Purchasing real estate in Thailand is a popular and profitable investment. But the country’s property market has some subtleties that frighten many investors.
For example, well-connected Thais may purchase an “off-plan” condo project before construction begins and then sell it off the books to a longer term investor to avoid taxes and scrutiny.
1. Encroachment
An encroachment is when a structure or piece of infrastructure owned by one person intrudes on or crosses the property line of another’s land. This could be something as small as a garden bed planted on the fence line or as big as a house addition jutting into the yard. Whether intentional or not, an encroachment can affect the value of a property and cause legal issues for homebuyers.
A professional property survey can provide insight into the exact property lines and boundaries for both parties. This will also help identify any encroachments that need to be addressed.
If an encroachment has been in place for a long time without either party formally acknowledging it, then the encroaching property may be subject to adverse possession. This is why it’s important to always have a professional property survey done before buying a new home or making improvements. It can save both parties a lot of hassle and heartache in the future.
2. Liens
A common problem for foreigners buying property in Thailand is that the seller may have a lien on the property. This occurs when the owner has a personal loan that is not paid off in time. This lien prevents the property from being sold until the debt is paid off.
This is often the case in apartment buildings that are not registered and licensed as a condominium. The owner of this building may have sold his property through leases to different parties each having a specific block of time during which they could use the property.
This type of real estate is very popular in the tourist areas of Thailand but the law does not allow foreign ownership (unless the property is registered and licensed as a condominium). If you are thinking about purchasing a leasehold property in Thailand it is always best to have the agreement checked carefully to make sure that you will not be stuck with a property that you cannot sell.
3. Taxes
As the global economy has slowed, many property buyers in Thailand have been tempted to under declare their property values in order to reduce their tax burden when it is time to transfer ownership. This practice has serious legal implications as it may be considered tax evasion which could lead to criminal prosecution.
ILCT offers extensive expertise in the area of Thai property taxes including advising on transfer tax rates, withholding tax and specific business tax and defending clients against claims made by the local revenue service. Our lawyers can assist with planning, interpretation of tax laws and regulations, and negotiating double tax treaties.
Foreigners cannot own land in Thailand unless they are granted permission by the Minister of Interior to do so under a treaty or if they inherit land as statutory heirs to a Thai spouse. Generally foreigners may own apartments in buildings registered and licensed as condominiums under the Condominium Act but not land.
4. Title Deeds
It is important for foreign buyers to understand the different types of land title deeds available in Thailand and the rights that they do, or do not, entail. Purchasing land that is not accompanied by a Chanote (full ownership rights) or Nor Sor 3 Gor (possessory rights) does not offer any registered security or legal protection.
For example, Nor Sor Kor Nung title deeds were formerly issued for coastal land plots in Thailand but they do not have accurate surveyed parcel points and can’t be upgraded to a full Chanote. Therefore, this type of title is not recommended for foreigners.
The best option for land ownership in Thailand is a Chanote which is a certificate of ownership and approximates freehold land ownership in Western countries. A chanote shows the current owners name, an area map and lists any registered encumbrances such as usufructs and mortgages. It is advisable to use an experienced property lawyer in the case of a Chanote purchase to ensure the legality of the deed and that the survey details are correct.
