Owning Land - 2 More Options I Wasnt Aware Of...

[Khun Bob]

I have recently been in touch with a property developer who put me in touch with a property purchase consultant after i started to talk about potentially leasing land from the developer.

The consultant provided 4 options, of which 3 are below. Options 3 and 4 i had not heard of before in thailand. Originally i was interested in option 2 - doing a lease. However, option 4 looks interesting if the costs are low and the risk is similar or less than a lease.

Interestingly with option 2, lease, my view was that getting an automatic extension was not always "automatic" if the thai land owner didnt want to...

2. Buy the property in the name of a Thai national, usually a spouse, but

subject to a 30 yr + 30 year lease. This is the usual method and is in

accordance with the revised Laws now in place. The risks are that (a) you

must have an appropriate nominee, ( B ) that person actually owns the land

whicle you only have a 60 year right of occupancy and use, ( c ) the nominee

often/usually really thinks their ownership supercedes your rights, so

unless there are mechanisms in place to resolve future

conflicts/missunderstandings, you right to "quiet enjoyment" can be made

uncomfortable by irrational nominees, and (d) there is a ongoing requirement

that a rental payment be made otherwise the lease is broken and you lose

your occuppancy rights. Such mechanisms we use include either a will and/or

a Purchase Option where the exercise price is set by formula.

3. Buy the property is a nominee name but subject to a registered first

mortgage. If the value of the investment escalates, the risk is that the

"owner" can remorgage to property at a higher valuation, pay out your

mortgage and then own the property. Again a Purchase Option is necessary to

protect your interests

4. Our firm manages a property Investment Company which in the west would be

considered an escrow or Trustee company. The property is purchased in the

name of our company and annual fees are charged for acting as the nominee of

the true owner. Thus the costs of setting up and managing a separate company

are shared at a saving to our clients. The clients may mortgage their

properties but such actions are of course done in the name of our company,

who assumes the first liability. The client is responsible for all loan

repayment and costs, again for a fee.

Your ability to sell the property will depend on the mechanisim (as set out

above) you have structured. It is you who lease the land from the Thai

national and that lease has a built in 30 year renewal clause so is

automatically extended. There are too many important Non-Thai nationals

currently enjoying the lease arrangements for a change in the law occurring,

other than a future softening, not tightening.

We insist on the client (not the nominee) holding the title, and register

the lease or mortage against with the Lands Department so as to discourage

potential future investors from interfering.

Edited February 8, 2006 by Khun Bob

[Morden]

I may have misunderstood but option 4 seems to say something like, 'Give us your money, we will buy the property, you live there and hope that our company doesn't go out of business'. But I may have misunderstood!

In my view, and not everyone agrees, if you have a wife do it all in her name. It's simple and there is no question that it's an arrangement recognised in law. It gives her less of a hold over your assets back home. If she wants to give you the elbow one day you will probably lose it all because she is entitled to a settlement (morally at least). The other methods that are occasionally suggested, especially by developers and their agents, could, if you are not very careful and a bit lucky, result in both of you losing the property one day. If one doesn't trust one's wife or want to her to have a fair settlement in the event of divorce or one's death, buy a condo.

[chownah]

I may have misunderstood but option 4 seems to say something like, 'Give us your money, we will buy the property, you live there and hope that our company doesn't go out of business'. But I may have misunderstood!

In my view, and not everyone agrees, if you have a wife do it all in her name. It's simple and there is no question that it's an arrangement recognised in law. It gives her less of a hold over your assets back home. If she wants to give you the elbow one day you will probably lose it all because she is entitled to a settlement (morally at least). The other methods that are occasionally suggested, especially by developers and their agents, could, if you are not very careful and a bit lucky, result in both of you losing the property one day. If one doesn't trust one's wife or want to her to have a fair settlement in the event of divorce or one's death, buy a condo.

Thank you for being the watchdog of morality. I'm glad that someone here is reminding us what real morality is all about. If it wasn't for people like you many people might just start to think that there are different views on morality and not the singularly true one which is yours.

[Neeranam]

What I have seen in a lot of relationships is that when the woman gets the house/business etc in her name she gets control which she is not used to and can't handle if she comes from a modest background. This puts pressure on the man and the relationship goes bad.

interesting thread.

[Swelters]

I may have misunderstood but option 4 seems to say something like, 'Give us your money, we will buy the property, you live there and hope that our company doesn't go out of business'. But I may have misunderstood!

In my view, and not everyone agrees, if you have a wife do it all in her name. It's simple and there is no question that it's an arrangement recognised in law. It gives her less of a hold over your assets back home. If she wants to give you the elbow one day you will probably lose it all because she is entitled to a settlement (morally at least). The other methods that are occasionally suggested, especially by developers and their agents, could, if you are not very careful and a bit lucky, result in both of you losing the property one day. If one doesn't trust one's wife or want to her to have a fair settlement in the event of divorce or one's death, buy a condo.

Thank you for being the watchdog of morality. I'm glad that someone here is reminding us what real morality is all about. If it wasn't for people like you many people might just start to think that there are different views on morality and not the singularly true one which is yours.

Isn't this an unnecessarily angry reponse to what seemed a thoughtful comment? After all, what he said was it's better to look to your own before depending on some real estate developers promise, and that the wife is entitled to a settlement of some unspecified kind on divorce. What alternative morality dictates otherwise?

[Morden]

I may have misunderstood but option 4 seems to say something like, 'Give us your money, we will buy the property, you live there and hope that our company doesn't go out of business'. But I may have misunderstood!

In my view, and not everyone agrees, if you have a wife do it all in her name. It's simple and there is no question that it's an arrangement recognised in law. It gives her less of a hold over your assets back home. If she wants to give you the elbow one day you will probably lose it all because she is entitled to a settlement (morally at least). The other methods that are occasionally suggested, especially by developers and their agents, could, if you are not very careful and a bit lucky, result in both of you losing the property one day. If one doesn't trust one's wife or want to her to have a fair settlement in the event of divorce or one's death, buy a condo.

Thank you for being the watchdog of morality. I'm glad that someone here is reminding us what real morality is all about. If it wasn't for people like you many people might just start to think that there are different views on morality and not the singularly true one which is yours.

Glad to be of help, Chownah. As I said, not everyone will agree with me but I don't mind about that. What is your response to the OP, please?

[Nadia 2]

This option 4 is not new and developers have tried a similar structure in the past, but it won't work because it is too difficult to sell, more expensive and just as insecure as an independent landholding company. (how it works) even though the foreigner will be issued part of the foreign owned preference shares in the holding company, the original the title deed of the land (whatever that will mean because a new one is not that difficult to obtain) and the 30 year lease that will be registered in the foreigner's name, it still will be insecure. The foreigner will only have a share certificate in the holding company, will not have control over his/ her asset (unless the foreigner is also a director in this holding company) and will be required to pay an annual maintenance charge to offset the nominee directors’ professional fees, the auditors’ fees and whatever other costs. I would like to own such a company........

You missed option 5;

If you have a Thai spouse the land can be bought in the name of the spouse/ the property will be registered in the spouse's name (proof is required that the money used to purchase the land is legally the Thai spouse's name, with no foreign claim to it).

'The Thai person has to show evidence that all money paid is a personal property (Sin Suan Tua) according to section 1471 and 1472 of the Civil and Commercial Code. The other way is that the Thai and his/her spouse present themselves at the Land office to confirm in a standard Land Office ‘letter of confirmation' for the property is personal property (Sin Suan Tua) not a common property (Sin Som Ros)'.

A lease is the obvious way to protect the foreign interest, but thge options most 'lawyers' forget is the Ufruct - this ve you a stronger right to the land than lease. Title VIII Civil and Commercial Code - Section Section 1417; 'An immovable property may be subjected to a usufruct by virtue of which the usufructuary is entitled to the possession, use and enjoyment of the property'. The Land Office will only register and accept this option if you have a Thai spouse. It is probably also better in the way of taxes! It will be for life, no limit, but you can't transfer or sell it, but you are allowed to lease/ sub-lease. There is lot to say about usefrruct but better go to a reliable Thai law firm.

Cheers N.

[Auntie Dah]

A lease is the obvious way to protect the foreign interest, but thge options most 'lawyers' forget is the Ufruct - this ve you a stronger right to the land than lease. Title VIII Civil and Commercial Code - Section Section 1417; 'An immovable property may be subjected to a usufruct by virtue of which the usufructuary is entitled to the possession, use and enjoyment of the property'. The Land Office will only register and accept this option if you have a Thai spouse. It is probably also better in the way of taxes! It will be for life, no limit, but you can't transfer or sell it, but you are allowed to lease/ sub-lease. There is lot to say about usefrruct but better go to a reliable Thai law firm.

Cheers N.

How about Thai wife borrow down payment money from husband and get loan for 90 percent? The she agree to share profit if renting to others and profit if she sell. Why not just make contract like that, not a lease?

[Khun Bob]

i'm asking the consultant more questions about option 4

Any one got comments on option 3 - anyone done this - whats the pros and cons as agaianst options 2 and 4 ?

seems option 4 is just as risky then as option 2 and probably at a higher annual cost too...

any comments on how effective automatic extentions of leases are - guess not many people have got to that stage yet.... Also the consultant talks alot about purchase options which i just dont get and have asked for clarification.

When get further details will post here...

[chownah]

I may have misunderstood but option 4 seems to say something like, 'Give us your money, we will buy the property, you live there and hope that our company doesn't go out of business'. But I may have misunderstood!

In my view, and not everyone agrees, if you have a wife do it all in her name. It's simple and there is no question that it's an arrangement recognised in law. It gives her less of a hold over your assets back home. If she wants to give you the elbow one day you will probably lose it all because she is entitled to a settlement (morally at least). The other methods that are occasionally suggested, especially by developers and their agents, could, if you are not very careful and a bit lucky, result in both of you losing the property one day. If one doesn't trust one's wife or want to her to have a fair settlement in the event of divorce or one's death, buy a condo.

Thank you for being the watchdog of morality. I'm glad that someone here is reminding us what real morality is all about. If it wasn't for people like you many people might just start to think that there are different views on morality and not the singularly true one which is yours.

Isn't this an unnecessarily angry reponse to what seemed a thoughtful comment? After all, what he said was it's better to look to your own before depending on some real estate developers promise, and that the wife is entitled to a settlement of some unspecified kind on divorce. What alternative morality dictates otherwise?

To answer your question...if you don't know by now then don't mess with it.

I may have misunderstood but option 4 seems to say something like, 'Give us your money, we will buy the property, you live there and hope that our company doesn't go out of business'. But I may have misunderstood!

In my view, and not everyone agrees, if you have a wife do it all in her name. It's simple and there is no question that it's an arrangement recognised in law. It gives her less of a hold over your assets back home. If she wants to give you the elbow one day you will probably lose it all because she is entitled to a settlement (morally at least). The other methods that are occasionally suggested, especially by developers and their agents, could, if you are not very careful and a bit lucky, result in both of you losing the property one day. If one doesn't trust one's wife or want to her to have a fair settlement in the event of divorce or one's death, buy a condo.

Thank you for being the watchdog of morality. I'm glad that someone here is reminding us what real morality is all about. If it wasn't for people like you many people might just start to think that there are different views on morality and not the singularly true one which is yours.

Glad to be of help, Chownah. As I said, not everyone will agree with me but I don't mind about that. What is your response to the OP, please?

Clearly my opinion is the same as yours....since I have a wife it is all in her name...and I had forgotten about my moral obligation to give her the house and land if she decides to dump me for no reason...I actually was so morally deluded that I thought that since we both promised that our marriage would be forever that they one who bailed would get nothing except personal items!!! How dreadfully awful of me to have thought of an idea so lacking in basic moral decency. I forgot that if a woman holds a special moral something that allows her to break her promises and get rewarded for it!!! Thank you so much for the reminder!!

[Khun Bob]

some of the best advice i ever got was "dont get involved" those three little alternative words - however regardless "protect your interests" - another three words that mean alot too..

any comments on the original topic anyone...

[Swelters]

I may have misunderstood but option 4 seems to say something like, 'Give us your money, we will buy the property, you live there and hope that our company doesn't go out of business'. But I may have misunderstood!

In my view, and not everyone agrees, if you have a wife do it all in her name. It's simple and there is no question that it's an arrangement recognised in law. It gives her less of a hold over your assets back home. If she wants to give you the elbow one day you will probably lose it all because she is entitled to a settlement (morally at least). The other methods that are occasionally suggested, especially by developers and their agents, could, if you are not very careful and a bit lucky, result in both of you losing the property one day. If one doesn't trust one's wife or want to her to have a fair settlement in the event of divorce or one's death, buy a condo.

Thank you for being the watchdog of morality. I'm glad that someone here is reminding us what real morality is all about. If it wasn't for people like you many people might just start to think that there are different views on morality and not the singularly true one which is yours.

Isn't this an unnecessarily angry reponse to what seemed a thoughtful comment? After all, what he said was it's better to look to your own before depending on some real estate developers promise, and that the wife is entitled to a settlement of some unspecified kind on divorce. What alternative morality dictates otherwise?

To answer your question...if you don't know by now then don't mess with it.

Thank you for the clarification, I think I get the idea now.

[Nadia 2]

Sure you can purchase land in the name of your spouse but obviously this carries some risk. The property will be registered in your spouse's name and for the spouse to buy land, proof is required that the money used to purchase the land is legally the Thai spouse's name, with no foreign claim to it. Get divorced or separated and the Thai ex gets to keep it all. Even if the Thai spouse dies, you have no claim to the land. Agreements, like a loan agreement - should you have to go to court - is not worth the paper it is written on. What will be your protection? Your spouse has full control over the land - and can sell the land and kick you out - . What happens when your spouse dies? You must register a 30-year lease or usufruct against the land at the Land Office - this will give your investment protection.

Are you young and married to a Thai national - a usufruct can be for life exceeding 30 years.

In line with Supreme Court judgments it is only 30 years - pre-signed separate 30 year leases won't work and will be enforceable for the first 30 years only. Secondly - promises given by the lessor shall be bound upon the parties concerned only and a new owner (heirs) shall only be bound by the 'real rights' as provided by the Civil and Commercial Code so you will lose the options.

However, the lease agreement should include clauses that allow 30-year renewals of the lease and the option to purchase in any Thai entity's name or the foreigners name should the laws on foreign ownership change, and the right to sell and transfer the lease - and in the event of death of the Lessee prior to the expiration of the lease Term that his or her heirs shall continue to lease etc.

Cheers

N.

[Swelters]

Sure you can purchase land in the name of your spouse but obviously this carries some risk. The property will be registered in your spouse's name and for the spouse to buy land, proof is required that the money used to purchase the land is legally the Thai spouse's name, with no foreign claim to it. Get divorced or separated and the Thai ex gets to keep it all. Even if the Thai spouse dies, you have no claim to the land. Agreements, like a loan agreement - should you have to go to court - is not worth the paper it is written on. What will be your protection? Your spouse has full control over the land - and can sell the land and kick you out - . What happens when your spouse dies? You must register a 30-year lease or usufruct against the land at the Land Office - this will give your investment protection.

Are you young and married to a Thai national - a usufruct can be for life exceeding 30 years.

Thank you Nadia for this very helpful comment, especially the fact that purchase money has to be free of claims, news to me.

The disadvantage of a lease is that it cannot be used if the property is mortgaged (ie the bank's name is on the title, the bank will not allow). Perhaps there are other inconveniences as well, I'm not sure I'd enjoy holding a lease on some village property where I was perceived as a bad fahlang.

On the other hand the recent terms of bank loans have been very favorable, for example a 15 year, million baht loan can be had for a monthly payment of about 14,000 THB which is pretty good (forget about figuring out Thai interest rates, I've given up on that one), and the required down payment is rather small, maybe 10 or 15 percent. So even if the alien puts up all the cash, the exposure is relatively small, the land is not available for borrowing, in effect the bank becomes a stabilizing majority partner to the whole deal.

So, all things considered, I'm suggesting there may be cases when managing risk of infelicity would suggest the mortage option, which I've not seen suggested in these pages.

[Dragonman]

Sure you can purchase land in the name of your spouse but obviously this carries some risk. The property will be registered in your spouse's name and for the spouse to buy land, proof is required that the money used to purchase the land is legally the Thai spouse's name, with no foreign claim to it. Get divorced or separated and the Thai ex gets to keep it all. Even if the Thai spouse dies, you have no claim to the land. Agreements, like a loan agreement - should you have to go to court - is not worth the paper it is written on. What will be your protection? Your spouse has full control over the land - and can sell the land and kick you out - . What happens when your spouse dies? You must register a 30-year lease or usufruct against the land at the Land Office - this will give your investment protection.

Are you young and married to a Thai national - a usufruct can be for life exceeding 30 years.

In line with Supreme Court judgments it is only 30 years - pre-signed separate 30 year leases won't work and will be enforceable for the first 30 years only. Secondly - promises given by the lessor shall be bound upon the parties concerned only and a new owner (heirs) shall only be bound by the 'real rights' as provided by the Civil and Commercial Code so you will lose the options.

However, the lease agreement should include clauses that allow 30-year renewals of the lease and the option to purchase in any Thai entity's name or the foreigners name should the laws on foreign ownership change, and the right to sell and transfer the lease - and in the event of death of the Lessee prior to the expiration of the lease Term that his or her heirs shall continue to lease etc.

Cheers

N.

It is an interesting legal concept, as I have mentioned previously, regarding the idea of a sort of Government " post nup agreement" ie the signing away of communal property rights. Whilst it is quite possible that some Judges would see it as legitimate in divorce proceedings, my understanding from legal documents is that this is not the case if the spouse dies, as per legal heir provisions in a will.

With regards to your comments regarding usufructs, are you aware that despite simplistic reading of the Civil and Commercial Code, Judges have found that the 30 year ruling often applies, as per historic usufructory laws.

[Nadia 2]

The required proof that the money is the personal property of the Thai spouse relates specifically to the Land Code - that the foreigner cannot have any claim or interest in the land. The consequences for the Civil and Commercial Code it is a different story.

In the event of death of the Thai spouse; Section 93 of Land Code A foreigner who acquires land by inheritance as statutory heir can have an ownership in such land upon a permission of the Minister of Interior. However, the total plots of land shall not be exceeding of those specified in Section 87. Section 87 of Land Code The total plots of land permitted to be owned by foreigners shall be as follow:

(1) For residential purpose, not exceeding 1 rai per household

(2) For commercial purpose, not exceeding 1 rai

(3) For industrial purpose, not exceeding 10 rai

(4) For agricultural purpose, not exceeding 10 rai per household

(5) For religious purpose, not exceeding 1 rai

(6) For charity purpose, not exceeding 5 rai

(7) For cemetery purpose, not exceeding ฝ rai'

A foreigner who has legally married Thai spouse under Thai law is entitled to request for an ownership in land as statutory heir. Such request shall be executed in writing submitted to the Minister of Interior. The Minister of Interior shall have the sole discretion to grant permission. The land devolved when combined with the land already acquired shall not exceed that specified by law, for examples, land for residential purpose not exceeding 1 rai per household. However, if a foreigner is inheritor under will, the above clauses of land code shall not be applied.

The civil Code is quite clear in section 1418; 'A usufruct may be created either for a period of time or for the life of the usufructuary. If no time has been fixed, it is presumed that the usufruct is for the life of the usufructuary'. I do not see why in this example the usefruct should be limited or reduced to 30 years.

Cheers

N

[jas007]

Suppose I don't mind the lease concept, but don't want to deal with just any Thai national off the street to be the nominee owner. Suppose, instead, that I'd feel more comfortable if a Thai bank were to own the property and in turn lease it to me. Is that sort of arrangement possible in Thailand? Of course, it would be in the Bank's interest in the long run.

J

[Khun Bob]

Some discussion around leasing from a thai bank or company would be good - i know most of the thai banks have repossessed properties that they sell at a good price and would be interested to hear from anyone who has leased land from the bank they bought it from or leased it from a company and what experience they had...

[Anon999]

This option 4 is not new and developers have tried a similar structure in the past, but it won't work because it is too difficult to sell, more expensive and just as insecure as an independent landholding company. (how it works) even though the foreigner will be issued part of the foreign owned preference shares in the holding company, the original the title deed of the land (whatever that will mean because a new one is not that difficult to obtain) and the 30 year lease that will be registered in the foreigner's name, it still will be insecure. The foreigner will only have a share certificate in the holding company, will not have control over his/ her asset (unless the foreigner is also a director in this holding company) and will be required to pay an annual maintenance charge to offset the nominee directors’ professional fees, the auditors’ fees and whatever other costs. I would like to own such a company........

You missed option 5;

If you have a Thai spouse the land can be bought in the name of the spouse/ the property will be registered in the spouse's name (proof is required that the money used to purchase the land is legally the Thai spouse's name, with no foreign claim to it).

'The Thai person has to show evidence that all money paid is a personal property (Sin Suan Tua) according to section 1471 and 1472 of the Civil and Commercial Code. The other way is that the Thai and his/her spouse present themselves at the Land office to confirm in a standard Land Office ‘letter of confirmation' for the property is personal property (Sin Suan Tua) not a common property (Sin Som Ros)'.

A lease is the obvious way to protect the foreign interest, but thge options most 'lawyers' forget is the Ufruct - this ve you a stronger right to the land than lease. Title VIII Civil and Commercial Code - Section Section 1417; 'An immovable property may be subjected to a usufruct by virtue of which the usufructuary is entitled to the possession, use and enjoyment of the property'. The Land Office will only register and accept this option if you have a Thai spouse. It is probably also better in the way of taxes! It will be for life, no limit, but you can't transfer or sell it, but you are allowed to lease/ sub-lease. There is lot to say about usefrruct but better go to a reliable Thai law firm.

Cheers N.

Correct me if I'm wrong but my understanding is that you cannot buy the land but can buy the property. Therefore if you have a wife or partner the land is registered in her name. To safeguard yourself, in the event of divorce, from her family throwing you out which they can legally do, a 30 year land lease is drawn up which can be extended to 60 years and you agree to pay her a peppercorn rent for the land.

I'm interested in the responses to this.

Have now read later post, however, I guess getting a specialist lawyer, who is fully conversant, is the key so as to establish which is the better way for your own circumstances.

Edited February 18, 2006 by Anon999

[Dragonman]

This option 4 is not new and developers have tried a similar structure in the past, but it won't work because it is too difficult to sell, more expensive and just as insecure as an independent landholding company. (how it works) even though the foreigner will be issued part of the foreign owned preference shares in the holding company, the original the title deed of the land (whatever that will mean because a new one is not that difficult to obtain) and the 30 year lease that will be registered in the foreigner's name, it still will be insecure. The foreigner will only have a share certificate in the holding company, will not have control over his/ her asset (unless the foreigner is also a director in this holding company) and will be required to pay an annual maintenance charge to offset the nominee directors’ professional fees, the auditors’ fees and whatever other costs. I would like to own such a company........

You missed option 5;

If you have a Thai spouse the land can be bought in the name of the spouse/ the property will be registered in the spouse's name (proof is required that the money used to purchase the land is legally the Thai spouse's name, with no foreign claim to it).

'The Thai person has to show evidence that all money paid is a personal property (Sin Suan Tua) according to section 1471 and 1472 of the Civil and Commercial Code. The other way is that the Thai and his/her spouse present themselves at the Land office to confirm in a standard Land Office ‘letter of confirmation' for the property is personal property (Sin Suan Tua) not a common property (Sin Som Ros)'.

A lease is the obvious way to protect the foreign interest, but thge options most 'lawyers' forget is the Ufruct - this ve you a stronger right to the land than lease. Title VIII Civil and Commercial Code - Section Section 1417; 'An immovable property may be subjected to a usufruct by virtue of which the usufructuary is entitled to the possession, use and enjoyment of the property'. The Land Office will only register and accept this option if you have a Thai spouse. It is probably also better in the way of taxes! It will be for life, no limit, but you can't transfer or sell it, but you are allowed to lease/ sub-lease. There is lot to say about usefrruct but better go to a reliable Thai law firm.

Cheers N.

Correct me if I'm wrong but my understanding is that you cannot buy the land but can buy the property. Therefore if you have a wife or partner the land is registered in her name. To safeguard yourself, in the event of divorce, from her family throwing you out which they can legally do, a 30 year land lease is drawn up which can be extended to 60 years and you agree to pay her a peppercorn rent for the land.

I'm interested in the responses to this.

Have now read later post, however, I guess getting a specialist lawyer, who is fully conversant, is the key so as to establish which is the better way for your own circumstances.

Anon999. In the case you quote the extension you suggest is worthless if the ex wife transfers to her family. You can still stay there for 30 years however and then knock the house down

When you find the specialist lawyer who is fully conversant with all aspects of Property Law in Thailand, most people on here will be amazed.