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Further Reading:

Back to Basics - Foreign Ownership Laws

The rainy season has once again drawn to and end and the sunshine and blue seas are welcoming back not only Phuket's perennial winter visitors but also an unprecedented number of new ones. Despite the rains, Phuket has just undergone another record breaking season in both tourism and real estate sales and the coming year promises to be even stronger.

The change of season also marks the time when Ask William! stops responding to the more esoteric property issues and reverts to a series of article answering the more general inquiries of first time buyers as to how land titling works and what a foreign investor can legally acquire in Phuket.

There are restrictions to foreign land ownership in Thailand and while these have been subject to serious debate to seek ways to ease the requirements for foreign investors, and some slight easing of the land coded 18 months ago, there have yet to be any very significant changes to the land code. Minor relaxations of the land laws have occurred , such as increasing the percentage of a condominium block's floor space that can be owned freehold by a non-Thai, the re-entitlement of Thais married to a foreigner to own land freehold in their own name and the granting of freehold rights to certain large investors in Thailand . These are small signs in the change of attitude that is taking place to land ownership by foreigners in Thailand, but the rate of change is still a very slow and long-drawn out business.

I will begin by reviewing what a foreigner can and cannot own in the way of property in Thailand and then move on to the different types of land ownership documents and strata titles that are available.

So lets start with the most basic issue. Foreign nationals may not own freehold land in Thailand. Even a Thai spouse (male or female) of a foreigner must prove that the money used in the purchase of freehold land is legally solely theirs with no foreign claim to it.

There are two rare exceptions to this rule ; firstly for the principal investor/manager in a new export orientated BOI (Board of Investment) approved company, or secondly an investment of over 40 Million baht into an approved investment company or a Thai Bank deposit and left for a minimum of three years will entitle the investor to freehold ownership rights on one Rai of land (1600 sq.m).You can of course avoid the issue by obtaining Thai nationality, a lengthy process, possible after several years of residence in practice as well as theory, but not far removed in complexity from finding a needle in a haystack.

That may sound pretty restricting, but as I will explain, it's really not as bad as it might at first appear. Let's look instead at what a foreigner may acquire. Freehold ownership of a condominium title (with a proportional or strata interest in common land), long term registered transferable lease rights to land and or buildings, options to purchase land (but not to exercise that option in their own name, unless the law should change), and freehold ownership of all buildings and improvements either existing or to be constructed upon leased land. A foreigner may also own up to 49% of the shares in a Thai company that owns property in Thailand and may be a director of that company.
Through applying one or a combination of the above completely legal mechanisms, a foreign national may have effective ownership of property and may sell and transfer those rights to achieve capital gain - in other words just about everything that a freehold owner could do. I am not going to bore you in this article with the fine details of how all this works - rather I will simply outline the main principles

Purchasing a condominium is the easiest, simplest transaction and in certain condominium blocks a full 100 % of the units can now be owned by foreigners on a freehold basis. One important requirement in order to qualify for freehold status is that the foreign currency funds for the purchase have been remitted from abroad and correctly recorded as such by a Thai bank. The foreign freehold is definitely the preferred structure for purchase of a Condo; if you do choose another structure of "ownership", have it checked carefully (since most are likely to have tax or other implications that are not immediately apparent) and certainly look for a price that is less than the freehold equivalent.

However if what you want is a house, don't be deterred by the fact that you can't acquire freehold land. You may own the building freehold and together with a well constructed leasehold (typically a 30 year lease with two prepaid 30 year renewals) and a purchase option for the land (that could be invoked in the event the laws of foreign ownership changed - or you sold the property on to a Thai person or legal entity) you will have effective ownership, yet still remain within the laws of Thailand.

The structure of such a lease/purchase is complex and needs to be reviewed carefully with respect the properties current ownership and your own personal needs - it is recommended that you always seek the advice of an independent lawyer or property consultant, who speaks your language before making any financial commitment regarding property.

(to be continued next month)