Rent to Buy Contract with the Property Owner

[Pilotman]

How common is it to enter a rent to buy contract with a house owner? My Thai friend has been offered such a contact with his house owner, paying a fixed amount per month, over 12 years, to buy the property he presently rents. He says that this is a common practice in Thailand, but I have not heard of it before. I presume that the contract needs to be drawn up by a lawyer, for the protection of both the buyer and the owner.  He has checked on google for standard contract terms to cover this type of process, but it's all in Thai, so I can't give him my opinion, not that he needs it.  He seems quite relaxed about the arrangement he is about to enter into. 

[scorecard]

I've aware of 2 cases both going back many years and both were quite successful and win-win for buyer and seller.

 

One case was a farang buying from Thai owner, the other was a farang buyer / farang seller.

 

In both cases the sales/purchase agreement stated clearly that ownership, on completion of the payments, could not (because of overriding Thai laws) be transferred to the farang buyers own name, and In both cases the farang buyer stated, in the contract *a specific Thai persons' name to be used to transfer ownership on the chanut document. In both cases it was also clearly mentioned that at any time up to the actual name change on the chanut the buyer (farang) had the right to change this name (but of course must still be a Thai citizen).

 

*In both cases this person signed a separate document indicating they fully understood that their name appearing in the main contract could not be claimed as any form of promise of guarantee that they were in any way entitled to ownership of the land and house and also indicating they understood the buying farang had every right to change this name at any time. Also indicating full understanding that if the name was changed the Thai person initially mentioned was not entitled to any form of compensation. 

 

In both cases the sale/purchase contract had many attached photographs of every aspect of the land / nearby building etc., every wall, door, ceiling etc., of every room, the outer walls, the roof interior etc., all the furniture and fittings, the open electricity master switch box, water pump, etc., etc., all photos with date stamps and all signed by the seller and the buyer, and it was stated clearly in the contract that neither the buyer or seller could make any alterations / changes / maintenance without the written approval of both parties, plus it stated that from the date of signing the contract the buyer was responsible for all costs of repairs and maintenance.

 

Other things I can recall:

 

- Both parties signed that they could not resell the property, could not sub-let the property, etc., before date of transfer of the ownership and buyer could not bring more people or any animals to live in the house before transfer of ownership.

 

Also stated in the contract that the buyer agreed the property had to remain a totally residential property and buyer could not start any form of business activity in the premises before ownership was transferred.

 

- Sellers agreed to reduce the interest payments by an agreed formula is the total purchase price if final payment was achieved 60 days or more before the date stated in the contract.

 

- In one case the seller agreed to reduce the total purchase price by 200,000Baht for early total payment (by an agreed formula).

 

- That's all I can remember, probably more items in the full contact documents. 

 

In both cases (separate cases) competent respected agreed lawyers wrote the contracts and from my understanding in both cases they started with a standard template (not compulsory template) they found on the www.

 

In both cases both parties with lawyers went to the local LTO with the unsigned contracts to get an opinion whether the LTO would accept the documents at the actual time of transfer. In both cases no hesitation by the LTO senior that it was all legal and acceptable.

 

 

Edited October 27, 2019 by scorecard

[Pilotman]

25 minutes ago, scorecard said:

I've aware of 2 cases both going back many years and both were quite successful and win-win for buyer and seller.

 

One case was a farang buying from Thai owner, the other was a farang buyer / farang seller.

 

In both cases the sales/purchase agreement stated clearly that ownership, on completion of the payments, could not (because of overriding Thai laws) be transferred to the farang buyers own name, and In both cases the farang buyer stated, in the contract *a specific Thai persons' name to be used to transfer ownership on the chanut document. In both cases it was also clearly mentioned that at any time up to the actual name change on the chanut the buyer (farang) had the right to change this name (but of course must still be a Thai citizen).

 

*In both cases this person signed a separate document indicating they fully understood that their name appearing in the main contract could not be claimed as any form of promise of guarantee that they were in any way entitled to ownership of the land and house and also indicating they understood the buying farang had every right to change this name at any time. Also indicating full understanding that if the name was changed the Thai person initially mentioned was not entitled to any form of compensation. 

 

In both cases the sale/purchase contract had many attached photographs of every aspect of the land / nearby building etc., every wall, door, ceiling etc., of every room, the outer walls, the roof interior etc., all the furniture and fittings, the electricity master switch box, all photos with date stamps and all signed by the seller and the buyer, and it was stated clearly in the contract that neither the buyer or seller could make any alterations / changes / maintenance without the written approval of both parties, plus it stated that from the date of signing the contract the buyer was responsible for all costs of repairs and maintenance.

 

Other things I can recall:

 

- Both parties signed that they could not resell the property, could not sub-let the property, etc., before date of transfer of the ownership and buyer could not bring more people or any animals to live in the house before transfer of ownership. Also stated in the contract that the buyer agreed the property had to remain a totally residential property and buyer could not could not start any form of business activity in the premises before ownership was transferred.

 

- Sellers agreed to reduce the interest payments by an agreed formula is the total purchase price if final payment was achieved was achieved 60 days or more before the date stated in the contract.

 

- In one case the seller agreed to reduce the total purchase price by 200,000Baht for early total payment (by an agreed formula).

 

- That's all I can remember, probably more items in the full contact documents. 

 

In both cases competent respected agreed lawyers wrote the contracts and from my understanding in both cases they started with a standard template (not compulsory) they found on the www.

 

In both cases both parties with lawyers went to the local LTO with the unsigned contracts to get an opinion whether the LTO would accept the documents at the actual time of transfer. In both cases no hesitation by the LTO senior that it was all legal and acceptable.

 

 

many thanks, that is very useful.  Of course, in this case, this would be Thai to Thai deal, but the conditions would be much the same in the contract   Once again, many thanks. 

[baansgr]

Transfer to your friend now with a mortgage attached along with detailed contract.

[Pilotman]

7 minutes ago, baansgr said:

Transfer to your friend now with a mortgage attached along with detailed contract.

It is not a property that I own or have any interest in and as I understand it, mortgages with the bank cannot be transferred without all of the bank issues.  The proposed process in this case does not involve the bank directly, or the present owners mortgage. According to google, the process is termed 'flipping a property'. 

[scorecard]

In both cases that I mentioned there was no outstanding mortgage or any other lien or encumbrances on the properties. Both properties were owned outright by the sellers involved. 

Edited October 27, 2019 by scorecard

[Los Luver]

I stumbled on this site  2 years ago. But I remarked that this easy payment plan is possible only for old cheap condos in not attractive areas.....

[neeray]

7 hours ago, Pilotman said:

It is not a property that I own or have any interest in and as I understand it, mortgages with the bank cannot be transferred without all of the bank issues.  The proposed process in this case does not involve the bank directly, or the present owners mortgage. According to google, the process is termed 'flipping a property'. 

In North America, this would be known as a "vendor take-back mortgage", quite a common way to sell/purchase real estate.

 

Interestingly, I had previously brought this up to a Thai lady acquaintance who is having difficulty selling her lovely home for somewhere around 2 million baht. Her answer, "no such thing in Thailand, only the bank gives mortgage".

 

Obviously, she is not tuned into alternative financing.

 

Above, "@scorecard", has outlined a very clean cut arrangement, very similar to what I had in mind for my acquaintance.

[Pravda]

Your friend. 

 

How many times have I read this on internet forums. 

[Farma]

Very common method among Thais. Similar to how scorecard described. I know of many sales this way and not just condos. Houses and shop houses too.

 

My wife has also sold shophouses this way.

 

The only difference was the payments were 6 monthly spread over 2 or 3 years.

 

 

Edited October 27, 2019 by Farma

[Pilotman]

9 hours ago, Pravda said:

Your friend. 

 

How many times have I read this on internet forums. 

if you don't have anything useful to add, I suggest that you save your smart keyboard comments for other posts. 

[Pilotman]

9 hours ago, Los Luver said:

I stumbled on this site  2 years ago. But I remarked that this easy payment plan is possible only for old cheap condos in not attractive areas.....

I can't access that link address. 

[Los Luver]

1 hour ago, Pilotman said:

I can't access that link address. 

here it is:  https://www.expat-condos.com/rent-to-own-a-pattaya-condo.html

 

[DJ54]

I’ve bought two houses in the US (yes I know it’s Thailand). One was two years old and made payments for two years abortion was monthly rent and balance was toward buy.

 

The prices skyrocketed and in the agreement if this happened the owner could either ask us to buy at the higher price and if not we

get a full refund. We opted not to buy and were refunded $36,000. 

They were good friends.... and I felt fortunate it didn’t go upside down.

[scorecard]

Back to my original post... you just rmeinded me of another clause in the two cases I mentioned was that if the buyer decided before full payment to withdraw there was no refund at all of the monies already paid.