Buying an Apartment by way of Shareholding

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I am interested in an apartment in a small development of 9 units - the sizes of these units vary from 90M2 to 220M2

 

The title for the ground is held in a Thai Freehold in a limited liability company and the shares are allocated on the following basis.

 

• 55 % for the developer / owner
• 5 % for each of the units regardless of size or contribution. giving a total of 45%

 

I am wondering if anyone has experience or knowledge of this kind property holding structure and if so what the risks and rewards might be in this regard.

 

The only advantage I can see for a purchaser is the saving on transfer fees and taxes.

 

Any assistance would be much appreciated.

[smutcakes]

Seems a bit strange if someone bought a 220 sqm unit and got 5% and a 90 sqm unit also gets 5%. Not heard of that to be honest, might work but sounds a bit odd to me. With the owner having 55% surely they would have overall control as they own the land. Sure your legal fees would be higher trying to work out a structure to ensure that your investment is protected, and also possibly difficult to dispose of in the future if not a common structure in the market.

[Delight]

Changed my mind

Edited March 17, 2022 by Delight
added detail

[Delight]

 You explain how the ownership of the land is allocated.

Q 

How is the ownership of each apartment organised?

[insite]

The land ownership is in a Thai Freehold in a Thai company.

 

The ownership of each unit is established by shares in this company - each unit is allocated 5% of the company regardless of the size or value of the unit.

 

The nine units represent 45% of the company whilst the developer holds 55%.

 

There is no title attached to each unit and as such when ownership is transferred it is simply a share transfer and there are no transfer taxes.

[HampiK]

sounds very strange. as a 5% share of the company could not be same for 90 or 220m2

[Delight]

 The developer is clearly trying to become more competitive.

 

There is only one transfer i.e. from the land office to the company.

 However as a 5% shareholder you own just that 5%

All the non developer shareholders between them only own 45%.

Therefore total power is with the developer.

 

It is  not a condominium as defined by the act.

This act has one purpose only i.e. to protect the co owners.

 

I think that only the foolish will buy.

 

The developer will out own and therefore can out vote the other 45%.

Therefore he can easily sell(or sell the control) of the entire company.

Each 5% will simply be asked to move out.

 

Edited March 19, 2022 by Delight
added detail

[donx]

I'm certainly not an expert on this and I've never seen an arrangement like this before; however, what I find interesting is that the original post appears to indicate that ownership of the land is separate from the ownership of the building. So even though a 200m2 unit owns the same 5% share of the Thai limited company as a 90m2 unit, the cost for the unit itself would be higher.

 

How much are the 200m2 units compared to the 90m2 units? How is ownership of a unit identified?

[Delight]

2 hours ago, donx said:

 How is ownership of a unit identified?

It is not.

The closest arrangement to that detailed by the OP is an apartment block.

The rooms are rented out.

One Chanote .

A Chanote only details land-not apartments

 

A company is set up to encourage investors to invest.

So if a particular investors invests 5 % of the total capital -then he will receive 5 % of the profit.

 

This arrangement could be of interest to the OP.

However it will not provide anywhere to live-unless he choses to rent a room.

 

Typically these apartment blocks are built on land which is leased.

30 years is popular.

 

 

[zappalot]

This sounds so very odd and as this is Thailand I guarantee a lot of trouble ahead. Never ever such a construction for me, that's for sure...

[Delight]

On 3/26/2022 at 4:46 PM, zappalot said:

This sounds so very odd and as this is Thailand I guarantee a lot of trouble ahead. Never ever such a construction for me, that's for sure...

 The developer will have 55% of the shares-Presumably this person is Thai

[KKr]

... Run ...
bit cynical but this could happen:
a) no title deed: no rights.
b) 5 % shareholding in a company that likely will make a loss in year 2 : no value as the real estate is squatter occupied apartment units. (liquidation value say 60 % of construction cost of say 10.000 / sqm.)
c) if company incurs debt, the 5% will be holding a share in the debt, but it is a limited company so no regress on the shareholder, hence you would not have to repay the company's debts, but will be expelled once the company bankrupts.
However, you can then bid at auction on the development, as there are no separate title deeds and, thus, the property will be offered as one lot.
... faster ....

Edited March 28, 2022 by KKr

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