Thread: Buying A Condominium in Thailand – some issues to think about

Dear members:

The following is my lastest Thai law article for your review and flaming. Enjoy!

~w~


Buying A Condominium in Thailand – some issues to think about
* Note: the following is intend only to provide the reader with an overview of the issues that need to be considered when purchasing a condominium or apartment in Thailand; it is not intended to be a comprehensive guide, nor is it intended to constitute legal advice. In the event that you are contemplating purchasing a condominium or apartment in Thailand, it is strongly recommended that you seek the advice of a reputable lawyer in Thailand.

When I first came to Thailand I was often asked what the difference was between an “apartment”, on the one hand, and a “condominium”, on the other hand. Being a little green in those days, I would often answer either that most people ‘purchased’ a condominium while they ‘rented’ an apartment, or else I would reply that a ‘condominium’ was a more modern building than an ‘apartment’. It wasn’t until a few years later that I came to realize that in fact, under Thai law, I could not be more wrong and that there is an important and quite specific distinction between what constitutes a ‘condominium’ and what constitutes an ‘apartment’. Moreover, as recent experience has shown me, certain property developers in Thailand play on the fact that most foreigners will not actually be aware that there is this fine distinction, in Thai law, between purchasing a condominium and purchasing an apartment. Indeed, there may well be sound reasons why this technical legal distinction could be of particular importance to you! For this reason, I have taken it upon myself in the latest of my articles on Thai law to outline what the legal distinction between a condominium and apartment is, and also to outline some of the issues that you may want to take on board.

Are you purchasing a condominium or an apartment?
Before you embark on anything else, the very first thing you need to establish is whether or not you are purchasing a condominium or an apartment. Now, this may sound easy. After all, all you need do is look to the name of the building and if it calls itself a condominium, you are obviously purchasing a condominium. If, on the other hand, the building is called an apartment, you are purchasing an apartment.

I only wish it could be so simple! In fact, recently a number of property developers in Bangkok have shown they, fortuitously, didn’t know that the building they were advertising for sale should have been advertised as an apartment, not a condominium, because, frankly, selling a Thai Baht 10 million condominium is a lot easier than selling a Thai Baht 10 million apartment!

In fact, in order to constitute a ‘condominium’ the building needs to fulfil the requirements of the Condominium Act B.E. 2522 (1979) (“Condominium Act”). Under the definition section of the Condominium Act, a condominium is defined as being:

“…a building where the persons are able to hold ownership separately according to the section whereby each section consists of personal ownership in the property and joint ownership in common property.”.

The bolded section of the above definition has been done by me and is, in a nutshell, the difference between purchasing a condominium and purchasing an apartment. In short, when you purchase a condominium what you are doing is purchasing a separate unit with personal ownership in that unit, as evidenced by the issuance of a certificate of unit ownership or unit title deed from the Land Department of the Ministry of Interior.

On the other hand, when you purchase an apartment, ordinarily what you are doing is purchasing stock in the legal entity (company) that the building takes the form of. Ordinarily here, the amount of stock you own in the company will be proportional to the area of space you own in the building over the total area of the building. For example, if you own a 100 sq. meter apartment in a building that has total area of 1,000 sq. meters, you’ll have 1/10th of the total issued stock in the company.

Importantly, regardless of the name given the building, if you do not have separate individual ownership of the unit in question, as evidence by a unit title deed, you have not bought a condominium, but what you have most likely bought is an apartment.

Why is it even important?
There are two reasons why it may be important that you clarify whether or not it is an apartment or condominium you have bought.

The first, which (as we shall see) is less important to foreigners purchasing a condominium, is because while a condominium can be mortgaged, an apartment cannot – because you have no unit title deed.

The second, which is far more important as far as foreigners are concerned, is that it may not be 100% legal for foreigners to own apartments in Thailand. Now, before you rush off and panic, the use of the words “may not” are important here. So let’s take a look why there may be this problem.

As we all know, under Thai law there is a general prohibition on foreigners owning land outright. Nonetheless, an exemption to this rule can be found in Section 19 of the Condominium Act, which specifies that foreigners can own a condominium unit in one of the circumstances listed therein, which basically includes:

- foreigners permitted to reside in Thailand
- foreigners permitted to reside under investment promotion laws, which may also include foreigners who bring into Thailand funds to purchase the condominium unit
- and certain foreign companies in certain circumstances where to company has been granted investment promotion previliges

Nonetheless, unless the foreigner is also a permanent resident in Thailand, collective foreign ownership of the total area of the condominium cannot exceed 49%.

None of these apply to apartments. Indeed, purchase of a unit in an apartment would need to follow the rules on foreign ownership of a Thai company. Thus, at minimum, the maximum ownership of the apartment’s share capital by foreigner cannot be more than 49%, or else the company will be considered a foreign company under Thai law, whichunder the Land Code would likely prohibit the company from owning land.

Furthermore, while you acquire a property right with a condominium, the same cannot be said about purchasing an apartment, which is the equivalent of purchasing shares in a Thai company.

Now, while it may be easy to say this distinction is irrelevant, which it may well be, from a legal standpoint there are some things, as a shareholder of a company, you may need to be asking yourself. For example, who are the board of directors? can the articles of association be changed without your authorisation? can the company be liquidated without your input? In fact, you need to be asking yourself all of the same questions you would otherwise be asking if you were considering investing in a joint venture company in Thailand.

Purchasing a condominium – some further issues to consider
So you’ve established with your property developer that it is indeed a condominium you are buying. What else should you be considering? In short, 2 important issues should be high on your agenda:

1. you should get an undertaking/guarantee from the property developer, before you proceed with the purchase, that the unit you are buying constitutes one of the 49% of overall ownership permitted under the law and that the property developer will not sell more than 49% of the units to foreigners. Obviously, if you have permanent residence in Thailand, this may not apply. However, if you do have permanent residence in Thailand, and more than 49% of the units have been sold to foreigners, you should bear in mind that your only chance of selling your unit is to: (a) a Thai; or (b) another permanent resident. While you may be happy doing this, it may have an affect on the price you can command when selling. So do consider it!

2. in most cases, foreigner cannot mortgage their condominium unit to purchase the unit. Rather, foreigners need to remit funds into Thailand to purchase the unit. It is a vital part of the process of registering your unit that some form of evidence of the remittance of foreign money be shown. Thus, make sure that you get the required foreign exchange control form and that the proper name show on this. Having said all this, it should be noted that Bangkok Bank has recently being advertising the fact that it will offer a mortgage through its Singapore branch – where evidence of the remittance of foreign exchange can still be shown.

Enforce disposal of your condominium unit
As well as permitting foreigners to own condominiums in Thailand, the Condominium Act also outlines certain circumstances under which a foreigner must sell a condominium unit they own, as follows:

1. where you inherit the condominium unit and the total number of units owned by foreigners exceeds 49%.

2. if permission for you to reside in Thailand has been revoked, or if your permanent residence certificate becomes invalid.

3. if you are deported from Thailand and no exemption to own the unit is given.

4. if, as a juristic entity, the company investment promotion is revoked.

Conclusion
Owning a condominium in Thailand has many benefits. It can provide you with the stability and security that, frankly, land ownership cannot. It can also provide with a nice ‘home’ in Thailand. Nonetheless, as with all forms of property ownership in Thailand it is not without its limitations/risks. For this reason, if no other, make sure you undertake careful due diligence before you go ahead and buy something and make sure you get sound legal advice (please do not rely on this article!). Not least of all, make sure it is a condominium you are buying!


As always, best of luck…


© Copyright ownership of this article belongs to William Jarvis. You are free to copy this article at liberty and you are also free to quote from this article in full. In either case you are asked, as a matter of courtesy, to make reference to the author as being just that. To this end, while not being particularly fussy, the author views the act of ‘passing off’ as being a particularly repugnant act done by those too stupid to work things out for themselves. Please respect my views on that – it’s not asking a lot!

If you have any questions relating to this article, please feel free to PM me or email me. I cannot promise that I’ll be able to answer your questions, but I’ll do my best.