Guide to buying a condo or apartment in Bangkok and Thailand

BUYING YOUR CONDO:

Condo developers need to consider the law
source: Neil Simmons/Bkk Post July 29 2008

There is some confusion over the law for foreign purchases of condominiums in Thailand. Most developers and government officials agree that foreigners can buy up to 49% of the units in any one condominium building. However, the law used to limit foreign ownership at 40%, and this was increased to 49% on a five-year basis. This five-year period has now expired and so the limit should revert back to 40%. However, most people are still working on the 49% rule, meaning that many new condominium units perhaps are being sold to foreigners illegally.

For the purposes of this article, let's assume that the law actually allows 49% (as is the common belief). I recently visited a very nice luxury condominium in the Sukhumvit area. It is a low-rise, eight-storey building, which is the maximum height that the law allows given the width of the access road into the premises. Each unit in this deluxe new condominium has four bedrooms and measures 300 square metres. All I can say is that it is a stunning building, very classy. However, it also commands a very high price tag, with each unit being sold at more than 40 million baht.

The developers had a concept of a deluxe condominium, where all of the owners are wealthy individuals. However, the developers have now hit a problem. They have sold 49%, the full foreign quota, to foreign buyers, but they have sold only about 10% of the remaining 51% to Thai nationals, some of whom were associates of the developers. The problem the developers face now is that they cannot find enough wealthy Thai nationals to buy the remaining units, meaning that they are stuck with them. This represents a very large percentage of the profits of this development.

Thai law prohibits non-Thai nationals from owning land, so condominiums are the obvious alternative for foreign investors. However, if you are a Thai national, then you could buy a very large house for 40 million baht, so why would you spend that much on a 300 sq m condominium unit? Because of this, there are a number of new condominium buildings in Bangkok targeting the high-end market, that have sold out the foreign quota and now are struggling to sell large and expensive units to Thais.
There aren't that many Thais in Bangkok who could or would choose to buy a 40-million-baht condominium unit. If you did some research, you would discover that new condominiums offering small studio, one- and two-bedroom units are selling like hotcakes and most of the buyers are Thai nationals.

Here's a thought: perhaps a developer who wanted to build a luxury Grade A condominium with only large and expensive units should consider building another condominium in an adjacent land plot, with small units, and register both areas as one condominium (like Tower 1 and Tower 2, but branded as two separate entities). That way, they could attract more Thais to purchase smaller units and the luxury units sell to wealthy foreign investors. Perhaps they could separate both buildings with a wall and have separate access points too, just a thought. Or perhaps the government could reconsider the 49% foreign ownership limit. The law has in the past allowed up to 100% foreign ownership of units in any one condominium building, but this was back when the economy was crashing and extra stimulation in the economy was required.

So, why 49% now? Well, technically as the owner of a condominium unit, you also own part of the voting rights of the building and part of the land. So, in theory if there was more than 50% foreign ownership in a condominium, there would be more than 50% ownership of the land. So what does this mean, that the foreign owners could collaborate together, outvote the Thai owners and sell the land? Well no, the Condominium Act B.E. 2522 requires unanimous voting of all 100% of co-owners to demolish a condominium building. It also requires 75% co-owner approval to sell common area land. So the real question is, should the government reconsider this 49% rule? After all, it is really hurting some developers.

Neil Simmons is a director of Ideal Homes Real Estate Co Ltd

Sales of condominiums subject to four different taxes
source: KPMG/The Nation July 30, 2008

Foreign nationals in Thailand are permitted to own condominium units not exceeding 49 per cent of the total area of a condominium building. However, foreign buyers are required to transfer the funds for the purchase from abroad or withdraw the money from their local nonresident bank account. Buying a condo may seem relatively straightforward. There is usually a helpful sales agent ready to assist in completing the documentation for you to sign on the dotted line. When it comes time to sell, however, it is important that you equip yourself with a basic understanding of the costs associated with a sale, so that you can take these into consideration when agreeing a price.

The sale of a condominium is subject to four different kinds of taxes and fees that are each paid to the relevant government office: government transfer fee, specific business tax (SBT), stamp duty and withholding tax.
Under the law, only the government transfer fee is shared equally between the buyer and the seller, and the remaining taxes are the responsibility of the seller. The calculation of the government transfer fee is quite straightforward, with the amount payable 2 per cent of government appraised value irrespective of the actual selling price. Nevertheless, the sale of a condominium between March 29, 2008, and March 28, 2009, is eligible for a fee reduction of 0.01 per cent in the government appraised value. The SBT is a special levy on certain business transactions. It applies to the sale of a condominium by an individual at the rate of 3 per cent of the government appraised value or sale proceeds, whichever is higher.

This tax is payable if the condominium is sold within one year of acquisition if the individual has registered the condominium as his or her official residence in the government household registration system or if the condominium is sold within five years of acquisition in other cases. The sale of a condominium by a company is generally subject to SBT at the rate of 3 per cent of either the sale proceeds or the government appraised value, whichever is higher. An additional local tax of 0.3 per cent is collected at the same time and on the same basis as the SBT. For the period from March 29, 2008, to March 28, 2009, the rate of the SBT and local tax applicable to condominium sales, either by individuals or companies, has been temporarily reduced to 0.11 per cent. The stamp duty is applied to all condominium sales that are not subject to SBT. The rate is 0.5 per cent of government appraised value or the selling price, whichever is higher.

Check your foreign currency exchange rates

BUYING A CONDO:

A foreigner can ONLY own a condo in his / her name OUTRIGHT. You cannot own a house and land in your name unless you invest 40m baht = 1 Rai of land. Bank's do not lend to foreigners; only Thais or Companies and you must lease, or have a Thai Company to own a house in your name. Just a note about buying Condos. ---Find out what the monthly maintenance costs are from the managers. Ask for this in writing. Avoid unfinished projects as they may run out of money or be over mortgaged. If very few condos have been sold in a building with good amenities like landscaped grounds, security Guards and a receptionist and office have the title searched but most of all someone has to pay for all this, plus the electricity for lighting and lifts. The total cost (often inflated) has to be divided up among the condo owners, which can be a lot if only a few units have been sold. Ask for an exact statement of maintenance costs and how they are paid. If the project has different size condos in the same building, large units will pay more towards maintenance costs than small units. If you are a legal resident you can obtain a mortgage but you need to check with your bank and credit. The best idea though is pay cash as you can negotiate but you must remit from abroad. In Bangkok look at around 25,000 -100,000 baht per sq m. A foreigner can only buy max 40% of a condo unit so if that 40% has been taken up and you are the 42% person you may find you are buying a lemon so to speak. If the developer owns a majority of units you may not like his manager but if the owners have majority votes than they can remove him. Here is a check list:

BUYING YOUR CONDO AND WHAT TO LOOK FOR

Use an agent as they know what to do and also their commission comes from the seller and not you so the price you pay has nothing to do with the commission from the agent normally.

Check age of any building and if over 20 years ask questions on future plans for the building are. Buy, buying older buildings can be Ok to see if Management is OK and you can check with existing tenants. check cost to pay for the maintenance contract each year? & if management been looking after it since the start.
Has the condo management an annual insurance premium and town planning in the area
Is there a booking fee and is it refundable?
When must you pay full price after the deposit & read conditions? Use a lawyer if not sure
Has the condo management a Sinking Fund? This is often a one time payment made upon transferring ownership and it ensures that the condo will be well maintained.
can be based on sq metre paid lump sum or monthly. Some condos require a sinking fund payment each year, and others require it 'on demand'. Make sure you know in advance what their policy is and cost.
Who pays the transfer fees? Nomally the owner pays or share the costs 50/50. Calculate fees before you sign up to buy. Bangkok and Pattaya, the transfer fee is 3.3% of the purchase price. However, this may change.
You must ALL purchasing funds from overseas. The minimum amount set by the Thai government is $US10,000 and over 2m baht register with the National Thailand bank.
Leasehold means just that. Freehold allows full ownership rights.
Check security, lifts, maintenance and if ask when the building will next be painted? Check the parking and if you have a park reserved & also the roads in and out for flooding etc.
Check other tenants, phone lines if ADSL or PABX or direct lines & if you can obtain one. No university students?
Check Rubbish collection, safety standards like extinguishers and dry/wet fire risers.
If you want to rent use an agent who may charge 20% or upwards. The big guys charge up to 40%. Have a written contract, responsibilities etc. If agent advertises for you you must pay the costs. We can help you here
If in doubt use a [ lawyer ]

The Condominium Act has been amended. Now 49% of units in all condominiums and 100% of units in condominiums in a total development area under 5 rai located in Bangkok, all municipal districts and such other areas as shall hereafter be announced by the Minister of the Interior (which is expected to include rural Phuket) can be foreign owned. Funds used to buy a condominium & remitted from abroad are recorded by a Thai Bank on a Tor Tor Sam. Purchases of condominiums by foreigners come under the Condominium Act B.E. 2535 (1992). The owner of each condominium is issued with a certificate of unit ownership. The certificate also has a statement with percentage rights over the common areas of the building each owner has.

COMMISSION PAYMENTS:

Are normally levied on the seller rated at between 3 & up to 6% of the asking price. Some agents are known to charge a commission from both the buyer and seller. Due to the unregulated realty industry you must use discretion when buying off any agent or person. If they say the price of a house does not include their commission, chances are this company is getting a cut both ends. Our company levies a commission solely on the "seller" & makes sure the person buying is getting the best deal for their money. We normally only sell houses that have a chanote (title).

ONSITE INSPECTION REPORT:

If you want to make sure your house is safe and has what it should have & hasn't had recent false renovations, hidden maintenance, then we also conduct a professional onsite inspection house appraisal of the home you want to buy or sell. This inspection is over and above your title search but compliments the title search as we work in with our own lawyer. This 6 -12 page onsite inspection report covers everything from electricity, inside and outside structures, water supply, plumbing, and general condition of your house & land, elevation etc in a check list report. Added to this we give you the buyer, a full written maintenance report plus our suggestions and recommendations all in English photos for your interest and on clear faults with the construction of. We even oversee the recommendations on your behalf. Cost for this Inspection ranges from 8,000 baht for new houses under 2 years old to 12,000 baht for a standard 4-6 bedroom older house, condos 7,000 baht as we look at the entire building ( This does not including away travelling expenses out of the Bangkok area). eg. cost to inspect in Bangkok is 12,000 baht----takes 2 -4 days ----report printout. We do not conduct land area searches as survey pegs are not shown. For this you need a surveyor which we can obtain for you. Other buildings like Commercial properties we can quote you. PLAY IT SAFE-- WHY HAVE A HOUSE THAT WILL NOT LAST!!!!!! As of August 2005 we have managed to assist foreign clients before they buy with the knowledge that the seller will initiate our recommendations & save money for our clients. We highly recommend you obtain a Title search and House Inspection report before you purchase ANY property in Thailand. Cost 12-22,000 baht depending on travel.

INSURANCE:

We use the services of Thai Zurich for all your house insurance. Please just ask us as we are agents for Thai Zurich in Chiangmai and all over Thailand. Need to know more then ask cmhouses@gmail.com . We can advise you on all your insurance needs & whether you go through us or you do yourself there is no difference in the price. However using our services we make sure you are happy before you even have to pay any more------- no hidden agendas as we are safe. [ See more on insurance ]

WHY USE OUR SERVICES:

	We work for you (Both Thai & foreign consultants )
	No hidden charges-everything is up front.
	Guaranteed conveyancy help & Company, work permit & land setup for foreigners
	We will sell your Commercial property, houses, businesses, bars and Guest Houses
	Because you have the benefit of foreign help with our Thai lawyers and expat consultants
	We offer: Full house onsite appraisals.
	We show you max 4-6 houses that may be suitable for you. We charge downpayment of 2000 baht refunded should you buy from us.
	We now conduct outhouse consultation at your Hotel if you require assistance with any Business ideas or housing advice with our foreign consultant. Cost is 1000 baht. Refunded if you buy a house from us.

BUYING A BUSINESS:Thailand differs from every other country and when you decide to buy a service or hospitality business here the first and most foremost thing you do is ascertain who your management structure will be. The location is second to this and if you do not have your management sorted out first then you will find it hard to make headway in Thailand eg. honesty. [ SEE MORE ON BUYING A BUSINESS ]FREIGHT FORWARDER FOR YOUR HOUSEHOLD GOODS & ANIMALS:Thailand can offer many foreigners moving household belongings to and from Thailand. If you need to ask then us. If you have animals and pets like a dog please ask a freight forwarder and Vet in your country. There are certain requirements to meet including Vet Certificate & innoculations so please ask your Thai Embassy and Vet services in your country and also a freight forwarder if you are sending furniture etc to Thailand. Do not get the innoculations before you find out the time factors you have. eg a Vet Cert must only be 7 days old? In Thailand pit bulls are banned dogs. They must have rabbies injection. A good way is sending the dog by excess baggage but it is not cheap. There is no quarantine period as far as we know. We can customs clear all your belongings and shipments. USING A LAWYER:When using the services of a lawyer please be considerate and talk slowly. Although many lawyers speak English it is not there first language and be slow and patient when making your case. There understanding of what you are trying to say maybe is not what they are thinking so when talking use local layman speech not heavy doctrine. Do not stand and demand like one will do in the west. Do not look down at a lawyer who is sitting down while you are standing. You are in Thailand not in the West. Do not shout and make demands or bang your fist on the table because you gave all your money to the "local bargirl" & now are crying!!!. Why? Some Thai lawyers will simply turn there back and close you out. You may even lose the money you gave. Simply speaking if you are rude and act like one does in the west then forget using a lawyer here. Thailand people are very patient and they do not like to be threatened or placed in situations where they do not understand the falang. Remember if you have a litigation case pending here in Thailand it can take many years to process & lots of money and court sittings that just drag on and on but this is Thailand and one must abide by their rules.

New property law stuns foreigners

Bangkok (dpa) - Thailand's booming property sector has been thrown into confusion by a new regulation issued this month that requires all partly foreign-owned companies to prove the source of their funding before purchasing land, industry sources said Tuesday.

The new Interior Ministry regulation that went into effect on May 25 has already started to slow sales of housing estates in Thailand's popular seaside resorts, such as Pattaya, Phuket, Hua Hin and Samui Island, which have been specifically targeting well-to-do foreigners as vacation getaways or retirement homes.
Thailand has strict laws prohibiting foreigners from directly purchasing property themselves although loopholes in the law allow them to own land and their houses through long leases or a "nominee company," providing the company is majority Thai-owned.

It is common practice for such "shell companies" to include Thai nationals who have been paid to act as nominees to facilitate the deal and who have invested nothing in the purchase. The new regulation, signed by Suraart Thoingniramol, deputy permanent secretary of the Interior Ministry, is designed to halt the use of such companies for property purchases in the future.

"If it appears that an alien holds shares or is a director or it is reasonable to believe that a Thai holds shares as a representative of an alien, the officers shall investigate the income of Thais holding shares, delving into the number of years [they have spent] in the current profession and monthly salary," reads a translation of the law. "The provision of necessary evidence is required."

The new regulation is actually an enforcement of Thailand's existing laws, legal experts said. "It's not a radical change. It's a radical implementation," Ronachai said.
The regulation has already started to stall home sales to foreigners, sources said.
"There's a lot of confusion," said Simon Landy, managing director of the Primo Co, a property-development firm. "Some land offices don't know what to do with it, and many have simply stopped transferring land."

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