My Understanding of Farang Property Ownership - Comments, please!

[Tapster]

Hi Everyone,

I have read everything I can, both on Thai Visa and elsewhere, regarding buying property in Thailand.

I really need some help and clarification, so I hope people will put me straight if I've got it wrong, thanks!

Please note: I have no family ties with Thailand, so I'm only discussing the case of a foreigner in such a position.

My understanding is as follows:

1. There is no possibility of a foreigner owning land in Thailand, except under some rare and very specific circumstances which will not apply to the average person. The loophole of using a 51% Thai-owned company is being increasingly frowned upon by the authorities and unless you actually do have a legitimate company, it seems not to be a viable option any more.
   
2. A foreigner can own the freehold on a condominium but only if 51% of the units in the development are already owned by Thai nationals.
   
3. Regarding a house/villa/townhouse, it will never be possible for a foreigner to hold the freehold on a property.
   
4. The so-called "sale price" and all the taxes, conveyancing fees, etc. associated with the purchase of such a property (as in 4, above) are in fact the cost of a 30-year lease on that property and no more.
   
5. Much is said about another 30-year lease being possible, but there is no current law ensuring that, and no-one has any idea how much such a lease might cost, given that one thought one had already paid for the house in full, 30 years before.
   
6. On the death of the foreign "owner" of the property, the lease ends. A surviving foreign spouse cannot inherit the lease unless this is written into the original agreement with the owner of the land/property. However, such an agreement is a personal agreement between the two, ceasing on the death of the owner of the land or on the sale of the land. In short, it may not be possible to pass on the leasehold rights to surviving family.

Therefore, if I'm right in 1-6 above, I conclude that buying a house to live in, rather than to rent out, should be looked at as a way of leasing a property for thirty years, on a fixed rental.

Thirty years is 360 months and the "purchase price" of the house, divided by 360 will usually be substantially lower than the monthly rent for a similar house AND the rent is inflation-proofed. (I have just checked an example where the current monthly rent is double that figure.)

As such, it may be a reasonable thing to do if the foreigner wants to spend many years in that house.

However, as an investment or as something to leave to your (foreign) family, a house in Thailand seems like a poor deal.

Am I correct?

***puts on tin hat and waits!***

[Khun Jean]

Yes.

[Bpuumike]

Consider a house something you are prepared to walk (or fly) away from.

[sotsira]

Point 2 is incorrect.

A foreigner can own a condo freehold, irrelevant of how much is Thai owned.

As long as the foreign quota doesn't exceed 49%.

The remaining 51% can be left empty, or company owned, or Thai owned.

[olfu]

Yes, this idea with 30 years lease looks very reasonable if we consider prices for condo but suddenly you die and somebody make money.

I know there are multiple villages in Pattaya with houses filled with farangs, anybody from there?

[farang62]

It is very simple, A Foreigner "Can Not Own Land" in Thailand.

"Own" means the land is in the Foreigners Name.

[keeniau96]

OP posting is very accurate and concise summary of Thai situation as I know it after twelve years and two houses here (Thai wife). My compliments to OP on the very astute way of looking at the 30-yr lease as 360 monthly payment alternative, does clarify the value of such. One can twiddle about time value of money, inflation, foregone alternative investments etc. but after many years of doing financial analysis and forecasting I find the simple comparison valid.

[alfieconn]

Thirty years is 360 months and the "purchase price" of the house, divided by 360 will usually be substantially lower than the monthly rent for a similar house AND the rent is inflation-proofed. (I have just checked an example where the current monthly rent is double that figure.)

There should be a premium on the price of a 30 year lease property against the freehold price.

[Khun Jean]

Point 2 is incorrect.

A foreigner can own a condo freehold, irrelevant of how much is Thai owned.

As long as the foreign quota doesn't exceed 49%.

The remaining 51% can be left empty, or company owned, or Thai owned.

Point 2 is correct.

Empty or company owned just means Thai owned.

A condominium starts as 100% Thai owned.

Each condo sold from the start can be allocated to the foreign quota until 49% is reached.

Older condominiums often have much more then 51% Thai owned. The one i live in is on last count 85% Thai owned.

The OP's post should be pinned, front paged, and be part of every brokers information page.

It is short and correct

The only thing missing is a usufruct which has the same protection as a lease but can be for 30 years or live whichever is longer and can included third parties like your children (or other family, friends etc) so that they also can use the property. Also adding a third party will remove the ability of your Thai spouse to dissolve the contract.

[colinp]

(derailing the thread a little but...) If the condominium complex consists of 3 buildings, each of 100 rooms for arguments sake, is the foreign quota 49% of each building or 49% of the complex?

Is the quota 49% of the floor space of the building or the available rooms?

[Tapster]

Many thanks to all contributors!!

@Khun Jean:

I can't get a cigarette paper between the definition of Usufruct and Superficies!

It looks like Usufruct applies only to a building on the land and Superfices can apply to a building or anything else on the land (eg. chicken farm/rubber plantation).

If I have it right, these property rights confer greater security than an agreement in a contract to allow a foreign spouse to inherit the remaining term of the lease, because they aren't ended by the death of the landowner or the sale of the land, but only by the death of the 'lessee' of the property.

But still, neither agreement can be inherited by a foreign spouse, it seems, so there's no greater security there.

Please fill in the blanks if I'm missing something important.

@everyone:

If you own a house on this 30-year lease and you want to sell it after ten years, are you selling only a 20-year lease or will the owner of the land start another 30-year lease with the new owner?

There seems to be a form of co-ownership. If a couple could co-own a property would this not allow the surviving spouse to continue with the lease. Does anyone know anything about this?

Co-ownership is described at the bottom of the page in this link:

http://www.thailandlawonline.com/thai-real-estate-law/1298-1366-real-estate-rights-and-ownership#1356

[Sophon]

(derailing the thread a little but...) If the condominium complex consists of 3 buildings, each of 100 rooms for arguments sake, is the foreign quota 49% of each building or 49% of the complex?

49% of the complex.

Is the quota 49% of the floor space of the building or the available rooms?

Floor space.

Sophon

[SDM0712]

Hi Tapster

I can give you an agent’s answer on most of these points, although sceptics might say that is not especially useful (or even truthful!)

1. Generally true, the only exception I have heard about (but never experienced) if you are willing to invest 1 million plus USD you will be “ kindly” permitted to own up to one Rai (1600m2) of land in your own name. The company route (51% Thai owned) is coming under a lot of scrutiny at the moment, although still being used.

2. If a condominium block is registered and certified under The Condominium Act 49% of it can be registered in a non-Thai name directly. Generally speaking developers will charge an uplifted price for this. Perhaps around 1 MB extra on say a 6/7 MB purchase. But the order is, developer registers the block and then sells them. In reality 49% are what we call Foreign Freehold titles and 51% sold on leases, normally all to non-Thais.

3. With the exception in my point 1 above, a non-Thai can never own Land in his own name. So in this case a Thai entity (Thai citizen or company) will own the land that the house/villa/townhouse is built on, and then lease the building to you.

4. I don’t completely understand, but I think you mean the price you pay for a leasehold property. The important factor is that is the property is leasehold you are not buying it at all. You are merely leasing it for the period of the lease. After that time without a further lease it reverts to the freehold/landlord/person or company that you have leased it from.

5. There is much confusion on the point, and many people talk about selling properties with 90 year leases. I have been a UK agent for the last 25 years (in fact still have a company in NW London) so the idea of leasehold is not at all alien to us Brits in the same way it would be to say Americans. To be clear under Thai Law the maximum period of a lease for these kinds of properties is 30 years. However lawyers and agents (surely not) have come up with a way to extend the duration to a level that is generally more acceptable to us foreigners. In the UK for example we would normally have 99, 125 and 999 year leases. You may be offered a 90 year lease in Thailand but what that actually is is a thirty year lease plus two further contractual promises to extend the lease by the same 30 year period in 30 years time and again in 60 years time. So technically no laws have been broken, however it is clearly and attempt to circumnavigate the Law. A case has not yet been brought where a Landlord has refused to renew, has died or disappeared, or has been challenged by the Thai authorities. Most people take the view that they will worry in 30 years time. However the issue I have is when people come to my company to try to sell on the lease of a property that they have had for say 15 years, so really I am selling on a lease for 15 years and maybe the promise of it being extended after that time.

6. Correct, but also if the terms of the lease are breached it may also be possible to terminate it in theory.

I agree with you conclusion. But personally I would view Thailand like a “luxury good”, I wouldn’t view it as an investment, just as somewhere lovely to have a fulltime or holiday home. However if you buy a Condominium with a Foreign Freehold title it will (probably) increase in value, you can have it in your name and you can leave it to your family after death.

Regards

Stephen

PS If I can help at all, send me a PM, maybe I can sell you something (sorry I am an agent after all !!!!!!)

[davejones]

If I was being pedantic I'd say that point 3 is incorrect. Never is a very long time, and Thailand could one day change the law to allow foreigners to register land in their own name. Probably not any time soon, but if Thailand becomes a developed country then it is entirely possible. Or maybe they'll need cash if the economy tanks. You never know. So I wouldn't say never.

5. If someone bought a 30-year lease on a house, I don't see why they should think they have bought the house outright. At the end of a lease, the property goes back to the freehold owner. There are lots of leasehold apartments in London, and the shorter the lease the cheaper the property is relative to similar properties with longer leases. I don't know about Thai leasehold properties, but in the UK you can resell a lease and pass on to someone when you die. Surely it should be the same in Thailand. Does anyone know?

[SDM0712]

The UK situation is very different. Under the Leasehold Reform Act a tenant/lessee has the legal right to extend a lease. If a price cannot be agreed there is a formula and a freeholder can be forced to extend a lease at a price agreed in Court or even sell the Freehold itself. So it is quite safe to buy a UK leasehold. In Thailand unless it is specified in the Lease, it is not transferable.

So the UK is very different to Thailand.

I suppose never say never, but don't hold your breath.

Regards

Stephen

[davejones]

The UK situation is very different. Under the Leasehold Reform Act a tenant/lessee has the legal right to extend a lease. If a price cannot be agreed there is a formula and a freeholder can be forced to extend a lease at a price agreed in Court or even sell the Freehold itself. So it is quite safe to buy a UK leasehold. In Thailand unless it is specified in the Lease, it is not transferable. So the UK is very different to Thailand. I suppose never say never, but don't hold your breath. Regards Stephen

If it's ok in Thailand to specify in the lease that it's transferable, why would anyone exclude this from the lease? That would make the leases transferable in all/most cases.

Out of interest, is there much difference in price between buying a house outright or on a 30-year lease.

Do you have a general idea of how much it costs to extend a lease in the UK? Is it based on current price of the property?

[olfu]

Now I see it more clearly.

Lease and rent as a terms are connected where rent is normally for short time and maybe without paperwork and lease is official with paperwork.

Normally in US residential property is leased for 1 year.

And if I lease it for 30 years its still a lease--bad idea unless you planning to be there for 30 years.

But farangs doing this anyway. Why?

[Thai at Heart]

If you are of an age, just rent. Unless your house is in a uniquely attractive place, or its spectacular, it isn't likely to increase in value much.

Even less in forex terms.

[davejones]

Now I see it more clearly.

Lease and rent as a terms are connected where rent is normally for short time and maybe without paperwork and lease is official with paperwork.

Normally in US residential property is leased for 1 year.

And if I lease it for 30 years its still a lease--bad idea unless you planning to be there for 30 years.

But farangs doing this anyway. Why?

I assume because a 30-year lease is much cheaper than 30 x 1-year leases. Also because they plan to settle down long-term and don't want the hassle of moving around. I'd assume that more alterations could be made to a house that had a 30-year lease compared to a 1-year lease/rent. There are probably plenty of other reason. You'll have ask some people that have done it to get some real answers.

[davejones]

If you are of an age, just rent. Unless your house is in a uniquely attractive place, or its spectacular, it isn't likely to increase in value much.

Even less in forex terms.

So now you're able to predict foreign exchange rates. LOL.

[SDM0712]

Hello Davejones

Can't get my Z10 to quote you, I'll just add that to the list of things it doesn't do properly.

However to answer your question you can put whatever you like in a lease and if it's ever challenged in court,in the absence of any case law, it's just down to the Judge on the days if he supports it.

For UK lease extensions and enfranchisements the formula is quite complicated and I am happy to recommend a specialist company, but the final costs is based on a marriage value between length of lease and ground rent.

Regards

Stephen

[Thai at Heart]

If you are of an age, just rent. Unless your house is in a uniquely attractive place, or its spectacular, it isn't likely to increase in value much.

Even less in forex terms.

So now you're able to predict foreign exchange rates. LOL.

Well I bought my place at 74 to the GBP after a financial crisis, so I had a fair inclination that it would come back after a while.

Today the house has gone up some in baht value but the gbp is a bigger driver.

If you think 47 to the gbp feels cheap and it's likely that the gbp or usd will weaken further against the baht, you are obviously reading a different economist to me.

The baht is as strong as it's been in 15 years and the usd and GBP as weak as in 30. So, all other things being equal, in the medium term, I would rent and wait for the baht to weaken as the gbp and usd strengthen over the next few years.

[davejones]

If you are of an age, just rent. Unless your house is in a uniquely attractive place, or its spectacular, it isn't likely to increase in value much.

Even less in forex terms.

So now you're able to predict foreign exchange rates. LOL.

Well I bought my place at 74 to the GBP after a financial crisis, so I had a fair inclination that it would come back after a while.

Today the house has gone up some in baht value but the gbp is a bigger driver.

If you think 47 to the gbp feels cheap and it's likely that the gbp or usd will weaken further against the baht, you are obviously reading a different economist to me.

The baht is as strong as it's been in 15 years and the usd and GBP as weak as in 30. So, all other things being equal, in the medium term, I would rent and wait for the baht to weaken as the gbp and usd strengthen over the next few years.

I also think the GBP and USD will strengthen, but it's not a foregone conclusion. If you're basing Thai property investment on where you think it the Baht will be against your home currency, then you're really just using property to bet on currency exchange movements. That's a very dangerous game. Plenty of people have been 'convinced' of currency movements in the past and lost everything.

I was just commenting on your ability to predict because you mentioned it as if it was a foregone conclusion. You might be right, but you might be wrong.

But one thing you are right about is that big swings during currency crises tend to correct themselves, so there is probably less risk at those times. But still some risk.

I know someone who sold his London property at 400K because it was "obvious" to him that prices were way overvalued. He was confident of buying a similar property for 200-300K sometime soon after. The property he sold in now valued at over 800K. He's still "convinced" it's overvalued. But now he can't afford a property in the place he wants to live. These are very dangerous games to play.

[SDM0712]

I've seen a lot of this gambling on property prices. There are just too many variables involved, especially with the UK market which bounces up and down like a Space Hopper anyway.

In the good times I've lost count of how many people, said to me " how much higher can prices prices go, they must stop at some point". My answer is why must they stop, they will continue for as long as buyers feed them. Off topic I know but I was once looking at an old Edwardian house for a dealer client, he wanted me to just give it a quick look to make sure it wasn't falling down. I pulled up some carpets to check for dry rot, woodworm etc. At the time it was common for carpet fitters to put newspaper under the carpet. This was in the late 80's so boom time and I found the front page of one of the Dailys, Daily Mirror I think dated 1965. The headline read something like "Average UK house price now £2600 - CAN IT GO ANY HIGHER" I was so sorry I never kept the page !

SDM

[davejones]

I've seen a lot of this gambling on property prices. There are just too many variables involved, especially with the UK market which bounces up and down like a Space Hopper anyway.

In the good times I've lost count of how many people, said to me " how much higher can prices prices go, they must stop at some point". My answer is why must they stop, they will continue for as long as buyers feed them. Off topic I know but I was once looking at an old Edwardian house for a dealer client, he wanted me to just give it a quick look to make sure it wasn't falling down. I pulled up some carpets to check for dry rot, woodworm etc. At the time it was common for carpet fitters to put newspaper under the carpet. This was in the late 80's so boom time and I found the front page of one of the Dailys, Daily Mirror I think dated 1965. The headline read something like "Average UK house price now £2600 - CAN IT GO ANY HIGHER" I was so sorry I never kept the page !

SDM

I remember my grandmother showing me a document for her house purchase (early 1900s). It cost £200. And my parents first house cost £1,500. I think that was late 60s, early 70s. And you remember Space Hoppers. LOL.

[Tapster]

Hi Tapster

I can give you an agent’s answer on most of these points, although sceptics might say that is not especially useful (or even truthful!)

1. Generally true, the only exception I have heard about (but never experienced) if you are willing to invest 1 million plus USD you will be “ kindly” permitted to own up to one Rai (1600m2) of land in your own name. The company route (51% Thai owned) is coming under a lot of scrutiny at the moment, although still being used.

2. If a condominium block is registered and certified under The Condominium Act 49% of it can be registered in a non-Thai name directly. Generally speaking developers will charge an uplifted price for this. Perhaps around 1 MB extra on say a 6/7 MB purchase. But the order is, developer registers the block and then sells them. In reality 49% are what we call Foreign Freehold titles and 51% sold on leases, normally all to non-Thais.

3. With the exception in my point 1 above, a non-Thai can never own Land in his own name. So in this case a Thai entity (Thai citizen or company) will own the land that the house/villa/townhouse is built on, and then lease the building to you.

4. I don’t completely understand, but I think you mean the price you pay for a leasehold property. The important factor is that is the property is leasehold you are not buying it at all. You are merely leasing it for the period of the lease. After that time without a further lease it reverts to the freehold/landlord/person or company that you have leased it from.

5. There is much confusion on the point, and many people talk about selling properties with 90 year leases. I have been a UK agent for the last 25 years (in fact still have a company in NW London) so the idea of leasehold is not at all alien to us Brits in the same way it would be to say Americans. To be clear under Thai Law the maximum period of a lease for these kinds of properties is 30 years. However lawyers and agents (surely not) have come up with a way to extend the duration to a level that is generally more acceptable to us foreigners. In the UK for example we would normally have 99, 125 and 999 year leases. You may be offered a 90 year lease in Thailand but what that actually is is a thirty year lease plus two further contractual promises to extend the lease by the same 30 year period in 30 years time and again in 60 years time. So technically no laws have been broken, however it is clearly and attempt to circumnavigate the Law. A case has not yet been brought where a Landlord has refused to renew, has died or disappeared, or has been challenged by the Thai authorities. Most people take the view that they will worry in 30 years time. However the issue I have is when people come to my company to try to sell on the lease of a property that they have had for say 15 years, so really I am selling on a lease for 15 years and maybe the promise of it being extended after that time.

6. Correct, but also if the terms of the lease are breached it may also be possible to terminate it in theory.

I agree with you conclusion. But personally I would view Thailand like a “luxury good”, I wouldn’t view it as an investment, just as somewhere lovely to have a fulltime or holiday home. However if you buy a Condominium with a Foreign Freehold title it will (probably) increase in value, you can have it in your name and you can leave it to your family after death.

Regards

Stephen

PS If I can help at all, send me a PM, maybe I can sell you something (sorry I am an agent after all !!!!!!)

Hi Stephen,

Thanks for your detailed post above.

I'd like to take you up on point 4.

You said that you don't completely understand my point. This point is crucial to my understanding of buying property in Thailand.

I mean that when a foreigner buys a house in Thailand he is not buying the freehold. Under current law that isn't possible because foreigners can't own the land the house is built on. So, instead of truly buying the house, the foreigner is essentially leasing the land (and therefore essentially leasing the house) for 30 years, with the distant, but by no means certain possibility of leasing again for another thirty years after that.

Thus, I'm suggesting that, 'The so-called "sale price" and all the taxes, conveyancing fees, etc. associated with the purchase of such a property (as in 4, above) are in fact the cost of a 30-year lease on that property and no more'....that there is in fact, no 'buying' involved.

I am suggesting that no foreigner in Thailand can own a house and have the security of ownership available in the UK. Because the land is Thai-owned, it is always only leased to the foreigner and therefore the house is essentially only leased as it's ownership is dependant in renewal of the lease after 30 years.

If I understand you correctly, you're saying that (buying a house in Thailand) is a 'luxury good' rather than an investment and I'm agreeing and suggesting that one might usefully look at it as a very long-term rental with the possibility of some security after 30 years but nothing guaranteed.

Instead of worrying if the property will go up in value, one might take heart from the fact that the 'monthly rental' (sale price and fees, etc...divided by the number of months in 30 years) is much lower than 30-years'-worth of monthly rentals at market rates and it's not affected by inflation.

If you have time, I'd really like your opinion on this, please, and on the further points I made above, which are:

If you own a house on this '30-year lease' and you want to sell it after ten years, are you selling only a 20-year lease or will the owner of the land start another 30-year lease with the new owner?

There seems to be a form of co-ownership. If a couple could co-own a property would this not allow the surviving spouse to continue with the lease? Does anyone know anything about this?

Co-ownership is described at the bottom of the page in this link:

http://www.thailandl...-ownership#1356

Many thanks

P.S. I had a Space Hopper!

[Tapster]

Oops!

I double-posted, sorry!!

Edited November 2, 2013 by Tapster

[george]

Check out more details/options on foreign ownership of Thai property on the Property blog here:

http://property.thaivisa.com

[SDM0712]

Hi Tapster

I will try to answer these but for the technical questions I must recommend you speak to a Lawyer when you are next here, perhaps just for a consultation and happy to recommend one. I am not a lawyer and try not to advise on points of Law unless I have previous experience on those points. In fact, and not referring to you, I always recommend to buyers to at least consult with a lawyer before getting serious about buying. Just to sit down for a consultation for a few thousand baht so they can get an expert opinion on what they can really do and what the costs are likely to be. I see so many people who don’t, do everything themselves albeit based upon well meaning advice, and live to regret it.

Anyway, you say ;

“So, instead of truly buying the house, the foreigner is essentially leasing the land (and therefore essentially leasing the house) for 30 years with the distant, but by no means certain possibility of leasing again for another thirty years after that”

”

In the situation you describe you are buying the house, to do with as you wish, but you are not buying the land on which the house sits, otherwise correct, although the 30, 30, 30 arrangement has never been challenged so no one can say either way what the result would be. You seem to intimate that in 30 years you would have to negotiate a new 30 year lease and again 30 years after. Although there would be new leases the framework and agreement to do this would be all signed and agreed at the very outset. SDM

“Thus, I'm suggesting that, 'The so-called "sale price" and all the taxes, conveyancing fees, etc. associated with the purchase of such a property (as in 4, above) are in fact the cost of a 30-year lease on that property and no more'....that there is in fact, no 'buying' involved.”

Well 30 for sure and promises of another 60, but I would agree with that although technically no different to buying a London flat with a 99 year lease. SDM

“ If you own a house on this '30-year lease' and you want to sell it after ten years, are you selling only a 20-year lease or will the owner of the land start another 30-year lease with the new owner? “

If the lease is not transferable you may not be able to sell it on so make sure it is. Unless the Lessor (Land Owner) has signed an agreement saying he will issue a new 30 years lease (with the additional 30 & 30) to a new lessee that you wish to transfer the lease to then he is not obliged to do so, but that’s not to say he will not. I am sure he will for a price. But essentially correct, assuming the lease can be transferred with the further 30 & 30, if you have had the lease for 20 years then you would be transferring a 10 year lease plus two further leases of 30 & 30. But this is exactly why buyers must have good legal representation so they are safeguarded. SDM

“There seems to be a form of co-ownership. If a couple could co-own a property would this not allow the surviving spouse to continue with the lease? Does anyone know anything about this?”

A legal issue really but you would deal with it in the lease, i.e. you would have specified within the lease that if one party died then the remaining party would continue with the same rights of both. Another one for your lawyer to deal with at the outset. SDM

“P.S. I had a Space Hopper!”

Those were the days ! SDM

[olfu]

Hm.

My intention is to retire in Pattaya and I couldnt figure out whats the best idea--to rent or to buy, and I see I cannot win unless I hit a lottery.

I can rent or own on a beach place size about 200-400 sq. f. and rent will be reasonable but my relatives dont want inherit rent.

And if I buy a condo they will be happy to pocket some money or use property and they will mention I was a good lad but should die some time ago.