Tropical Beach House - The Dream and the Reality
Once again it is time to cast our attention to the most basic
of questions facing foreigners considering property purchases in Thailand
and Phuket: Can I buy ? How ? The following series of articles to be
published over the next four months examine the basic issues facing
property buyers from abroad.
Buyers options are conditioned by the overarching principle contained in the Thai land code that foreign nationals may not own freehold land in Thailand. Even recent amendments that allow a Thai spouse (male or female) of a foreigner to buy land require proof that the money used in the purchase of freehold land is legally solely theirs with no foreign claim to it. Divorce or separate from your Thai spouse and the land will stay with them in it's entirety.
Baring the complex and lengthy process of obtaining Thai nationality, exceptions to foreign ownership restrictions on land only exist under two scenarios, the first applies to the principal investor/manager in a new export orientated BOI (Board of Investment) approved company, the second, by passage of law, still lacking rules of implementation, applies to those making 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. Under each of these scenarios the maximum size limit of freehold ownership rights is one Rai of land (1600 Sq.m.)
For the great majority of potential property buyers the exceptions above are of academic interest only, and the real issue is how does one manage to comply with this law and yet join the increasing number of lucky foreigners who do have a place to call home in Phuket.
Daunting as it may sound, don't give up on the idea just yet. There are several legal rights which either in isolation or in combination give foreigners the ability and confidence to buy secure interests in property and also to sell or transfer those rights to achieve capital gain. The most salient are that foreigners may have freehold ownership of a condominium title (with a proportional or strata interest in common land), can obtain long term registered transferable lease rights to land and or buildings, complete with 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.
Purchasing a condominium is the easiest, simplest transaction. The law allows foreigners to hold 49% of the units in a condominium freehold while in certain condominium blocks a full 100 % of the units can 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 an condominium apartment; 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). Freehold prices for condo will be higher than leasehold prices to reflect the greater surety of ownership in this type of ownership.
If however, what you want is a house, the fact that you can't acquire freehold land should not be a deterrent.. 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 exercised 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)