Buying a Condo in Thailand
By Sebastian H. Brousseau, Managing Director of Isaan Lawyers.
Condominium ownership is one of the few "immovable" property rights that foreign nationals are granted in Thailand and therefore condos are increasingly popular both as residences and investment purposes. Whether you’re looking for a place near the Skytrain in Bangkok or overlooking the beach in Pattaya or Phuket, there are a few things you need to know before buying a condo in Thailand.
Condos For Foreigners
According to the Condominium Acts of 1979 (and following modifications) foreign nationals who have legally entered Thailand may be freehold owners (100% owner) of condo units, in buildings where not more than 49% of the unit floor space is owned by foreigners, with some exceptions in Pattaya and Bangkok. This is good news for anyone who has looked into buying a house or land in Thailand and has run into nothing but headaches. Though buildings in Phuket and Pattaya may have high foreign ownership, in Bangkok, Hua Hin, and other locations this condition is rarely an issue and occupancy rates across the country are still not high enough to make finding a condo a fairly easy proposition. But which one to choose, and is the condo lifestyle even for you?
Section 19 bis of the Condominium Act states :
" Ownership by aliens in each condominium under Section 19 shall not exceed 49% of the total area of such condominium which was registered under Section 6."
Some alternatives in these cases where 49% is already owned by foreigners are to make a lease (30 years with option to renew) or to setup a Thai limited company.
Condo Living: Is it for you?
Condos come in many different shapes and sizes, but share the underlying feature of private mixed with collective ownership. All the owners collectively own the building housing their units and share access to the building and its common areas and facilities. Usually created by the original developer, the condo exists legally as a juristic person (like individual people and companies), meaning it can be party to contracts, sue and be sued, etc. The main contract that the condo juristic person holds is with a management company which is hired to maintain the property’s facilities, cleanliness, and security. The management is paid through levy by the unit owners, and has a responsibility to maintain things at a level acceptable to everyone, or face being replaced – an important right often overlooked by condo communities!
Because of this collective ownership, individual owners have to limit some of their activities for the common good. Behaviour like blasting music late at night or painting your unit in shocking neon colours may seem restrictive to some free-spirits, but in general harmony is preserved through the old-fashioned practice of being a good neighbour.
The big difference from owning a home that is stated by owner after owner as their reason for preferring condos is the big C-word: convenience. Sure you have to pay fees for management, but in exchange you don’t have to do anything except the minimal work of maintaining the inside of your unit. A light burns out on the front stoop? Not your problem. Won a must-leave-right-away vacation on The Price is Right? Lock the door and fret not. In short, condo living can be a welcome relief to renters or homeowners, and since most expatriates move to Thailand to live a life of richness and relaxation, a condo most often ends up being exactly what’s needed.
Choosing a Condo
So you’re interested in making the move to life as a condo owner here in tropical Thailand. How do you go about choosing your new home? Only about umpteen considerations immediately come to mind, and surely more would spring up later, and that’s about right number of things you really ought to think about before making what will potentially be the biggest purchase of your life – your own new home. “Buyer beware” is the order of the day, called “due diligence” in legal terms, and means that the burden of investigating every possible aspect of the condo purchase is on you.
The very best advice is to spend a lot of time thinking about all the activities you’ll do at your home (don’t forget storage for your windsurfing kit!), all the things you find important in a comfortable home (running water is just the beginning), and also all the things that could go wrong and create a big headache for you (like a fire and inadequate sprinkler system). Make a checklist and actually print out copies then take them along on your condo shopping adventures, be thorough, and actually use them!
Take this as a starting point, and then find an estate agent to show you around. Discuss your list with him and add more points to check into based on his experienced recommendations. Good agents build good reputations by putting people into good deals where they get what they want and stay happy with their homes and then receiving their endorsements and recommendations. Choose yours based on recommendations from friends and associates if you can, but otherwise look to experience, transparency, and professionalism. The best agent will not come cheapest, but his fee should be considered an investment in peace of mind in a future where your home isn’t coming apart at the seams.
Of the many, many things to consider, here are some categories to help you focus and start your checklist:
It DOES matter! If you have never lived in an apartment or condo before, they can feel limiting and cramped, but remember that there is also common space to use. Think about the space you use now and whether it’s adequate. Measure it. Condos in Thailand are described first and foremost in terms of floor space in square meters, and once you know your size requirements you can seriously refine your search for the right space.
2. Price Range
A range is necessary of course. What is the absolute most you can spend? How low can you go before seriously compromising your quality of life? With a size and price range in mind, and agent should already be able to present you with some excellent choices, one or more of which will should spark your interest.
Are you looking for a particular part of town? A certain view? These are the easy things to limit but there’s more to location (x3) than that. What are the other things you want to have in the neighbourhood, like shopping, transportation, school for the kids, or a great local pub? How far are these services from the condo building in question? Remember to look around the neighbourhood as well to see what local life is like. Visit a location a few times, night and day and especially at peak traffic times to see how the local atmosphere changes. If you’re buying your condo with the intention of renting it out, remember that location is going to be hugely important and will largely determine how much rent you can take in.
Condos can be purchased at 3 different stages of their lives, and each has its advantages and drawbacks. “Off-plan” condos are still being built and are bought directly from the developer usually at good prices (since this money will generally be used to help finance the rest of the construction), but can be fraught with delays and even the potential danger of a developer bankruptcy leaving you holding the bag.
New, finished condos, though not as cheap as off-plan, are still generally a good deal as the developer is usually trying to sell as soon as possible to re-coup construction expenses. They are finished and therefore available for detailed inspection, so you can see exactly what you’ll get, plus everything is shiny and new and should therefore afford you a long and happy time in your home. Again you deal here with the developer directly or through a sales agency.
Previously owned condos are of course older and may also cost you more, but hopefully this will be because you are buying a place with a proven good location and an established relationship with the management company. In this case you will deal with the previous owner as the seller, who will likely also retain an estate agent. Be aware that good deals can be indicative of 2 different situations. The seller may be somewhat desperate or hurried to sell his investment, which can often happen if people find they have to suddenly return to their home countries, and sorry to his misfortune but this is a way to get a great deal. Investigate listings that have dropped in asking price over a short period of time. The opposite situation that can be potentially disastrous is that the seller is so fed up with the place that she is willing to sell at a low price just to get out of there in a hurry. The good news is that being slow, systematic and thorough in your investigation will likely weed out these bad deals, as the seller will increasingly frantic the more you look into things.
One final consideration with pre-owned condos is that any building over 20-25 years old in Thailand could be a worry within the next 10-20 years, and if this is your retirement palace you won’t want to have to deal with a building that’s falling apart. On the other hand, a building that’s 5 years old should already have an established positive relationship with a management company and established residents as well. Remember that however good the unit itself is, it’s not going to be worth much in a terrible building.
How does the building look in common areas? Is it clean and in good repair? Are the elevators in good order? Are there strange smells floating about? Ask the seller about cleaning schedules and general maintenance and make sure it’s worth the fees you’ll be paying to the management company.
Most condos are designed to attract the majority and offend very few, but if you’re very sensitive to the aesthetics of your environment, remember to let your agent know what you love and what you simply can’t abide.
7. Neighbours and Noise
Find out who your neighbours are going to be to see if you’ll like the condo neighbourhood. Owners are generally more respectful to their neighbours and to the building than renters with no vested interest. Thais generally enjoy a community lifestyle more than many foreign nationals, which includes sharing music and cooking smells with other units. For some this gives a great sense of community while others may find a building with a large proportion of keep-to-themselves foreigners more comfortable. If you’re particularly sensitive to noise levels, test out noise insulation by cranking your potential unit’s stereo then listening for it outside in the hall – this is equivalent to what you may hear from your neighbours while you’re trying to sleep!
It’s the norm for a sleepy security guard to be on duty 24-hours a day, as well as key cards at the common doors, but some buildings will offer CCTV in a security booth to also monitor hallways. Women are usually more concerned about security issues than men, so if you’re a male buyer ask a female friend to accompany you on a visit and give her feedback.
Some buyers will be content with a place to lay their heads and cook a meal or 2, but condo buildings offering swimming pools, fitness centers, and games rooms exist because some want all those conveniences right at home. Sharing these features with your fellow owners may present a great opportunity that you’d never be able to own by yourself. Still, many buyers won’t want to pay higher prices and extra fees for things they’ll never use or that they intentionally go out to use.
Price is a big factor in any major real estate deal, and it can be a bigger issue for foreign nationals than Thais as financing is rarely available or difficult to non-Thais. Prices can range from 100-200 times the monthly rent for a similar property. In case you are planning to move to Thailand for just a short time then the calculation of renting versus buying is certainly one to take into account, especially since you’ll need to have all the money ready for a ‘cash buy’. A down-payment can typically run 10-30% of the full sale price and is needed to reserve the sale for you. It’s a good idea to move this deposit money to Thailand when you come to do your condo shopping so that you don’t miss out on any opportunities, and then move the rest later when you have a contract ready.
To transfer these funds, and then the subsequent funds you’ll need to buy the unit that you’ve selected, you must transfer from foreign currency to a Thai account where the remittances will be exchanged to Thai currency (unless the foreigner already lives in Thailand). These remittances should be marked “for the purpose of condominium purchase” (Write it when you transfer the money), and then the receiving bank will issue FET certificates (Foreign Exchange Transfer) for amounts over $20,000 USD. You can have a confirmation letter for smaller amounts. It’s important to obtain certificates for each remittance in the buyer’s exact legal name as they will be needed if and when you choose to sell on or otherwise transfer ownership of your unit and move money back overseas.You must show these certificates at the land department to transfer the condominium to a foreign national.
If you sell and want to transfer back the money to your own country, your Thai bank will probably require:
* a copy of the sale agreement from the Land Department
* copies of FETF form when you transferred the money in Thailand to buy your condominiumè
* a copy of the title deeds of the condo unit
* a copy of your passport
This is an example of FETF (Foreign Exchange Transfer form).
Remember, you must send the money AS A FOREIGN CURRENCY IN THAILAND. That means any foreign currency, dollars, euros, pesos but do not send the money in "Baht". Here, in Thailand, the foreign currency will be converted in Baht. If you send Thai baht in Thailand, you won't be able to register the condominium as a foreigner because you won't comply with the Law.
Finally there are fees to pay to the government as in any deal of significant size. Three different fees are charged on condo sales transactions as percentages of the purchase price: the transfer fee (normally 2%), property business tax (normally 3.3%), and stamp duty (about 0.5%). Be sure to find out not only what these fees will be but also which party is responsible for them according to your contract. It could be the seller, the buyer, 50-50%, etc.
This is where a lawyer and/or agent becomes so critical. If you have found the home of your dreams and everything checks out on your checklist, including negotiations for the price if possible, then it’s time to get into a contract that will protect your interests for the transaction and into your future as a homeowner. It will be wiser to contact a law firm BEFORE signing a contract and BEFORE paying a deposit. Lawyers can save you money: They might be able to negotiate with the seller, they might prevent costly mistakes, they might be able to modify an agreement to protect your rights better.
If buying from the developer, they should have a standard contract format already drawn up with only the specific details of your unit to fill in, while with a private seller it’s normal to work together to draw up a reservation or purchase option contract. In either case, ALWAYS have a lawyer or experienced estate agent read over your contract or help to draft one you make yourself. If the contract is already signed, it could be difficult for a law firm to change some terms of your contract.
The contract you have will set out the sale price of the unit, detail the takeover schedule, and establish penalties for both buyer and seller should either default on the deal. It will also spell out who is responsible for the transfer fees necessary for your transaction to take place. It’s normal for these to go to the seller, but this may change in some instances – make sure you know who is supposed to pay.
Before the handover of a deposit, you should have a lawyer check the most important part of the deal, which is to see at the Land Office who is the true owner of the land and that this coincides with the name of the seller on the land title deed.
If things check out then you can hand over your deposit to be held by the lawyer in escrow (meaning it is held legally by a 3rd party until conditions of your agreement are reached). You and the seller will sign a Sales and Purchase Agreement, which will then allow the lawyer to prepare the sales documents necessary to register the transaction. This can take a few days though you may regularly take up to 1-2 months from the deposit date, which will allow you time to move the rest of your money into Thailand to make the purchase. When the papers are ready, you the buyer, the seller, and your lawyer must go to the Land Office together to complete the land title deed transfer. Transfers can also be done with power of attorneys but we do prefer when all parties are present.
After this point, you become the legal owner of the condo unit, and can take over your property according to the schedule stipulated in your contract. And enjoy it, because you’ve done all the hard work, investigation, and research and have dropped the big sum of money all so that you can sit back and relax in your new home for years to come!
About the laws and modifications:
Condominium Act B.E. 2522 (1979)
This first Act about condominiums in Thailand came into force due to the arising problems and conflicts about ownership and property rights in municipal areas where the Commercial and Civil Code of Thailand couldn't solve all problems and especially because of some properties of condominium, like their indivisibility.
Condominium Act No. 2 B.E. 2534 (1981)
These modifications on the Condominium Act were done to allow foreigners and foreign entities to buy condominium in oder to support foreign investments.
Published in Government Gazette No. 2534/171 /1por/30 dated September 1991.
Condominium Act No. 3 B.E. 2542 (1999)
The government wanted to change the method of owning condominium units by foreigners or foreign entities in order to be adapted to the Foreign Currency Control Act, regulating and controlling imported foreign currency. The percentage of ownership held by aliens in the condominium was also modified to help the sales and to strengthen the investment in reak estate sector.
Published in the Government Gazette No. 2542/31 Kor 1/ dd. 27 April 1999.
Ministerial Regulation No. 8 (B.E. 2543) issued by the virtue of the Condominium Act B.E. 2522 (1979)
Government Gazette No. 117 dated 4 October 2000. Given on the date of 29 September 2000
This Ministerial Regulation classifies Pattaya City as another local government zone apart from Bangkok Metropolis and other municipal jurisdictions to allow foreigners and foreign entities to possess condominium exceeding the limit of 49% of the entire area of the condominium building. In addition, the Section 19 bis paragraph two of the Condominium Act B.E. 2522 was amended by the Condominium Act No. 3 B.E. 2542 on setting other government zones.
Ministerial Act No. 9 B.E. 2543 issued by the virtue of Condominium Act B.E. 2522 (1979)
Government Gazette No. 117 Section 91 Kor dated 4 October 2000. Given on the date of 29 September 2000
Condominium Act No. 4 B.E. 2551 (2008)
This is the last condominium Act of 2008.