16 December 2008

Buying a Condominium in Thailand

Buying a unit in a condominium is one of the easiest ways for foreigners to acquire an ownership interest in Thailand real estate.

Generally, foreign persons and entities, including Thai entities owned by more than 49% foreign persons or entities, are prohibited from acquiring a freehold interest in land in Thailand.  Exceptions include ownership permitted by treaty (of which there are currently none) and ownership permitted by special permissions and approvals, such as the ownership of a limited amount of land by persons investing at least 40 million baht in specified Thai investments.

Because title to a condominium unit includes co-ownership of the common property of the condominium, which in turn includes the land on which the condominium is situated, Thai law places limits on the number of units in a condominium that can be owned by foreign persons or entities.

Background of the Condominium Act

By way of background, the law governing condominiums was enacted as Condominium Act, B.E. 2522 (1979).  This law was liberalized to allow foreign investment in condominiums by Condominium Act (No. 2), B.E. 2534 (1991), which allowed foreign persons and entities to own condominium units on a freehold basis, but limited foreign ownership to 40% of the total area of the units of the condominium.  This law was again further liberalized to promote foreign investment in condominiums by Condominium Act (No. 3), B.E. 2542 (1999), which raised the foreign ownership limit to 49% (and indeed up to 100% in certain condominiums in certain urban areas, such as Bangkok and Pattaya, for the five-year period).  The condominium law was further strengthened recently by Condominium Act (No. 4), B.E. 2551 (2008), which was adopted to provide further protection for purchasers of condominium units from developers, by making developers responsible for the truth of their marketing materials, by making developers responsible for paying the ratable portion of fees and expenses for unsold units and by providing that contracts of sale had to conform to a form established by the Ministry of the Interior.  See “2008 Amendments to the Condominium Act” for more information about the 2008 amendments to the Condominium Act.

Furthermore, additional protection for buyers of condominium units was provided this year through the enactment of the Escrow Act, B.E. 2551 (2008).  Although the provisions of the Escrow Act are optional for condominium purchases, it does provide a way for a potential purchaser to protect deposits for condominium purchases from being used (and potentially lost) by a developer when short of funds.  See “Escrow Business Law” for more information about the Escrow Act.

Unit Title for Owners of Condominium Units

Under the Condominium Act (including No. 1 – 4),

a “condominium” is defined as “a building that persons are able to divide the holding of title to in parts where each part comprises title to personal property and co-ownership of common property”;

“personal property” is defined as “a condominium unit and includes structures and land provided for each condominium unit owner”; and

“common property” is defined as “the parts of the condominium that are not units, the land on which the condominium is situated and other land and property provided for use by or for the common benefit of the co-owners”.

The developer registers the condominium with the Land Department, and a juristic person representing the condominium is created.

Each owner of a unit has title to his or her own personal property and co-ownership of the common property, as evidenced by a unit title deed.  The unit title deed will contain at least the following information:

1. the position of the land and the area of the land belonging to the condominium;
2. the site, the area and a plan of the unit showing the width, length and height;
3. the ratio of the title to the common property;
4. the personal and family names of the person with title to the unit;
5. the abstract of title;
6. the signature of the Competent Official; and
7. the seal of office of the Competent Official.

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