Buying A Mortgaged Condo + Giving False Price To Land Office

[yeti]

Hi,

I am going to buy a condo, which is presently mortgaged. So the chan note is at the owner's bank.

He told us we will meet at the land office, the owner lawyer (who has a power of attorney from the owner, with a signed copy of the owner ID card, i've never seen the owner), the bank representative and me, and to prepare 2 cheques, one in the bank name and one in the owner name.

Is that the normal way to proceed?

The lawyer asked us to give a lower price (1.5 million instead of 2.4) if the Land Office officer asks us for the sales price in order to reduce the tax he has to pay (he pays all transfer fees). Said that it's not important, as this amount is not recorded. Sounds fishy to me: how a number used to calculate taxes can be non important, and not recorded at the Land Office?

[Mobi]

Hi,

I am going to buy a condo, which is presently mortgaged. So the chan note is at the owner's bank.

He told us we will meet at the land office, the owner lawyer (who has a power of attorney from the owner, with a signed copy of the owner ID card, i've never seen the owner), the bank representative and me, and to prepare 2 cheques, one in the bank name and one in the owner name.

Is that the normal way to proceed?

The lawyer asked us to give a lower price (1.5 million instead of 2.4) if the Land Office officer asks us for the sales price in order to reduce the tax he has to pay (he pays all transfer fees). Said that it's not important, as this amount is not recorded. Sounds fishy to me: how a number used to calculate taxes can be non important, and not recorded at the Land Office?

It is common practice to state a lower price to the land Officer in order to reduce the amount of tax payable. Obviously this is illegal, but like so many things here it is regarded as 'normal'.

It is also common practice to isue a sale contract which shows the reduced sale price.

The lawyer is lying to you - the amount of tax is certainly recorded, and an official receipt is issued.

You must decide whether you wish to be a party to this common, but illegal practice.

[yeti]

As I'm not the one paying taxes, I already told them I wouldn't do it (in fact my gf was the one who had the lawyer on the phone, she said my husband is farang, and he doesn't want to do it this way, not the same culture. Answer of the lawyer: your husband doesn't need to know about this ).

[Mobi]

With the exception of the esteemed sponsor of this forum, I've yet to meet a single lawyer in Thailand who I would completely trust - and that's 30 years' of experience.

If push comes to shove, they can probably do it without you becoming involved - just a bit more under the table, or a bit more tax, or both.

As I said - it's your call.

[thaigene2]

Hi,

The lawyer asked us to give a lower price (1.5 million instead of 2.4) if the Land Office officer asks us for the sales price in order to reduce the tax he has to pay (he pays all transfer fees). Said that it's not important, as this amount is not recorded. Sounds fishy to me:

You bet it's fishy as Mobi pointed out it is recorded. Now you could report this pr+ck to the Law Society of Thailand (whoch would be like fishing in a dry pond), or ask yourself a more pressing question in your own interests>:

"What happens if I have a dispute later? Is the price recorde at 2.4 or 1.5????" Oh Mia drong crap pee! Sale price 1.5 - see you sign paper!"

Edited March 9, 2007 by thaigene2

[yeti]

Well, the contract states 2.4 anyway.

More worried I'd have to pay more tax when I'll sell it if we lower the price now.

As for the part involving the bank. Is it the normal way of doing things?

[thaigene2]

Well, the contract states 2.4 anyway.

More worried I'd have to pay more tax when I'll sell it if we lower the price now.

As for the part involving the bank. Is it the normal way of doing things?

Listen - as many people have learned the hardway in Thailand. The sales contract means absolutely nothing. There is no contract law that will protect you here (well none for the sake of argument).

The ONLY thing that should really matter to you is that you can REGISTER that place in YOUR NAME at the Land Office as the FREEHOLDER of that condo and indicate the price you paid and that all taxes were paid and that the previous banker that had a lien on the title has lifted it because he/she has been paid the money owing. . Everything else is superfluous.

Edited March 9, 2007 by thaigene2

[Mobi]

The only advice I can give is to proceed with extreme caution.

This lawyer has already lied to you once. He could have come clean and admitted what was going on, but he chose otherwise. He's your lawyer for God's sake. Who knows what other deceptions are lying in wait.

2.4 million is a bunch of cash; it will cause ructions but the only way I would proceed now is with a new lawyer. Might cost a bit, but could be worth it in the end.

Again - your call. Cause ructions or risk your 2.4 m

[yeti]

The ONLY thing that should really matter to you is that you can REGISTER that place in YOUR NAME at the Land Office as the FREEHOLDER of that condo and indicate the price you paid and that all taxes were paid and that the previous banker that had a lien on the title has lifted it because he/she has been paid the money owing. . Everything else is superfluous.

Hence my question: is it the normal way of doing things when the condo is mortgaged?

[thaigene2]

I assume you already know about the 49/51 % rule. In BKK not usually an issue - in beach areas almolst always a red flag. be careful. once the seeler has your money - you're stuffed. And the 49% thing is YOUR problem not his.

[Mobi]

Well, the contract states 2.4 anyway.

More worried I'd have to pay more tax when I'll sell it if we lower the price now.

As for the part involving the bank. Is it the normal way of doing things?

Listen - as many people have learned the hardway in Thailand. The sales contract means absolutely nothing. There is no contract law that will protect you here (well none for the sake of argument).

The ONLY thing that should really matter to you is that you can REGISTER that place in YOUR NAME at the Land Office as the FREEHOLDER of that condo and indicate the price you paid and that all taxes were paid and that the previous banker that had a lien on the title has lifted it because he/she has been paid the money owing. . Everything else is superfluous.

Exactly.

And how can you be sure that all this will happen if your legal representative is lying?

Sorry... I've just realised that it is the owner's lawyer who lying - not yours.

Where is your lawyer? With a mortgage on the property, I wouldn't proceed an inch further without your own, trusted legal representative. You might end up paying the money and not getting the land free and clear.

Very risky.

Very good point from Thaigene2 about the 49%. There have been countless threads about farangs who were told they were part of the 49% only to subsequently discover they were misled. This must be made absolutely clear, and checked by your own lawyer.

Unless it is in your wife's name.

Edited March 9, 2007 by Mobi D'Ark

[pumpuiman]

Perhaps offering your/their lawyer the money to make up the difference in tax cost?

Pay them to tell the truth!!

I realize it's not your responsibility, but perhaps would keep everyone happy.

I don't know if the cost is worth it for ease and peace of mind........just a thought.

Good luck.

Edited March 9, 2007 by pumpuiman

[farangsay]

Might not be relevant but I had a colleague in France who was buying a property

and the vendor propose a deal whereby they would declare a lower price in front

of the notaire and he would save on taxes (10% on the purchase price in France)

and effectively they would split the difference in deciding the real price.

Some government agency came to him a couple of years later and stung him for

the tax on a real valuation plus a fine. So instead of saving on taxes he ended

up paying 5 times what he would have been liable for if he'd done a straight deal.

Have a care.

[backflip]

"As I'm not the one paying taxes, I already told them I wouldn't do it (in fact my gf was the one who had the lawyer on the phone, she said my husband is farang, and he doesn't want to do it this way, not the same culture. Answer of the lawyer: your husband doesn't need to know about this ). "

This response doesn't make a lot of sense; neither does your desire to get involved in fraud. You haven't done this already, so let's look at another perspective: you pay 2.4M, and the recording docs read 1.5M. Let's say, then, the seller claims that you shorted him the difference (900,000), and asks a court for you to pay this. Then, you're paying 3.3M for the condo...just so the seller can save a few thousand baht in taxes. What a GREAT idea!

[thaigene2]

I think to sum up here, everyone is saying to you:

1. get your own lawyer (one who doesn't lie and puts all of his advice to you in writing on his firm's letter head - don't follow his BS by phone. Get him to write it all down. They hate that.. but too bad.)

2. Don't agree to this thing about saving the seller some tax. Do you really think some Thai guy would do that for you? Forget your natural Western neighbourliness - you're in "good fortune" and "lucky, lucky do-what-you-have-to-and-get-rich-quick" land now!

They take no prisoners here...learn to smile and wai..and watch for the knives..

[Phil Conners]

It is 100% normal, even the guy in the land and house office will tell you how little you can get away with. TiT

[admiraldy]

I sold my condo last year to a Thai person , and the Thai buyer asked me to declare a lower price than the original selling price to the land department ,for tax purposes . it seems it is quiete common practice in Thailand , however my case is vice versa your case ( i am farang selling to a thai ).

what i dont like is the lawyer behavior , and the mortage thing (involving the bank) .

The best way is to buy and register the original price , you are a foreigner and if the seller has bad intentions you can find yourself with problems .

[admiraldy]

one more thing which seems fishy ,is the owner not showing up , as you said you never saw him .

and are you sure this lawyer is genuine?

[sxgun]

Hi, the answer to your other question regarding 2 checks is, yes it is common to issue 2 checks. 1 to the seller and 1 to the mortgage holder.

[Gary A]

I's very common practice to understate the sales price. That DOESN'T mean you have to do it. Since I am the visitor here, I had no desire for anything to come back and bite me later. I felt pretty safe at the land office. Unless the condo association states and documents that your unit is within the 49 percent and all fees and utilities are current the land office won't make the transfer. In addition, I had to have two bank checks. One to the bank to pay off the mortgage and one to the owner for his share. I had all this information in advance including how much tax I was going to pay. I might add that the owner paid MOST of the tax and it was agreed to before we ever finalized the deal. It was a pretty simple transaction and it would be difficult if not impossible for the farang to have any fraud problems later.

[yeti]

Ok, so I'm not going to understate the sales price, especially as I'm not the person paying taxes.

one more thing which seems fishy ,is the owner not showing up , as you said you never saw him .

and are you sure this lawyer is genuine?

Yes, seems fishy to me. I have a signed copy of the id card of the seller though (the name being the same as the one on the Land Office's copy of the chan Note).

And I now have the name of the person in charge of the mortgage at the bank, so I'm going to contact this person beforehand (the possibility of a fake bank officer and a fake Chan Note has crossed my mind, not sure how realistic this would be).

I already know that the foreigner ownership percentage is well below 50 % in the building. And that the current owner has not paid utilities to the building juristic person for some time (but they will have to before going to the Land Office).

[Phil Conners]

"up 2 you" as the word goes here, but unless you agree the added tax cost will probably be put on your purchase price or they won't sell. Simple as that.

[Mobi]

Well it was common practice to transfer land to farangs who had companies.

It was common practice for farangs to hold 'dormant' companies with nominee shareholders.

It was common practice to stay in Thailand indefinitely by doing visa runs.

Need I go on?

I'm not saying that understating land prices at the land office to avoid tax will not continue for decades - but who knows for sure where the next crackdown will be?

As a farang - in the current political climate- it is wise to stay as clean as possible.

[alexth]

Why don't you contact Sunbelt and let them handle? I'd definitely do it if I were you, it's not like you're buying a motorbike.

[pumpuiman]

Your going to pay one way or another. Refuse to tell the " Little white lie" And your price will rise accordingly.

[PeaceBlondie]

It just depends on the individual. If two or three million baht is chump change, what you'd pay for a week on the French Riviera, don't sweat it and just pay double the sales price, throw all the contracts in the waste bin, and fly to the Bahamas.

If even a million baht is a lot of money (as it is for me), I wouldn't buy a condo in Thailand if Thaksin Shinywater co-signed for me.

[Mobi]

Your going to pay one way or another. Refuse to tell the " Little white lie" And your price will rise accordingly.

Exactly.

We're talking the difference between tax on the real price and tax on the reduced price. I don't know the rates off hand, but on a relatively cheap condo, we're not talking mega bucks.

If push comes to shove you could split the extra, or even pay it 100% if you still want the deal.

But please get a lawyer and check out the mortgage properly.

[steveromagnino]

It is common practice to do this and a variety of other things to reduce tax.

If you want a receipt, then the usual way would be to simulataneously execute 2 contracts, one being for 1.5m for the property and a further 0.9m for fixtures and fittings or mobile furniture or similar. That is a big gap though; may try 2m and 0.4m fixtures and fitttings; still a bit of a saving there.

Then property would pay tax on the 1.5m, similarly the way commercial rent is structured here by almost all landlords to have a property rental and services component, with the services not incurring VAT; even though the 'services' are almost non existant.

Obviously you should get a share of the saving, otherwise there is no point in doing it.

And this further answers why property valuations are low; when everyone does this (which they mostly do) then the appearance is that the property is selling for lower than it really is.

[thaigene2]

Well it was common practice to transfer land to farangs who had companies.

It was common practice for farangs to hold 'dormant' companies with nominee shareholders.

It was common practice to stay in Thailand indefinitely by doing visa runs.

Need I go on?

I'm not saying that understating land prices at the land office to avoid tax will not continue for decades - but who knows for sure where the next crackdown will be?

As a farang - in the current political climate- it is wise to stay as clean as possible.

Exactly. And it's time everyone started to see the pattern. When have things gotten BETTER for foreigners here? People are cruising along on outdated, un-enforced laws - and suggesting those of us trying to point these things out are just 'doomsday' types. B+llsh+t. Thailand is never going to LOOSEN the rules, only tighten them.

It will not get better. What you are getting away with today you will not get away with next month or next year. Time to remember common sense - something easy to forget after many years in LOS.

[smartecosse]

why are you gonna do all the checking, for 2 m baht + pay for a lawyer like everyone is suggetsing