Using Escrow Act As A Property Developer's Tool

[Maestro]

Using Escrow Act as a property developer's tool

By: TILLEKE & GIBBINS

Published: 9/01/2009 at 12:00 AM

Newspaper section: Business

In certain jurisdictions, an escrow account system is required in order to protect the interests of the purchasers of properties. This is a system whereby the buyer and the seller mutually agree to appoint a third-party escrow agent who will hold the seller's documents and assets on the one hand, and on the other, the buyer's deposit or the whole purchase price. This involves a tri-party written agreement known as the escrow agreement.

The escrow agent has the duty to ensure that the parties fulfil their obligations under both the contract and the escrow agreement. The escrow agent will also be responsible for the safekeeping of any money, assets or documents deposited by the parties and for handing over the money or arranging the transfer of ownership or rights to the assets when required.

No such requirement yet exists in Thailand although in a move to offer more protection to property buyers, Thailand finally enacted the Escrow Act on May 21, 2008.

Under the Act, the use of an escrow account is voluntarily entered into by the contracting parties. Only commercial banks and finance companies under the law governing financial institution businesses, and banks established under a specific law may operate as escrow agents. In addition, to operate as escrow agents, they must be licensed by the Finance Minister, based on the recommendation of the Escrow Business Operation Supervision Committee.

...

Written by Cynthia Pornavalai, Partner, Commercial, Tilleke & Gibbins International Ltd.

Continued here: www.bangkokpost.com/business/economics/9395/using-escrow-act-as-a-property-developer-tool

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Maestro

[PattayaParent]

But ask any property developer and they will deny the existence of such a provision in Thailand and when you refer them to sources they claim that it's not required because if anything happens they will give you your money back.

[Maestro]

I saw the above article in today's Bangkok Post, did a search in this forum and found that the Escrow Act was earlier mentioned in these topics:

http://www.thaivisa.com/forum/Property-Sti...nt%5C&st=40

http://www.thaivisa.com/forum/Escrow-Law-t199271.html

PriceWaterhouse also has some information on its website here:

http://www.pwc.com/extweb/service.nsf/doci...A2574A40033ED2E

And a sponsor of our visa forum, Siam Legal, has a review of "Escrow in Thailand" here"

http://www.siam-legal.com/realestate/pdf-f...ow-thailand.pdf

The law in question is the Escrow Act B.E. 2551 (2008), in effect since 21 May 2008. I could not find an English translation of it on the web, nor the Thai text. If anybody has a link to the full text of the law, please post it here as I am sure it will be of interest to many members.

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Maestro

[prefabs]

Since this started(Escrow) has anyone heard of any developers using implementing it in their sales promotions? Seems a surefire way to go for people who are undecided and scared about their investment. Or is this just another silly question?

[trajan]

use of the escrow accounts under the new Escrow Law is completely voluntary....

if it's a buyer's market, then all buyers should probably insist on an escrow account (when buying from a developer)?

[malcolminthemiddle]

There would of course be increased costs arising from the agents fees and financing of the funds previously used to finance construction now being held in escrow.

[AddictedToThai]

I've heard about just 2 projects that going to use escrow:

The Arco condominium in Phuket claims in their new ad that they use escrow accounts.

The Beaches development in Bang Saray is now in the process of implementing escrow.

[GomerPyle]

I've heard about just 2 projects that going to use escrow:

The Arco condominium in Phuket claims in their new ad that they use escrow accounts.

The Beaches development in Bang Saray is now in the process of implementing escrow.

Sounds like : " I have heard of a clean Thai politician " .

[fivestar]

I've heard about just 2 projects that going to use escrow:

The Arco condominium in Phuket claims in their new ad that they use escrow accounts.

The Beaches development in Bang Saray is now in the process of implementing escrow.

Hi

I can confirm that The Beaches at Bang Sare have Escrow in place

Regards

[midas]

But ask any property developer and they will deny the existence of such a provision in Thailand and when you refer them to sources they claim that it's not required because if anything happens they will give you your money back.

Well anyone that relied on such an assurance from a property developer deserves no sympathy if they

subsequently lose their money if things go bad. In particular now in what is likely to be a buyer's market

for a long time.

Surely there is no reason for any vendor to refuse the request of a potential

purchaser from now on that the entire transaction be administered by an " escrow agent " ? I am interested to know

if these provisions can be applied to individual condominium purchasers -in other words at least in those

cases where the purchaser stipulates it as a condition of the contract. If the vendor refuses,

you simply advise them that you are going to look elsewhere for someone who will agree to escrow.

Has anyone read the PDF file handout from Siam Legal ? I love the way they describe why

escrow hasn't been popular in Thailand so far-where they write

" Property developer's are also strongly against an introduction of an escrow system because

they depend extensively on the 10 percent to 20 percent deposit of the selling price to finance the construction "

Precisely! And this is why there have been so many amateurs and deceitful players in the business

and if a development company doesn't have enough assets that it needs to rely on the deposits

of the purchasers to finance their ' entrepreneurial proposals ' then clearly they are not worth dealing with

if they shy away from these new provisions

Edited January 10, 2009 by midas

[quiksilva]

I think its a great thing for the market, but as others have said there is no mandatory requirement to use escrow, so only the market can force its adoption as standard market practice.

The day buyers insist on only buying from developers who use escrow will be the day it becomes standard market practice. This hasn't happened yet, but then again, the law only came into force in May last year.

In these tougher times I expect that more developer's will adopt this practice, as it sends a clear message to buyers as to the the financial health of the developers and demonstrates ethics in their business practices. This is why recessions are good for business, and consumers in the long run.

[ray08]

I think its a great thing for the market, but as others have said there is no mandatory requirement to use escrow, so only the market can force its adoption as standard market practice.

The day buyers insist on only buying from developers who use escrow will be the day it becomes standard market practice. This hasn't happened yet, but then again, the law only came into force in May last year.

In these tougher times I expect that more developer's will adopt this practice, as it sends a clear message to buyers as to the the financial health of the developers and demonstrates ethics in their business practices. This is why recessions are good for business, and consumers in the long run.

But is thailand in recession ???

[midas]

I think its a great thing for the market, but as others have said there is no mandatory requirement to use escrow, so only the market can force its adoption as standard market practice.

The day buyers insist on only buying from developers who use escrow will be the day it becomes standard market practice. This hasn't happened yet, but then again, the law only came into force in May last year.

In these tougher times I expect that more developer's will adopt this practice, as it sends a clear message to buyers as to the the financial health of the developers and demonstrates ethics in their business practices. This is why recessions are good for business, and consumers in the long run.

I think it's only a question of enough potential purchasers actually being aware of these new provisions and setting their own

personal parameters when considering buying to be disciplined enough to walk away from any developer

who doesn't entertain their request for escrow?

Knowing that somewhere out there there are developers who will do the right thing, unless you had no worries

about taking the risk with your hard earned money, why on earth would you deal with a development company

who is essentially using your money to finance their risk? More developers will have to adopt it because

it's going to signal who is an amateur and who is a trusted player

[PattayaParent]

The day buyers insist on only buying from developers who use escrow will be the day it becomes standard market practice. This hasn't happened yet, but then again, the law only came into force in May last year.

I insisted on an Escrow with a developer and he said no, so I didn't buy.

Plenty of other mugs around I guess that it doesn't concern them.

[prefabs]

The day buyers insist on only buying from developers who use escrow will be the day it becomes standard market practice. This hasn't happened yet, but then again, the law only came into force in May last year.

I insisted on an Escrow with a developer and he said no, so I didn't buy.

Plenty of other mugs around I guess that it doesn't concern them.

Fully understand if you aren't able to name them either

[Lost in LOS]

havent found any bank set up to do an escrow yet

[Pacifist]

I've heard about just 2 projects that going to use escrow:

The Arco condominium in Phuket claims in their new ad that they use escrow accounts.

The Beaches development in Bang Saray is now in the process of implementing escrow.

Hi

I can confirm that The Beaches at Bang Sare have Escrow in place

Regards

Hi

I received the e-mail information from Waterfront Condominium Pattaya , that the escrow facility now available please see attached information. So, from my understand Now we have only 2 projects in Pattaya offering the escrow facility.

Regards,

Waterfront___Escrow_Facility_Available.pdf

[stgrhe]

The day buyers insist on only buying from developers who use escrow will be the day it becomes standard market practice. This hasn't happened yet, but then again, the law only came into force in May last year.

I insisted on an Escrow with a developer and he said no, so I didn't buy.

Plenty of other mugs around I guess that it doesn't concern them.

I have been looking for a suitable house for a while and when talking to the developers about buying a house in their development, I have told them that I would only agree on three alternative payments methodes or I would walk away.

1. Payment through an escrow account;

2. Milestone payments only, i.e. they build a part and I pay for that and so on, with no money down; or

3. Milestone payments with an advance payment, but with security for the advance payment by an advance payment banker's guarantee.

Most of "the little guys", those married to a Thai lady, say no to this when asked while several of the bigger companies have declared that they would be prepared to negotiate.

So you other potential buyers, do not give in to unrealistic payment terms by paying for nothing, ask for security or look elsewhere.