What should you check if you are buying land or a house in Thailand

Due Diligence when buying real estate in Thailand

Due Diligence is a term usually reserved in Western countries for systematic investigation of businesses or business transactions before entering into to them so as to ensure that the business proposition is a sound one and that there will be no unexpected consequences in proceeding.

In Thailand in relation to property law it is a term that is often used to describe the process in Western countries known as investigation of the title of a vendor of a real estate property so as to be satisfied that the purchaser will obtain a good and marketable title free from defects in title and encumbrances.

In pursuing due diligence in respect of the proposed purchase of a real estate property in Thailand one would normally expect that the following matters would be investigated and that a prospective purchaser would be satisfied with the outcome of those investigations so as to be confident of obtaining a good and marketable title to the property to be purchased . An experienced property lawyer can provide these services.

Land Documents and Title Status

1.      The first step to be undertaken in investigation of a title on behalf of a foreign purchaser is for the title deed to be translated into English, or the foreigners own language, so that it can be fully understood by the prospective purchaser.

2.      A full title search needs to be undertaken at the relevant Land Office so as to ascertain the nature of the title (Nor Sor 4 Jor (chanote), Nor Sor 3 Gor, Nor Sor 3, Por Bor Tor, etc) and what rights attach to it. It is necessary to check whether the title deed was legally issued, particularly when the original ownership document was not a title deed, but a lower level of document.

Chronology of Ownership

3.      In Thailand the system of title is similar to the Torrens Title first established in Australia. The title deed is the basis of title and usually, on the back of the deed, is a history of transactions that have occurred during the course of ownership. This will give important information as to the background of the title and its history. If necessary searches can be undertaken of documents disclosed in this list. This should verify the chain of the ownership of the land.

Legal Encumbrances, Leases or Other Rights Registered Over the Land

4.      The title search will also establish whether there are any mortgages registered or any other encumbrances, lease, obligations, charges, easements (called servitudes), claims, powers of attorney, caveats or any right registered against the land. Copies should be obtained of these. Under Thai law, all mortgages, easements, servitudes, and other encumbrances created over land must be made in writing and registered with the Land Office where the immovable property is located in order to be valid.

Thai law requires that a lease of immovable property for more than three years must be written and registered by a competent official. If the duration of the lease is three years or less, it is not registered with the Land Office, but it must still be made in writing.

This section of the due diligence report will state whether the land is leased to any other person for more than three years or whether there are any other tenancy rights (usufructs or right of benefit, superficies, habitation rights, etc.) which may affect the purchaser’s right to use the land. A contract to lease immovable property is not extinguished by the transfer of ownership. Therefore, the transferee is entitled to the rights and is subject to the duties of the transferor contained in the lessee.

Litigation

5.      It should be ascertained whether there had been bankruptcy proceedings against the owner, and whether there any court orders or proceedings pending which might affect the title.

Zoning, Building Control Regulations, and Environmental Regulations

6.      In Thailand, land use is regulated under the City Planning Act for residential, industrial, agricultural, environmental and cultural protection, or other purposes.

7.      Additionally, the construction of a building must be in compliance with the relevant rules, regulations, and notifications issued under the laws governing building control and the environment, as well as other relevant laws.

Therefore, this section of the report is meant to provide the buyer with the current zoning, building control, and environmental regulations that cover land use and building construction, so that you will be informed of whether the land can be used and built upon, as intended. It will confirm whether the buildings constructed on the land have been properly granted a construction permit and other requisite permits. Enquiries should be made as to the permitted use of the land to the relevant zoning requirements and whether the current use of the land including construction of improvements complies with local requirements.

8.      If anyone else other than the vendor will is occupying the land enquiries should be made as to the basis upon which they are occupying the property and the nature of their rights, if any

9.      Any drainage problems on the land or subsidence? If necessary expert opinion should be obtained.

Legal Access

10.   A physical inspection of the property should be undertaken so that an assessment can be made as to access issues and the like and these can be followed up with enquiries of local authorities Enquiries should be made as to the connection of the property to utilities such as electricity, water, telephone and like and as to whether those connections passed through adjoining properties or a directly to publicly owned land.

11.   Enquiries should be made as to whether there is legal access to the property whether by way of access to public roads or by way of registered easement, called servitude in Thailand.

12.   Are there any problems with the local residents, noise nuisance or other disturbances from surrounding land, or problems with access to the land?

Official Assessed Price

13.   IA check should be made at the Land Office in respect of land taxes, the registered value of the property as determined by the last transfer.

On-Site Survey

14.   In the case of a chanote there will be a survey plan of the land attached to the title blue. This may also be the case in Nor Sor 3 titles but they may not have been fully survey. In addition the land survey does not provide any guarantee that improvements have been erected within the boundaries of the property. If there is any doubt as to this a qualified surveyor should be retained to carry out an identification survey.

Caveat Emptor and Other Matters (not strictly Due Diligence Issues)

15.   The Latin maxim, caveat emptor, “let the buyer beware”, is a basic legal principle in the sale and purchase of all the property including immovable. It means simply that where property is sold, unless the contract provides otherwise, it is sold as is and subject to all physical defects that may be apparent from a proper inspection of the property. The words, UK the property has inspected. The prudent purchaser will therefore ensure that he undertakes a full and proper inspection of the property and where necessary retain experts in building, engineering pest extermination or otherwise to advise him or her as to the physical condition of the property. This is not a matter for due diligence but simply a matter of common sense

16.   If anyone other than the vendor will is occupying the land enquiries should be made as to the basis upon which they are occupying the property and the nature of their rights, if any

17.   Any drainage problems on the land or subsidence? If necessary expert opinion should be obtained.

18.   If the property is being purchased from a Thai limited company a full company search should be carried out with the Department of Business Development so as to ascertain the structure of the company and whether the persons contracting with you at power to act on behalf of the company.

19.   If anyone else other than the vendor will is occupying the land enquiries should be made as to the basis upon which they are occupying the property and the nature of their rights, if any

20.   Any drainage problems on the land or subsidence? If necessary expert opinion should be obtained.

21.   Are there any problems with the local residents, noise nuisance or other disturbances from surrounding land, or problems with access to the land?

Purchasing from a Property Developer

Buying a property from a developer in a housing estate should be somewhat safer but this is no excuse not to rigorously checking the title. There are however other matters that should be considered when purchasing from a property developer. These include:

1.      If the property is being purchased on an “off the plan” basis that it needs to be established whether the developer is also the builder and whether separate contracts need to be entered into with each of them.

2.      The contract, or separate contracts if necessary, needs to fully set out the terms and conditions of the agreement and attach a copy of the plans and specifications for the home and, essentially, contain all the usual provisions which would be contained in a building contract. The type and quality of materials to be used should be specified in the contract or its addendum. Appropriate warranties and conditions precisely setting out the obligations of each of the developer and builder should be set out.

3.      Check compliance with the requirements under the Land Allocation Act.

4.      Check the Environmental Impact Assessment approval report (if applicable).

5.      Have any building permits been issued? If yes, under whose name?

6.      Does the developer have a Housing Development License? Under what kind of sales structure is the project is sold? How long has the developer been developing properties in Thailand? What is the registered share capital? Which construction company has been contracted to build the houses? Can you instruct an independent building surveyor to inspect the building upon completion? How many houses are being built in the project? Could a new construction in the neighborhood change the value of your property? For example, you buy a condominium for its view on the sea and a future project comes to block it.

7.      Will the developer connect the land to public utilities? Will you have to pay for separate meters or connect all utilities yourself?

8.      Will the developer take care of the registration of the house in the foreigner's name and the house registration booklet (Tabian baan)? Will there be a lease agreement, usufruct, servitude or superficies added at the transfer of the property?

9.      If the property is sold under a leasehold structure, who will be responsible for payment of building and land taxes?

10.   Will the land, including the common land, be delivered free any encumbrances, mortgages other liens?

11.   When is the property to be completed? What will happen if the completion of the property is late? What penalties apply?

12.   Who will be responsible for transfer or registration fees? It can be the buyer, the seller, 50-50% or otherwise.

13.   What services will be provided? How much is the monthly or yearly maintenance / service fee in the project? How will this be calculated? Does this decision rest with the house / plot owners? Remember that this can have an impact for many years.

14.   Is it possible to cancel the contract? If so, will the deposit be refunded?