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Abuse of loopholes by some have made it harder for foreigners who wish to acquire property in full compliance with the law

By: Kanana Katharangsiporn
Published: 15/06/2009 at 12:00 AM
Bangkok Post


Foreigners seeking dream homes in Thailand find it almost impossible to do so legally if they also want to own the land on which the home sits. The law allows them to own land only if they are legal heirs or invest at least 40 million baht in the country, or have a Thai spouse buy it using money that is proved to be the spouse's personal asset.

Many foreigners as a result opt for leaseholds or buy a condominium unit, as the law allows them to own up to 49% of total sellable area of a condominium building.

Some don't like either choice and pursue other strategies. Some of these strategies are completely legal, others exploit grey areas in the law, but some are just plain illegal.

For many, the approach of choice is to set up a legal Thai company, in which foreigners cannot own of more than 49%, to own the land. The practice has led to widespread use of Thai nominees to buy or own land for foreigners. In many cases it has been suspected that the Thai nominees did not put up any money of their own.

The Lands Department, a branch of the Interior Ministry, has guidelines in place for its offices throughout the country to check for possible legal avoidance before registering land ownership. The officials' checklist for a company with foreign shareholders includes the Thai party's source of funds for the land purchase, bank account, career, position, income, salary and workplace.

For land acquisitions by any Thai who has a foreign spouse, the department has another set of guidelines, some of them based on real cases, issued in December 2005 (see "Guidelines for officials".

However, the term sin suan tua or "personal asset" used in the guidelines worries some foreign spouses. They feel insecure and believe they might lose the asset in case of a divorce from their Thai mate.

Nirut Dej-udom, a partner with the law firm Bangkok Jurist Limited, suggests a legal right, called Real Right in civil law, would offer more assurance to a foreigner whose Thai spouse owns the land the foreigner purchased, as this law provides better protection than a leasehold.

Among the three kinds of Real Right that can apply to land, the most suitable for residential purposes is known as "superficies right" or right over the property, which can be granted to other party to own buildings, structures or plantations

After a land transfer is legally done between a Thai spouse and the property seller, with a confirmation letter where personal assets are detailed, a superficies right granted by the Thai spouse to a foreigner can be registered at a land office, says Mr Nirut, who has studied this law for 10 years and applied it for the past five years.

With a superficies right, he adds, the foreigner can own the house on the land, have a right to transfer and transmit the right by inheritance and can use it for a mortgage.

In contrast, a foreigner with a leasehold cannot own the house, transfer or give it as an inheritance or use it for a mortgage. As well, the leasehold contract will be cancelled when the tenant dies.

"Why don't we do it as the law allows to do?" Mr Nirut asks rhetorically. "It's better to not avoid the law or you have to keep escaping. The further you escape, the narrower the route will be and the more curves and twists it will have.

"If you [a foreigner] buy land via a company, there will be other problems awaiting. You have to find a Thai party holding at least 51% of the company while that Thai party must show the land authority documents to prove their sources of funds. Doing so is like tying many knots."

Before jumping to the solution of using superficies right, Mr Nirut suggests foreigners ask themselves what their requirements are, then see what the law allows to do and seek what right fits their requirements. If they find no law or regulations in line with their requirements or limitations, they should cut some requirements or limitations off.

To promote property businesses that target foreigners, Mr Nirut suggests the government offer leasing rights for residence of up to 50 years, issued as an act and allowing for inheritance, transfer and mortgaging.

The government, he says, can fine-tune the requirements or regulations. These could include special zones where such rights are allowed, buyers' qualifications, sources of funds, minimum investment in Thailand, minimum housing prices for leasing or land size. The rules could be used to screen for the types of foreigners the country wants to attract.

Mr Nirut believes rules could be drafted that could attract foreigners while ensuring the government would not be criticised for "betraying" the country.

He also supports increasing the foreign quota for condominiums in some locations where unit prices are too high for most Thais.

He says it is the duty of everyone involved to ensure that foreigners understand what their legal rights in Thailand are. "Government policy does not create the obstruction. If you want to stay here, you should comply with Thai laws," he says.