Structuring Land Buy For Development

[consciousrobot]

I’m thinking of “investing” in buying land and developing a small group of houses to sell with me probably keeping one. This way I can get a big enough piece of land to be distanced a bit from outside noise etc and also choose my neighbours and between us we may have a worthwhile bit of local clout. There can also be a communal gardener/maid couple. Every house might have it's own small bit of land terraced down to a shared central area perhaps with pond or even pool.

I might not go with a company but go usufruct if I was merely going to own a house for me, but this can be a legitimate business enterprise, to buy land, develop, and sell. It seems to me that IF it is a legitimate thing to do with no legal comebacks, whilst it has disadvantages such as officialdom and taxation, at least the company would have eternal rights on the land which the usufruct does not. It would be above board.

My slowly forming idea is that if I own 49%, and have say three Thai friends (these really are educated cosmopolitan nice people with a history who I trust individually and who don’t know each other) as co-owners, then to do a dirty all three would have to collude......so for anyone to start anything mucky they would be risking their reputation (I know their friends too) for a very high probability of gaining nothing. To carry a vote I only need one of the three to stick with me. If they happened to have turned dirty then they would obviously be bribeable so I could carry the vote at a price.

In any case I really don't think it's meaningful I love these people, but as Reagan said Trust, but Verify.

1. Any general observations?

2. Where’s a good guide to company ownership?

3. Can I be involved in a company without a work permit as a non-active investor?

4. Whether or not the answer to 3 is NO, can I get a work permit somehow for this type of thing?

5. Does the company HAVE to employ people, and under what conditions?

6. How onerous is the officialdom/expense?

7. What other questions should I be asking?

8. Can anyone recommend links or reading material?

thanks v much

Consciousrobot.

[consciousrobot]

Perhaps numbering 8 requests makes it look rather demanding :-)

I assure you.....any good information at all gratefully accepted.

You may say "Go to a lawyer", but posting here seems a reasonable starting point, if only to get input on what i need to learn.

[stgrhe]

In 2009 there was a change to the Land Allocation Act which means that now only developments larger than one rai in size, or having more than nine plots, must seek an approval for the land allocation permit.

If the area is larger than two rai, or there are mor than 19 plots, the development must have a juristic person.

[consciousrobot]

In 2009 there was a change to the Land Allocation Act which means that now only developments larger than one rai in size, or having more than nine plots, must seek an approval for the land allocation permit.

If the area is larger than two rai, or there are mor than 19 plots, the development must have a juristic person.

Now that's what I call essential information which I had no idea about Stgrhe!

I'm looking at two lots, was thinking of buying the first, over 1 and under 2 rai, on condition I get an option, as long an option as possible, for the second, over two rai. My thinking being that as it is the first development exactly in this area, though near a very good area, if the first lot is done and looks real good, it will bring up the value of the second.

Can you give any more info on the two situations, ie land allocation permit and having a juristic person?

thankyou!

[stgrhe]

In 2009 there was a change to the Land Allocation Act which means that now only developments larger than one rai in size, or having more than nine plots, must seek an approval for the land allocation permit.

If the area is larger than two rai, or there are mor than 19 plots, the development must have a juristic person.

Now that's what I call essential information which I had no idea about Stgrhe!

I'm looking at two lots, was thinking of buying the first, over 1 and under 2 rai, on condition I get an option, as long an option as possible, for the second, over two rai. My thinking being that as it is the first development exactly in this area, though near a very good area, if the first lot is done and looks real good, it will bring up the value of the second.

Can you give any more info on the two situations, ie land allocation permit and having a juristic person?

thankyou!

As said, if your development is not subdivided into more than nine plots you will no longer need a land allocation permit, but you yourself will in any case need a work permit and the builder must have a building permit. Since you are talking about a small development you will nevertheless not be able to subdivide the land in that many lots.

You need also a permit from tessaban for drilling a water well if there is no city water.

[consciousrobot]

As said, if your development is not subdivided into more than nine plots you will no longer need a land allocation permit, but you yourself will in any case need a work permit and the builder must have a building permit. Since you are talking about a small development you will nevertheless not be able to subdivide the land in that many lots.

Thanks Strghe but when i look at this:

In 2009 there was a change to the Land Allocation Act which means that now only developments larger than one rai in size, or having more than nine plots, must seek an approval for the land allocation permit.

....for the first chanot it looks to me as if, regardless of the number of proposed lots, because it's over a rai I shall require a permit for the development. Am I misreading? If not......is the LAP easy or difficult to get? Is it just a matter of form?

Likewise .....

If the area is larger than two rai, or there are mor than 19 plots, the development must have a juristic person.

suggests the second chanot, of 3+ rai, would need a juristic person. Any opinions on the ease or difficulty of that?

much obliged

[stgrhe]

What most foreign developers have done is that they circumvent the Land Allocation Act and the Environmental Control Regulations buy only register up to nine plots at the time if it is a large project, or put the remaining plots in a different company name. The 2009 change to the Land Allocation Act closed that loophole but still many foreign developers continue to neglect their obligations to seek the permits.

With regards to your question I was apparently tiered this morning as I gave you an incorrect answer. Yes, if you want to follow the law you need to seek relevant permits if the development is larger than one rai.

Your other question related to a juristic person I do not know the answer too, but I suppose such a person would operate more or less the same as the juristic person in a condominium.

There are two more laws you should observe if you want to start a housing development and do it legally: 1) Building Control Act B.E. 2522; and 2) The Town & City Planning Act for the area of your development's location. In addition there are different zones to consider under the acts.

A competent lawyer should be able to provided you with all details you need related to permits and setting up a company. Use a know Bangkok bureau to be on the safe side.

[jackdawson]

then they would obviously be bribeable

now that's what i like to see !

[monty]

And those 3 Thai shareholders cannot be nominee shareholders.

Which means that they actually have to put up 51% of the invested capital, and that they have to prove that they legally earned that cash.

When you buy the land and register it in the company, if you are a director in the company and hold 49% of the shares, the land registration department WILL check the Thai shareholders to make sure the above is complied with.

[sleepyjohn]

And those 3 Thai shareholders cannot be nominee shareholders.

Thankyou Monty

Yes I've been reading up and you're right. The three Thai shareholders I'm thinking of are actually people of substance and one could probably get away with it, but the thing is this is not cheap land it's a great location and in the several millions per rai. Add to that the cost of development and the sheer effort and time involved and even the first lot dev comes to a large propertion of my total wealth......so it has to be done right for a good night's sleep.

I'm actually concerned that there may simply be no way to do it. It's one thing trusting someone and getting a usufruct or lease as coverage for one modest plot for one's own house.....but for something like this one has to be covered properly. For example if the seller saw that after the first lot was developed the second larger lot, on which I'd have an option, was now worth 50%+ more he might look for any loophole to stop me buying it including inadequacies in my legal structure.

I would however love to do this so I'm very open to ideas.

[monty]

Legally it is only possible as a proper joint venture with Thai investors.

So you cannot invest more then 49% in it, so you'll only reap profits from the 49%.

The Thai investors will get 51% of the profits.

Doing the project entirely with your own funds, using Thai nominees, is totally against the spirit of the law, which states that no foreigner can own land at all! A company with a Thai majority is considered a Thai entity, only if the Thai's actually own 51% of it and can control the company.

Once the company is set up in a way that the foreigner holds control, it is de-facto considered a foreign entity, and as such 1)falls under the FBA and 2)is not allowed to own land.

[Pacificperson]

Legally it is only possible as a proper joint venture with Thai investors.

So you cannot invest more then 49% in it, so you'll only reap profits from the 49%.

The Thai investors will get 51% of the profits.

Doing the project entirely with your own funds, using Thai nominees, is totally against the spirit of the law, which states that no foreigner can own land at all! A company with a Thai majority is considered a Thai entity, only if the Thai's actually own 51% of it and can control the company.

Once the company is set up in a way that the foreigner holds control, it is de-facto considered a foreign entity, and as such 1)falls under the FBA and 2)is not allowed to own land.

Does this also apply to condos? If several units were under long-term lease (say 30 years) with voting rights transferred, then the condo could be under de facto foreign control.

[monty]

Legally it is only possible as a proper joint venture with Thai investors.

So you cannot invest more then 49% in it, so you'll only reap profits from the 49%.

The Thai investors will get 51% of the profits.

Doing the project entirely with your own funds, using Thai nominees, is totally against the spirit of the law, which states that no foreigner can own land at all! A company with a Thai majority is considered a Thai entity, only if the Thai's actually own 51% of it and can control the company.

Once the company is set up in a way that the foreigner holds control, it is de-facto considered a foreign entity, and as such 1)falls under the FBA and 2)is not allowed to own land.

Does this also apply to condos? If several units were under long-term lease (say 30 years) with voting rights transferred, then the condo could be under de facto foreign control.

I am not sure on condo law.

I have no idea if a long term lessee can get the voting rights transferred to him/her, or that the voting rights remain with the original owner (lessor).

And there still is a difference between ownership and holding voting rights!

In my company example, with de-facto foreign entity I mean that at any time the foreign owners can liquidate the assets of the company and collect the entire profits. As such they are the sole owners.

Having voting rights in a condo comes nowhere near having that same power, as ultimate ownership remains with the actual (Thai) owners who leased out their property.

[Pacificperson]

Legally it is only possible as a proper joint venture with Thai investors.

So you cannot invest more then 49% in it, so you'll only reap profits from the 49%.

The Thai investors will get 51% of the profits.

Doing the project entirely with your own funds, using Thai nominees, is totally against the spirit of the law, which states that no foreigner can own land at all! A company with a Thai majority is considered a Thai entity, only if the Thai's actually own 51% of it and can control the company.

Once the company is set up in a way that the foreigner holds control, it is de-facto considered a foreign entity, and as such 1)falls under the FBA and 2)is not allowed to own land.

Does this also apply to condos? If several units were under long-term lease (say 30 years) with voting rights transferred, then the condo could be under de facto foreign control.

I am not sure on condo law.

I have no idea if a long term lessee can get the voting rights transferred to him/her, or that the voting rights remain with the original owner (lessor).

And there still is a difference between ownership and holding voting rights!

In my company example, with de-facto foreign entity I mean that at any time the foreign owners can liquidate the assets of the company and collect the entire profits. As such they are the sole owners.

Having voting rights in a condo comes nowhere near having that same power, as ultimate ownership remains with the actual (Thai) owners who leased out their property.

I understand the differences. I was wondering about the condo laws. Condos have to remain under 51% Thai ownership and have a Jurasic person who is Thai to enforce this rule. My thought was more about operational control of the condo complex as a whole. If a 49% of the units were owned by expats and a significant of Thai owned units were leased long-term (say 30 years with a single cash payment) to expats with their voting rights included in the lease, then expats would have de facto control of the complex. From what I can see in TV, this would be against the spirit of the law in much the same way that you stated about non-Thai companies owning land.