Lease With Option To Buy

[Lindsay]

Hi, we are mid-way through purchasing an apartment in a small block of 7 units. The project was originally going to be sold as a condominium and we signed contracts to this effect; then the owners realised that they were not going to be able to secure the condominium licence (presumably because they were unable to meet the required percentage of Thai owners). In view of the recent FBA developments, they have now decided to draw up new contracts selling the units as leaseholds, but with an option allowing the foreign owners to purchase the freehold should this ever become legal under Thai law at some point in the future.

This sounds like a good solution to me, but what do others think? Obviously we will be consulting lawyers (although finding a decent lawyer is a nightmare), but I was wondering if anyone out there has any useful input.

[gummy]

Hi, we are mid-way through purchasing an apartment in a small block of 7 units. The project was originally going to be sold as a condominium and we signed contracts to this effect; then the owners realised that they were not going to be able to secure the condominium licence (presumably because they were unable to meet the required percentage of Thai owners). In view of the recent FBA developments, they have now decided to draw up new contracts selling the units as leaseholds, but with an option allowing the foreign owners to purchase the freehold should this ever become legal under Thai law at some point in the future.

This sounds like a good solution to me, but what do others think? Obviously we will be consulting lawyers (although finding a decent lawyer is a nightmare), but I was wondering if anyone out there has any useful input.

I would suggest you look elswhere if you wish to own your freehold in order to minimise your risks on future ownership. The Freeholder this year may sell out and you will have minimal rights as a Leaseholder to influence any future changes to plans that that new Freeholder may wish to undertake.

[quiksilva]

Firstly it is not that uncommon here I have seen several high profile multinational corporations take out long leases on land with similar provisions. However, whether it is a good solution or not depends very much on your personal point of view.

If freehold is what you are after and they were unable to secure a condominium license I would take a closer look at the reasons why they were unable to secure this.

Does the property comply with prescribed building regulations for condominium development? If not, can it be made to fit without prohibitively expensive investment? If not, it will never be a condo, building regulations and planning laws are becoming stricter.

If it is to do with foreign ownership quotas, what are the chances that a Thai will buy a leasehold interest in the hope that it might one-day be registered as a condominium? (I would suggest that its very poor).

If you must own freehold, buy a registered condominium unit only. (unless you are married to a local)

If however, you simply love the place and will be using it as your home, so don't care too much about its resale value then perhaps a pure leasehold with a vague hope of maybe, just maybe, becoming a condo at some point will be acceptable to you.

Edited April 23, 2007 by quiksilva

[Abrak]

Does the property comply with prescribed building regulations for condominium development? If not, can it be made to fit without prohibitively expensive investment?

This is the important point. In my opinion it is extremely unlikely that a small apartment block will ever meet the building requirements to be registered (effectively converted) as a condominium - such requirements include access, parking spaces, common areas etc.. The chances are your apartment block will remain just that irrespective of what happens re the FBA and foreign ownership laws. Selling on a long term lease in an apartment block is even more difficult than selling a long term lease in a condo.

[HowardJohnson]

I hate to say it but, if you can, walk away from this one.

Property purchase here is complicated enough that it makes buyers nervous. You could find yourself with a virtually unsaleable property.