Ways For Foreigners To Buy Houses And Costs Thereof...

[tebee]

My wife has a couple of houses we are trying to sell in Bangkok. She has been approached by the tenant of one, a young Australian couple, about the possibility of them buying it as the don't want to move as they run their clothes import-export business from there.

But of course, as foreigners, they can't easily buy it. What options would exist for them to buy it via a limited company or other ways round this law? Would any of these make sense in terms of buying a single house in the 6 million baht region or would the costs be prohibitive?

[LennyW]

Assuming your wife is Thai, she could grant the Aussie couple an Usufruct for life, at a whopping 150 Baht or thereabouts.

[JeffreyMcCollum]

There are many ways and the laws are changing the next 2 years

BOI has many programs. like transfer into Thailand 30m Baht and you can buy a home with up to 1 rai land.

There are other investment options, but the buyer needs to go down to BOI which I find 99% are to lazy to do and only want to check out a 4 year old un updated web site.

Next year one can own 51% of a business and the business ownes the property

Year after it changes to 70%

Anyone with half a notion can find a program to do it though 99% of the TV replys will say not

[Tatsujin]

Next year one can own 51% of a business and the business ownes the property

Year after it changes to 70%

Where did you hear this from? Details anywhere?

[DonaldBattles]

I rather doubt that the law is changing allowing a farang to own property in his company business with him being the major shareholder and not a Thai. Please give us details of how you know about this.

[Uddernonsense]

You can own only 49% stake in the company you establish in Thailand. 51% is owned by a Thai. The Thai can give you his/her power of attorney which enables you to buy property(house) and sell at will.Thats hoping the Thai will not come back to create any problems in future.

[DonaldBattles]

I have not heard anything about the change in Thai law next year to allow a farang owned company whith him being the major stock holder to own land. I feel that the person who quoated this made a serious mistake and can not justify his position. So far he has not.

[Tatsujin]

I have not heard anything about the change in Thai law next year to allow a farang owned company whith him being the major stock holder to own land. I feel that the person who quoated this made a serious mistake and can not justify his position. So far he has not.

I agree. I posted in another thread that I didn't see that particular ruling changing in the near future. They have nothing to gain by it.

[Langsuan Man]

In this case a usufruct is the best way to go, your wife gets the money and the couple get use of the house for the rest of their lives and if structured correctly the usufruct can be structured so that it is transferable to another party

Everyone here always states that usufruct's are the way to go, without realizing that most Thai owners don't want to get involved with them (as do most developers). This appears to be a case where that is not true.

If she encourages the buyers to go the company route they should be apprised of the fact that they are going to pay between 15,000-20,000 THB every year to keep the company legal, plus the 20,000 or so THB to set up the company initially

As stated earlier, the usufruct cost is minimal

[DonaldBattles]

If you have ever looked at a chanote where a usefruct has been applied it simple says the Thai term for rent or lease. Typically Thai language legal terms are the same for both. The big benefit from this approach as you are relieved of monthly lease taxes which is significant.

[BlackPuddingBertha]

In this case a usufruct is the best way to go, your wife gets the money and the couple get use of the house for the rest of their lives and if structured correctly the usufruct can be structured so that it is transferable to another party

This supposes that the couple are happy to pay out the full value of the property yet not end up with clear title to it, rather than having just some nebulous legal promise that may or may not be enforceable, may or may not be transferable, and may or may not be declared illegal at some future point. Not to mention potential future disagreements with the owner of the house and land.

I think they would have to be deranged to do such a thing here.

If I were them I would buy a condo in my own name somewhere else, rent it out and use that rental income to pay rent on the house. That way I would have my name on the asset title. Anything less than clear title in my sole name is inadequate as far as I'm concerned.

[koolbreez]

Going the BoI route limits the investor to only a few property estates in which they can buy their one Rai, and build their house, or buy an existing house in said estate. It does not give the investor free reign over where they can buy. If the investment is ended then the house has to be sold within one year to another qualified buyer.

The upcoming changes in the corporate ownership laws also involve changes in the corporate capital requirements for land ownership, and again in established estates. Not all businesses are going to be allowed, with agricultural land the main exception. This all should be completed by 2015 when Asean takes effect.

The common method now used is the lease route, with the law allowing a 30 year + 30 year renewal contract on a land lease.

[Khun Jean]

Or just have a usufruct for 150 baht and get it done now, instead of waiting for some law change in the future.

[tombkk]

A bitching contest has been removed from sight.

[Khun Jean]

The information provided by BlackpuddingBertha is completely incorrect.

This is a statement of fact.

[BlackPuddingBertha]

The information provided by BlackpuddingBertha is completely incorrect.

This is a statement of fact.

No, it's just your opinion. It will become a statement of fact only when you prove exactly which part of what I said is incorrect.

Good luck.

[Khun Jean]

ok. A usufruct is a 'real' right and as such can not be revoked by the current owner and not by a new owner. The right transfers to the new owner.

The only case it can be revoked is if it is done with your spouse.

A lease is a 'real' right and a new owner has to fulfill this contract until its end. 30 years is the maximum as an clause for an extension is not a real right and is only enforceable with the previous owner. The new owner only has to respect the real rights and he will be forced to do that by law.

No contracts can be transferred without approval of the owner because his signature is required. In practice this means it is like a new contract.

If a clause is in the contract that the lease can be transferred this is enforceable only against the owner who signed the contract as it is not a 'real' right that transfers to a new owner.

Future disagreements are impossible because everything is covered by a contract for a specific time frame. Within that time frame both parties have to honor the contract.

The law in Thailand is very clear and consistent.

It is just that lawyers see lots of people desperate enough to try loopholes and count on not enforcing existing laws.

Lawyers are the ones that make things nebulous because they come up with all kinds of clauses that are detrimental to the basic rental/lease/usufruct contract. Keep the contract simple and clear and preferably use standard forms.

[BlackPuddingBertha]

The owner may not be able to revoke the agreement but the government certainly could, if the fancy took them. And who's to say where fancy may take some Thai government?

This is what I would be worried about here, along with potential disagreements with the current or future owner of the land. Not forgetting that selling a usufruct on to a third party is surely going to be many times harder than selling clear title to a condo or house for example (something that many people here find very difficult anyway).

You still dont explain why anyone would want to do this when there are other safer options, such as the one I suggested. You also dont explain why the current owner would be interested in doing it either (unless he is finding it hard to sell the house, which would not surprise me).

I see nothing but downsides to this fanciful idea, except perhaps in the case of a farang/Thai couple who want to find a solution to house ownership that offers some minimum of security for the farang party who probably stumped up all the cash in the first place. And, unsurprisingly, this is precisely the sort of family-based situation in which usufructs are used in other countries.

Leases are another matter, but leases here are a dead loss because at 30 years they are much too short. Talk to me about 99- or 999-year leases and I will give you a very different answer as these are something that can be traded.

[Khun Jean]

The owner may not be able to revoke the agreement but the government certainly could, if the fancy took them. And who's to say where fancy may take some Thai government?

I can not disagree with this but why would this government do that and do you really think it can not happen in other countries. How much risk in something like that happening.

In my home country they make owning property difficult by having expensive real estate tax. If my kids inherit my real estate they have to pay 50% tax on its value. That is in a western country, is that any better? There they steal little by little and upon your demise 50%. In Thailand there is no such problem. Buying real estate here that i can leave to my children will help them in live not bog them down with a 50% tax.

This is what I would be worried about here, along with potential disagreements with the current or future owner of the land. Not forgetting that selling a usufruct on to a third party is surely going to be many times harder than selling clear title to a condo or house for example (something that many people here find very difficult anyway).

A usufruct can not be sold, no surprises there. The owner that gave the usufruct has more difficulty selling because of the usufruct but that is why you pay a compensation for that. Which is btw not taxed and very interesting for the land owner.

You still dont explain why anyone would want to do this when there are other safer options, such as the one I suggested. You also dont explain why the current owner would be interested in doing it either (unless he is finding it hard to sell the house, which would not surprise me).

The safer options requires them to buy a condo, if that is what they wish that surely is the best. But the op talks about a house.

For the current owner it is interesting because the land stays in his name. After the contract is finished he will still own it. Very good deal for him.

I see nothing but downsides to this fanciful idea, except perhaps in the case of a farang/Thai couple who want to find a solution to house ownership that offers some minimum of security for the farang party who probably stumped up all the cash in the first place. And, unsurprisingly, this is precisely the sort of family-based situation in which usufructs are used in other countries.

And the only condition when a usufruct is not worth anything in Thailand as a spouse can revoke that any time. (Also for any other contract between spouses)

Leases are another matter, but leases here are a dead loss because at 30 years they are much too short. Talk to me about 99- or 999-year leases and I will give you a very different answer as these are something that can be traded.

It is only a dead loss when you not get your value out of those 30 years.

[BlackPuddingBertha]

A usufruct can not be sold, no surprises there. The owner that gave the usufruct has more difficulty selling because of the usufruct but that is why you pay a compensation for that.

This is precisely my point. The OP wants to sell the house (presumably because he has another use for the money) and (also presumably) the people interested in it want to own it because they have the money available and dont want to pay rent.

However the usufruct option that you suggest does not really satisfy either party. The current owner would still own it, and presumably would not get the full value of the house as a payment for the usufruct unless the buyers are daft, and the buyers will be paying for a lifetime interest in something that they cant sell if, in a few years' time, their circumstances change and they want something different. So the owner doesnt have the cash and still owns a property that he cant use and probably cant sell, and the buyers buy something that is worth nothing to anyone else.

I just cant see the merit in it at all. As far as I can see usufruct has a (limited) place in inheritance planning and general family finances, but it has no place in deals between people who are not related in some way.

[Khun Jean]

When you want something you have to choose between the options that are available.

In this case a usufruct is the best option available if they want a house.

The owner can sell it for whatever the buyer wants to pay for it. There has to be a match between seller and buyer first.

If the owner wants the full amount and the buyer is prepared to pay it, both parties are satisfied.

The buyer has his house and the seller has his money.

If the buyer is not happy with the conditions of a usufruct then what other options are available to stay/use the house.

A lease, well that is not better than a usufruct. Owning it freehold, that option is not available unless their import/export business is a real registered one and paying taxes etc. Then the company could buy the house. I just suspect that that is not the case. Not enough details.

[davejones]

I don't see why anyone in their right mind would use an usufruct. Suppose the Aussie couple pay 6m baht and get an usufruct for 30 years. If they want to stay 50 years it means they lose the property and have to buy a new one. And what if they decide they want to leave after 2 years? Do they just walk away from the 6m baht. Seems like a really stupid thing to do.

[Naam]

I don't see why anyone in their right mind would use an usufruct. Suppose the Aussie couple pay 6m baht and get an usufruct for 30 years. If they want to stay 50 years it means they lose the property and have to buy a new one. And what if they decide they want to leave after 2 years? Do they just walk away from the 6m baht. Seems like a really stupid thing to do.

a usufruct is not for a limited time but for life.

[davejones]

I don't see why anyone in their right mind would use an usufruct. Suppose the Aussie couple pay 6m baht and get an usufruct for 30 years. If they want to stay 50 years it means they lose the property and have to buy a new one. And what if they decide they want to leave after 2 years? Do they just walk away from the 6m baht. Seems like a really stupid thing to do.

a usufruct is not for a limited time but for life.

But what happens if you decide you no longer want t live at a property? Not many people make a lifelong commitment to live in one property. I don't know anyone who's lived in the same property their whole life. No-one knows what the future holds, so I still think you'd have to be mad to enter a transaction such as this.

[Langsuan Man]

At least the law on usefruct's are clear, since they are contracts and have been upheld by case law

The alternative (for houses) via the company route is still up in the air and is subject to the whims of the government and as such are an un-known un- tested entity

This comes from a person who has a house in a company name since the developer would not do an usefruct. The OP asked for information, it has been given, now let him take it or leave it and stop all the posturing

What you think is immaterial, unless you have some houses that you want to sell to foreigners, as the OP does

[Khun Jean]

I don't see why anyone in their right mind would use an usufruct. Suppose the Aussie couple pay 6m baht and get an usufruct for 30 years. If they want to stay 50 years it means they lose the property and have to buy a new one. And what if they decide they want to leave after 2 years? Do they just walk away from the 6m baht. Seems like a really stupid thing to do.

a usufruct is not for a limited time but for life.

But what happens if you decide you no longer want t live at a property? Not many people make a lifelong commitment to live in one property. I don't know anyone who's lived in the same property their whole life. No-one knows what the future holds, so I still think you'd have to be mad to enter a transaction such as this.

My goodness. Isn't that a decision to be made by the ones who are going to do the transaction.

For me living in one place is difficult, that is why i rent.

Others don't always have that problem and are not limited to renting. Each to his own!

[andre47]

a usufruct is not for a limited time but for life.

Although the Thai law does not necessarily prohibit usufruct for foreigners, the final decision to grant a usufruct is up to the discretion of the Land Department official.

An important consideration for a foreigner involved as well as the Land Department official is whether the usufruct is being used to circumvent the law forbidding the transfer of real estate ownership for non-Thai citizens. Usufruct, pursuant to the language of the Thai law, is primarily intended for various commercial enterprises, such as agriculture, mining, and stone collection.

According to Thai law, the right to reside on property pursuant to a usufruct is not expressly stated. However, this right is generally assumed to be included within the right to a usufruct within the right to occupy.

The types of activities that are expressly referred to in the Thai law include obtaining the fruits of the land, mining, forestry and masonry. What is important to note is that all of these occupations are expressly prohibited to foreigners pursuant to the Foreign Business Act B.E. 2542 (A.D. 1999)

Accordingly, since a foreigner would not be allowed to participate in these business activities, the only remaining activity would be the right to occupy. The right to occupy would include the right to reside on the property. Nevertheless, if a foreigner is to use a usufruct for solely the right to occupy or reside on the property, and not for the expressed commercial activities as stated by the Thai law, it is conceivable that the Land Department official may decide that the usufruct is being used to circumvent the law and advise that the foreigner should register a right of habitation, which is a separate right, rather than the usufruct.

[TravelerEastWest]

a usufruct is not for a limited time but for life.

Although the Thai law does not necessarily prohibit usufruct for foreigners, the final decision to grant a usufruct is up to the discretion of the Land Department official.

An important consideration for a foreigner involved as well as the Land Department official is whether the usufruct is being used to circumvent the law forbidding the transfer of real estate ownership for non-Thai citizens. Usufruct, pursuant to the language of the Thai law, is primarily intended for various commercial enterprises, such as agriculture, mining, and stone collection.

According to Thai law, the right to reside on property pursuant to a usufruct is not expressly stated. However, this right is generally assumed to be included within the right to a usufruct within the right to occupy.

The types of activities that are expressly referred to in the Thai law include obtaining the fruits of the land, mining, forestry and masonry. What is important to note is that all of these occupations are expressly prohibited to foreigners pursuant to the Foreign Business Act B.E. 2542 (A.D. 1999)

Accordingly, since a foreigner would not be allowed to participate in these business activities, the only remaining activity would be the right to occupy. The right to occupy would include the right to reside on the property. Nevertheless, if a foreigner is to use a usufruct for solely the right to occupy or reside on the property, and not for the expressed commercial activities as stated by the Thai law, it is conceivable that the Land Department official may decide that the usufruct is being used to circumvent the law and advise that the foreigner should register a right of habitation, which is a separate right, rather than the usufruct.

Andre47,

I do not read Thai so I can't say if your underlying statements of Thai law are correct, but I can say that your thoughts are clear and logical and refreshing, and are far and away the best on the subject of Thai usufruct that I have read anywhere.

Thank you very much for your post - are you a lawyer or accountant by chance?

PS I just remembered that in America "... is primarily intended for..." is typically best found by looking at legislative history.

As an example American tax law will often be a statute, explained by a more complete IRS regulation which is typically not as strong as a legislative regulation - in cases where the regulation is not clear reference to what Congress intended by looking at their various meetings before the law was created can help clarify the meaning of the regulation or statute.

Is the above how you found the intent of the Thai law? Or some other way - I am very interested as I am a novice when it comes to Thai law.

Edited November 18, 2012 by TravelerEastWest

[andre47]

a usufruct is not for a limited time but for life.

Although the Thai law does not necessarily prohibit usufruct for foreigners, the final decision to grant a usufruct is up to the discretion of the Land Department official.

An important consideration for a foreigner involved as well as the Land Department official is whether the usufruct is being used to circumvent the law forbidding the transfer of real estate ownership for non-Thai citizens. Usufruct, pursuant to the language of the Thai law, is primarily intended for various commercial enterprises, such as agriculture, mining, and stone collection.

According to Thai law, the right to reside on property pursuant to a usufruct is not expressly stated. However, this right is generally assumed to be included within the right to a usufruct within the right to occupy.

The types of activities that are expressly referred to in the Thai law include obtaining the fruits of the land, mining, forestry and masonry. What is important to note is that all of these occupations are expressly prohibited to foreigners pursuant to the Foreign Business Act B.E. 2542 (A.D. 1999)

Accordingly, since a foreigner would not be allowed to participate in these business activities, the only remaining activity would be the right to occupy. The right to occupy would include the right to reside on the property. Nevertheless, if a foreigner is to use a usufruct for solely the right to occupy or reside on the property, and not for the expressed commercial activities as stated by the Thai law, it is conceivable that the Land Department official may decide that the usufruct is being used to circumvent the law and advise that the foreigner should register a right of habitation, which is a separate right, rather than the usufruct.

Andre47,

I do not read Thai so I can't say if your underlying statements of Thai law are correct, but I can say that your thoughts are clear and logical and refreshing, and are far and away the best on the subject of Thai usufruct that I have read anywhere.

Thank you very much for your post - are you a lawyer or accountant by chance?

PS I just remembered that in America "... is primarily intended for..." is typically best found by looking at legislative history.

As an example American tax law will often be a statute, explained by a more complete IRS regulation which is typically not as strong as a legislative regulation - in cases where the regulation is not clear reference to what Congress intended by looking at their various meetings before the law was created can help clarify the meaning of the regulation or statute.

Is the above how you found the intent of the Thai law? Or some other way - I am very interested as I am a novice when it comes to Thai law.

Sorry that I forgot to mention the link where I found this text which I posted before:

http://www.thailand-lawyer.com/usufruct.html

[Naam]

Nevertheless, if a foreigner is to use a usufruct for solely the right to occupy or reside on the property, and not for the expressed commercial activities as stated by the Thai law, it is conceivable that the Land Department official may decide that the usufruct is being used to circumvent the law and advise that the foreigner should register a right of habitation, which is a separate right, rather than the usufruct.

thanks for the interesting information Andre. never heard of "right of habitation" before. can you elaborate a bit more?