The New Escrow Law

[PattayaParent]

I read an article yesterday stating that the new Escrow Law that is part of the Condominium Act amendments became effective in May.

Has anyone bought from a developer and taken advantage of an Escrow Account?

Are there any developers out there actively advertising or otherwise offering an Escrow Account?

[ThaiLawOnline]

Never heard of a developer using it YET. But where I live, I would be surprised to see it in the next 5 years!!!!!!!!!!!!!!

But I've heard many real estate agencies and law firms (Pattaya, Bangkok) talking about escrow account when it was NOT a real escrow account.

I read this article on Thai Law Forum, I believe by Chaninat and Leeds, and it might help you:

(Not sure if I can post articles by other people here...if not, ask a moderator to just delete entirely my post!)

"

Escrow Business Law

24 March 2008 | The new escrow business law was enacted by Parliament on 21 December 2007 and comes into effect on 19 May 2008. The law is intended to protect buyers and sellers of real estate from possible fraud and deceit through the services of a neutral third party who holds funds, property, or legal documents for disbursement once certain conditions are met as instructed by the buyer and seller. An escrow service provider can provide services in the areas of reciprocal contract, contracts for purchase of homes, condominiums, and land. In property purchases, the escrow service provider is responsible for overseeing that payments for purchase of property are made according to schedule and as specified by the conditions under the escrow contract. In the event of breach of contract, such as the seller cannot complete the project as stated in the contract, the funds held by the escrow service provider will not be disbursed to the seller and can be returned to the buyer.

It is not mandatory under Thai laws to enlist the services of an escrow service provider. If the buyer and seller wish to avail themselves of an escrow arrangement, a contract with the buyer, seller, and escrow service provider as signatories will be needed in addition to the contract between buyer and seller.

The details are as follows:

1. The escrow service provider must be a financial institution, a commercial bank, or a financial company.

2. The escrow service provider must have received authorization to provide escrow services from the Ministry of Finance.

3. The escrow contract must be signed by the buyer, seller, and the escrow service provider.

4. The escrow service provider must be a neutral third party and have no connections to buyer or seller either directly or indirectly.

5. The escrow service provider must open a bank account for the parties to the contract with a financial institution.

6. The property, funds, or legal documents held in trust by the escrow service provider must be kept separate from the escrow service provider's personal assets.

7. For escrow property agreements, the escrow service provider must inform the Land Department that the property comes under the escrow agreement and that transfer of ownership is not permitted until the escrow service provider provides the department with a written notice authorizing transfer of ownership. The department's official must make a written record to that effect.

8. In the event of disagreement between buyer and seller, the escrow service provider must not transfer funds or property to either party until the parties come to an agreement or under order of the court.

9. Once the funds have been transferred from the escrow service provider's account to that of the rightful owner and the escrow agreement comes to an end, the escrow service provider must close the escrow bank account and inform the parties immediately."

[PattayaParent]

Thanks for that.

Although I was aware of the details I was wondering if there are any buyers out there that have made such Escrow provisions with a developer.

I've had a couple of emails from developers looking to sell me places and when I ask them about their Escrow provisions I receive no response.

It can only be a benefit to buyers, especially to 'off plan' purchases, and I think EVERYBODY should be asking the question when considering a purchase.

Do you know where a list of authorised escrow service providers might be obtained? Would any bank branch be able to do it?

[PattayaParent]

CORRECTION

I did get a reply from a developer

I regret to inform you that we do not have the escow bank or escow law in Thailand but the agreement which we draw up it bases on the consumer protection act.

[quiksilva]

The developer is misinformed. Its been in effect since 19th May 2008. (opps yes I just read that IL mentioned that too).

Some developers will offer it, when pushed by buyers, but its not mandatory.

[PattayaParent]

I sent them the cut and paste of ILs post pointing out that there is such a law and they responded

Thank you very much for the up date information. Unfortunately, we do not have this procedure so the buyer have to transfer the fund to the seller's account directly.

However, we have the Siam Commercial bank to support our financial to make sure that we have the fund to build the construction. Also our sale and purchase agreement is covering the benefit for the buyer as follow:

* The Purchaser has the right to terminate the agreement if the seller delays the construction and registration of the condominium beyond such period specified or the project is discontinued by the seller for whatsoever causes. The seller shall immediately return all payment paid by the purchase plus the interest at the rate of the 15 per cent per annum from the termination date to the purchaser.

That makes me feel much better.

[trajan]

the Escrow Account Law if already in effect as IL and Quiksilva mentioned....but an escrow account is not mandatory.... therefore, smaller and/or less reputable or stable developers (where an escrow arrangement is most needed) will likely just flat out refuse to provide an escrow arrangement for buyers (and just say "take-it-or-leave-it")...they need the money in their own pockets for construction cash flow.....

in such cases, to reduce the risk, it might be better to stick with larger, more reputable developers to buy an off-plan condo/house.....

[[however, I just read the new Condo Law of 2008 at my lawyers office.....it states in new Section 6/2, that the condo purchase agreement (between the developer and the consumer) must be in the "format prescribed by the Minister [of Interior]" ........... perhaps in future, if the Minister ever prescribes such mandatory format of a condo purchase agreement, such format will include a mandatory escrow account arrangement (as contemplated under the new Escrow Account Law) and set out clear refund circumstances to protect off-plan condo buyers??? but I imagine the current cabinet, including the Minister of Interior, is a bit preoccupied at the moment? --just a guess]]

[ThaiLawOnline]

Welcome to Thailand.

We have a law, it's not mandatory and people can use it or not. Brief explanation on escrow accounts here:

---------------------------

Legal Dictionnary on Internet (Yes, I know, Internet is not the best source!!!!!!)

"An escrow also refers to a writing deposited with someone until the performance of an act or the occurrence of an event specified in that writing. The directions given to the person who accepts delivery of the document are called the escrow agreement and are binding between the person who promises and the person to whom the promise is made. The writing is held in escrow by a third person until the purpose of the underlying agreement is accomplished. When the condition specified in the escrow agreement is performed, the individual holding the writing gives it over to the party entitled to receive it. This is known as the second delivery.

Any written document that is executed in accordance with all requisite legal formalities may properly be deposited in escrow. Documents that can be put in escrow include a deed, a mortgage, a promise to pay money, a bond, a check, a license, a patent, or a contract for the sale of real property. The term escrow initially applied solely to the deposit of a formal instrument or document; however, it is popularly used to describe a deposit of money."

----------------------------------

Registered lawyers where I come from can have or not an escrow account. Most of them HAVE ONE. This money doesn't belong to the lawyer. It's STRICTLY regulated and you the lawyer can't do whatever he/she wants with it, or he/she lose his/her license to practice law. Very simple in Law. And very complicated in paperwork.

But that's not enough, even if you lose your license, you need mechanisms that will protect the person giving his money to a third party, like an insurance. All lawyers in Canada have a professional insurance. That;s mandatory (I believe in all provinces and territories- never did a search). So, the client is REALLY protected (for the amount covered by the insurance, at least). But here, unless you show me all mechanisms under Thai law, that the government will insure these accounts or an insurance company or another entity like a bank, it's still NOT FULLY safe even if it's called ESCROW account. But I did not study this new law because we don't have a lot of condos in Isaan. However, I know how Thai lawyers work, and it could be very diffcult to get back a deposit paid. For real estate outside isaan, no idea.

[frenchfarangjomtien]

Hi,

Do you know any way to give a deposit to a third party in Thailand if official Escrow companies do not exist ?

Do you know any reliable lawyer who would keep 100000 thb deposit and give it to the seller when the deal is done ?

Maybe any lawyer would do that, but how much would they charge for this service ? And which one have you ever used ?

More explanations: I want to buy a condo but the seller is not in Thailand now and asked to give a deposit, but knowing that even any document signed by both parties doesn't give any garranty here i won't pay anything directly to the seller, so how to do ?

Thanks.

[PattayaParent]

in such cases, to reduce the risk, it might be better to stick with larger, more reputable developers to buy an off-plan condo/house.....

It was a larger developer that denied having knowledge of the Escrow Law and stated their contracts are drawn up in accordance with the Consumer Protection Act, so I would not consider them to be reputable.

[123ace]

If a developer does not want do do this then what is the point in pushing them? It would seem obvious that they will reject you as a buyer rather than compromsie on this point. Perhaps buy something completed instead.

[simon43]

This topic interests me because of another thread that I recently posted concerning the sale of 'fractional ownership' in my Phuket hotel.

Although the funds from investors are only required to buy out my ex,(ie they are not required for construction work since it's an operating business) I would much prefer to be able to offer an escrow service for investors, since this would provide them with more confidence that my proposal is legitimate.

Does anyone have an idea of the costs involved in using an escrow service? And which financial institutions is currently offering this type of service?

Thanks

Simon

[haveaniceday]

Post#8 from Issan Lawyers, possible slightly taken out of context with only part of the quote, but,

" I know how Thai lawyers work, and it could be very diffcult to get back a deposit paid."

This seems a realistic honest quote maybe. Has there been anything new that would change anything in this thread?

Seems an Escrow is pretty dodgy in Thailand.

[katabeachbum]

Post#8 from Issan Lawyers, possible slightly taken out of context with only part of the quote, but,

" I know how Thai lawyers work, and it could be very diffcult to get back a deposit paid."

This seems a realistic honest quote maybe. Has there been anything new that would change anything in this thread?

Seems an Escrow is pretty dodgy in Thailand.

Seems to me escrow does not give developer access to funds before condo completed and upon transfer.

Most developers depend on buyers payments to be able to complete

In 2003-2004 I had 2 houses build and developer didnt want to transfer on completion. I payed 3-4 million baht cashier check issued to developer as agreed on as final payment to a public office in Phuket town. Case ended in court, and developer was instructed by court to pick up check at this public office when transfer was completed

[trogers]

in such cases, to reduce the risk, it might be better to stick with larger, more reputable developers to buy an off-plan condo/house.....

It was a larger developer that denied having knowledge of the Escrow Law and stated their contracts are drawn up in accordance with the Consumer Protection Act, so I would not consider them to be reputable.

This point needs correction. One can be reputable in a negative way as well...

[Delight]

I think that if I were a developer selling initially off- plan then it would be say 25% off list -no escrow . 5% off with

Caveat Emptor.

Unless of course that kind of a deal is illegal.

Anybody Know?

Also ,again speaking as a developer maybe all transactions are done using escrow. The only condition being that the escrow provider is that same financial organization that is financing the project.

That way this financier can evaluate his risk and the developer need not discount .

'Early bird catches the worm' would be the only incentive for a buyer to commit early.

Edited April 13, 2011 by Delight

[Delight]

...

[[however, I just read the new Condo Law of 2008 at my lawyers office.....it states in new Section 6/2, that the condo purchase agreement (between the developer and the consumer) must be in the "format prescribed by the Minister [of Interior]" ...........

When I purchased a condo I do not remember seeing Section 6/2 pinned up on the wall of the seller.

Q. I presume that 6/2 does not give the buyer as much protection as escrow.

Does anybody know exactly what protection (in detail) that 6/2 in practice provides?

I attach a JPEG

Edited April 13, 2011 by Delight

[ESB7]

Thanks for that.

Although I was aware of the details I was wondering if there are any buyers out there that have made such Escrow provisions with a developer.

I've had a couple of emails from developers looking to sell me places and when I ask them about their Escrow provisions I receive no response.

It can only be a benefit to buyers, especially to 'off plan' purchases, and I think EVERYBODY should be asking the question when considering a purchase.

Do you know where a list of authorised escrow service providers might be obtained? Would any bank branch be able to do it?

You have previously posted that you would never buy off plan or from a developer so why are you contacting them..............no wonder they need to charge commissions, its to make up for spending time with timewasters that have no intention of ever buying

[PattayaParent]

Thanks for that.

Although I was aware of the details I was wondering if there are any buyers out there that have made such Escrow provisions with a developer.

I've had a couple of emails from developers looking to sell me places and when I ask them about their Escrow provisions I receive no response.

It can only be a benefit to buyers, especially to 'off plan' purchases, and I think EVERYBODY should be asking the question when considering a purchase.

Do you know where a list of authorised escrow service providers might be obtained? Would any bank branch be able to do it?

You have previously posted that you would never buy off plan or from a developer so why are you contacting them..............no wonder they need to charge commissions, its to make up for spending time with timewasters that have no intention of ever buying

Perhaps you could provide a link to where I have said that as I think you're probably confusing me with someone else.

I curently have 2 properties that I have bought off plan, and one previous that I have sold, and would be interested in buying a place at the right price and under the right conditions.

I think it's more a waste of MY time when so called 'repuable' developers tell me that Escrow Laws do not exist in Thailand and then give me bullshit answers when I have to correct them.

I would suggest maybe their commissions are charged due to the likes of you that have never actually bought anything, and are never likey to.

[PattayaParent]

^and I should add that the developer who's time you think I was wasting has yet to put a spade in the ground on the development he was trying to sell me, 3 years on.