailand occurred on Koh Samui in 2006.  It involved not only land fraud, but allegations of gang activity, drug smuggling, extortion and money laundering.  This hornet’s nest was shaken by ads placed by a foreign run sales agency, in local trade magazines and on the web selling land in The Peak development.  They were offering 514 rai of land on Khao Dang Mountain at 8 million baht per rai.  The subsequent outcry by locals who suspected that the land may have been obtained illegally, combined with the fact that hundreds of real estate companies, including some owned by reputed gang members, had been established in Samui since the middle of 2005, led to an investigation by the Department of Special Investigations (DSI) into the legality of title deeds for land owned by all land holding property companies on the island.  The shareholding structure of these companies was also investigated, as companies must have a majority of their shares owned by Thais or Thai juristic persons to purchase land in Thailand.

These investigations opened a Pandora’s Box of fraud throughout the island. Thousands of plots were found to have illegally issued title deeds and a number of officials were investigated for accepting bribes and falsifying land documents.  It was also discovered that while Koh Samui is comprised of only 150,000 rai, there were deeds issued for 200,000 rai.  Encroachment on protected forest reserves was found to be a related problem, as thousands of rai of protected forest had been illegally issued titles and cleared for development.  One of these plots housed a small resort owned by a Swiss businessman.  Although he claimed to have gained legal title to the land in 2003, he was arrested and fined 30,000 baht. It was ruled that the titles were illegally issued and his land was reclaimed as part of a national park.

As for The Peak project, it was found that part of the development encroached on public lands and as a result, foreign clients were loath to lease plots.  The project was later abandoned.  

 BandidosIncorporated:  A Motorcycle Gang with Island Fever

While one branch of the investigation on Samui dealt with forest encroachment and fraudulent title deeds, another was reviewing the ownership of the multitude of recently established real estate companies on Samui.  Members of the Bandidos motorcycle gang residing in both Samui and Pattaya, and a former land official were soon swept up by the DSI.  The story, as ginned up in the press by the DSI, was that the Bandidos were importing coke and ecstacy to sell to foreign tourists on the island and smuggling out marijuana and methamphetamine.   In collusion with British gangs on Samui and the former land official, they were bribing land officers to issue false titles on protected lands.  Using their Thai wives as nominees, the gang members would launder their drug money though illegal land purchases and build lavish houses. 

It was also alleged that the gang members would get foreign businessmen to invest in companies and then take over the business, or would simply take over foreign owned companies on the island by force.  Their foreign ‘partners’ were then threatened with violence if they tried to leave.  While these allegations were publicized by the DSI, the Anti-Money Laundering Office (AMLO) had yet to finish its investigation of the Bandidos at the time of the arrests, and the gang members were held on lesser charges of extortion and intimidation.  Although the DSI claimed that the Bandidos had brought as much as three billion baht into Thailand to launder through various land purchases and business ventures, they could find neither the money’s source, nor concrete evidence of money laundering.  

Evidence of ties to The Peak land scandal was also lacking and no charges relating to drug running, land fraud or money laundering were filed against the Bandidos. However, one member was found guilty of extortion and intimidation and sentenced to 18 months in jail while another member was cleared of extortion and intimidation due to lack of evidence.

Golf Course retirement Communities
Although not as well known internationally as Samui, Hua Hin, a beach town a few hours drive south of Bangkok, is another area extremely popular as a retirement and second home investment location.  However, the area has also become noted for a number of land fraud cases, in particular fraud against foreign investors. 

Hua Hin is a respected location in Thailand for a number of reasons:  The King of Thailand spends part of each year at his residence in quiet Hua Hin.  It is a source of pride amongst the local population and they have been assiduous in trying to keep both the town’s beaches and image clean.  It is also home to an internationally recognized Jazz festival and a decent beach. 

This relaxed atmosphere attracts many foreign families and retired couples in the market for vacation or retirement homes.  As on Samui, foreign developers have descended on Hua Hin in droves to capitalize on the increased demand for residential development.  The more unscrupulous of these will require large deposits on plots of land up front, and will then claim unforeseen delays in construction, failing to meet contractual requirements and timetables.  Progress on these developments will be delayed indefinitely while the deposit money is transferred to other projects lacking in funds.  The investors can be stuck for years with an unfinished home and property. 

Numerous fraud and breach of contract cases have been brought by foreign investors against foreign developers in recent times.  According to a local official, some of the more brazen developers, after signing 30-year leases with investors, will surreptitiously write ‘3 years’ in parenthesis.  After three years, the developer will try to charge the investors an exorbitant sum to buy or continue leasing the land. 

Why Thailand?

Land fraud is just one of the many types of frauds and scams perpetrated by and victimizing foreigners and Thai people on a regular basis in Thailand.  Nearly everyone who has visited or lived in Thailand has been a victim, or knows someone who has been a victim of fraud, or has heard stories of fraud.  But is fraud, and land fraud in particular, more prevalent in Thailand than elsewhere?  If it is more prevalent, what are the factors that contribute to it?

Buyer Beware in Thailand

It may be that fraud against foreigners is more visible in Thailand because of the extended expatriate media, particularly with multiple internet sites catering to foreigners and expats in Thailand.  If you run into a crime in your home country, it is less likely to be a media event.  In Thailand by virtue of being foreign, there are multiple people and resources that would publish and offer comment on your story.

There are other endemic factors that may Thailand a popular destination for confidence and fraud artists.  According to Leeds, “You have several factors that come together in Thailand that make it easier for foreign criminals to operate here.  First of all it’s a beautiful destination, the people are nice, the food is good, and life is easy.  People visit and think, 'I’d like to live here.'  So you have people who are enamored with Thailand, are ignorant of the laws, culture and language and want to invest.  They will only be here part time, and it will be difficult for them to monitor their investment or be involved in a long protracted court case."

From a criminal perspective, enforcement is lax and if he has a criminal case being threatened in Thailand, he can always flee.  It is not his country so he is not overly concerned.  Additionally, although law enforcement has made great strides in Thailand, law enforcement is still considered by some to be somewhat erratic and less reliable than in more developed nations.

The Marks

While systemic factors may help to create an environment that may facilitate fraud, there must also be an abundance of available targets.  Many of these targets come in the form of the millions of tourists and potential investors who visit Thailand each year – almost 14.5 million in 2007 alone.  For the most part, foreigners looking to invest in land do not fully understand the laws and their rights as investors.  As they most likely cannot read or speak the language, they are forced to trust that other parties (lawyers, developers, sales agents) will provide them with accurate information, parties whose interests may conflict with theirs.  Many investors in high-end resort developments are not in the country to oversee the construction phase, providing dishonest contractors more opportunities to cut corners or claim delays. According to an official in Hua Hin, many foreigners in contract disputes with developers will not press charges.  They are afraid of sinking precious time and resources into an extended court case and decide to cut their losses. 

Nevertheless, Thailand is still a beautiful country to vacation or retire in.  Many foreigners are quite happy with their second home in Thailand and property values are expected to rise, making Thailand an attractive investment opportunity. The best advice is probably to hire a qualified Thailand lawyer to perform a due diligence on the property and the Seller before investing funds.  An ounce of prevention is worth a pound of cure.

Return to Part 1:Love Hurts

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