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Land Law Clarification


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We read with interest the article in the Bangkok Post dated 31 May 2006 entitled, “New Regulation Causes Confusion.” Since the article has caused some concern in the expatriate and business community, we researched the basis of the statements made in the article.

The Ministry of Interior informed us that there was no regulation dated 25 May 2006 as was referred to in the article, and that the closest document that they have to such a regulation as described in the article was a circular letter dated 15 May 2006.

According to that circular letter, a company involved in the real estate business with a significant foreign shareholding, and where the use of Thai nominees (front men) is suspected, may come under investigation when the company has the objective of engaging in the real property business.

Trading real property is a business prohibited to non-Thai companies and persons and is listed on List 1 of the Foreign Business Act, which is the most strictly prohibited category of businesses. There are 2 other lists of prohibited businesses where restrictions and punishments are less severe.

Although the use of Thai nominees to evade the Foreign Business Act or Land Act is illegal, general enforcement is not, apparently, the objective of the circular letter. The circular letter is aimed particularly at the companies engaged in the real estate business and not limited companies that purchase real property for objectives other than the real property business. There are many business activities other than the real estate business. For example, limited companies may purchase real estate for resort operations, company headquarters, fitness centers, research facilities, factories and a host of other activities.

The companies that would likely be affected by the circular letter would be real estate development and real estate sales companies using Thai nominees that are in actuality managed by or for the benefit of non-Thai nationals. Such an activity would also be in violation of the Foreign Business Act by engaging in a business listed on List 1 of business activities prohibited to non-Thai nationals.

An English translation of the circular letter can be found on our website at //company url removed// This is our opinion, and persons taking any legal action, are advised, as usual, to consult with their own attorney.

//company signature removed//

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THE WAY I LOOK AT IT IS, LTD CO. IS A LTD CO! IF IT CAN BE SHOWN THAT A FOREIGNER HAS SET UP A CO. WITH SO CALLED LEGITIMATE THAI SHAREHOLDERS WITH A VIEW TO DODGE THE LAND LAW THEN THAT CO. FORMATION WOULD BE TREATED AS A SHAM. THE THAI SHAREHOLDERS HAVE TO PROVE WHERE THE MONEY ORIGINATED FROM AND ANY DIVIDENDS THEY MAY OR MAY NOT HAVE RECIEVED. IN MY OPINION, THIS IS JUST THE START OF THE INVESTIGATION . SUGGEST ANY PERSON WHO HAS PURCHASED A HOUSE THIS WAY TAKE SERIOUS LEGAL ADICE QUICKLY.

I agree 100% with this. And furthermore, this throws into question the legitimacy of BUYING a place from someone who presently owns it under a LTD CO. This is a huge minefield. The Land Office can scew you around endlessly, like they did to a Thai lady a few years ago who bought a house on land that the developer didn't have the right to sell to her. Think she finally won rather recently - - but it took several years. Why would I want the hassle??

Think renting is still the best option. It's cheap, you're in control, and if you don't like the neighbours you can move. Many people (chinese thais) have recently gone wild buying condos to rent out so the quality of apartments/houses to rent is really improving (still with low prices if you know where to look - and I don't mean the Bangkok Post or the home page of CB Richard Ellis, etc..! Only an idiot (or someone who has no idea of the value of money - e.g. is spending daddy's money) would pay 80 or 100,000 baht for rent in Bangkok)

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why are we as foreigners...settling for 49% anyway...my wife can buy in the united states...100%..of land and house...stop buying in thailand until we can own 100%...just like thais can in the countries were from..i will not invest another dime here..until i can go to the land office myself..and deed the property in my own name...100%..i bought land and built a house here...now that i live here...my brother-in law does not want to register the land and house in my name...never,never again will i go through this....until they change the law...and sign an agreement with each foreign government first....we as foreigners need to have property rights the same as thais do in our countries...there are other countries that would love our foreign money..

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why are we as foreigners...settling for 49% anyway...my wife can buy in the united states...100%..of land and house...stop buying in thailand until we can own 100%...just like thais can in the countries were from..i will not invest another dime here..until i can go to the land office myself..and deed the property in my own name...100%..i bought land and built a house here...now that i live here...my brother-in law does not want to register the land and house in my name...never,never again will i go through this....until they change the law...and sign an agreement with each foreign government first....we as foreigners need to have property rights the same as thais do in our countries...there are other countries that would love our foreign money..

I hope you're not suggesting that it is all on a level playing field for foreigners and American citizens to acquire land in The United States. There are a number of Federal and State Laws, particularly the Foreign Investment in Real Property Tax Act 1980 that make this not the case. Although of course there is no outright ban such as in Thailand.

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why are we as foreigners...settling for 49% anyway...my wife can buy in the united states...100%..of land and house...stop buying in thailand until we can own 100%...just like thais can in the countries were from..i will not invest another dime here..until i can go to the land office myself..and deed the property in my own name...100%..i bought land and built a house here...now that i live here...my brother-in law does not want to register the land and house in my name...never,never again will i go through this....until they change the law...and sign an agreement with each foreign government first....we as foreigners need to have property rights the same as thais do in our countries...there are other countries that would love our foreign money..

Why would you put the house and land in your brother in laws name rather than your wifes?

Maybe you could try taking out a 30 year lease.

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It is all very well forming a Ltd Co.at the start, everything appears great. THai shareholders with no powers, only the foreigner as director has the control. Sounds great does it not. Well,in opinion this as I have said before is a SHAM. Thai lawyers should go on to explain that if investigated theThai gov. will IMO close that Co and seize assets i. e house. I have seen this done in Mallorca Spain 6 years ago. THe Germans Nearly took over the Island with all sorts of Cos formations. Spainish and German govs. pounced and many people lost assets and homes. Some traced back to discover dodgy money brought in to buy. Mass exodos of Germams took place. Finally, IMO, when a Ltd Co. is sold the assets are divided between the shareholders, who ,are the Thai shareholders you broght in at the start!!! OUCH I think I know who has got it right.

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I'm very concerned about this recent turn of events regarding home ownership. There have been several new articles in the local papers about limited companies being illegal and I read that the land office has stopped transfering land until they get clarification. Needless to say this is not good news.

I have a signifacant investment in my home here as do my neighbors in this village and the thought of loosing this investment does not make me happy.

I purchased my house in December. I was told by the realitor and the seller that setting up a company was the way to go and my understanding at the time was that this was not only accepted practice but legal. The company was set up by the realitor at a cost of 20,000 baht. I than paid a Thai lawyer another 25,000 to check it all over and make sure it was legal and that my interest was protected. The lawyer actually did the transfer at the land office here in Pattaya.

Given that this is Thailand I'm not going to panic, but I would like to kick around some options so I can be ready to make a move if necessary and I have many questions.

1. If the land transfer was illegal than shouldn't it be considered void and the developer responsable for returning the money? I can't see the logic behind distributing the property amonst the shareholders if the deal that made them shareholders was illegal.

2. Obviously my first thought being a good American is to sue the lawyer I hired to protect my interest. Nobody told me, including him, that there could be a problem down the road.

3. My neighbor, who has been trying to sell his place for months had a buyer who has backed out over this news.

4. One option I am considering is to move up the date of my marrage to a Thai lady who I want to marry anyway. This has obvious risks involved. She is a wonderful middle class Thai lady that has only demonstrated integrity for the 6 months I've known her, but lets face it money does things to people, Thai or otherwise.

5. If this law is enforced it will effect thousands so the question of a class action law suit against the Thai govenment comes up. They have to be blind to not be aware that limited companies were being used to allow foreginers to buy property. It has been because of LTD companies that has been driving the real estate market for years. This amounts to a nationalization of foreign assets no different from stealing money.

Finally, who can we write to. If this comes to pass and why is it so quiet out there?

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I'm very concerned about this recent turn of events regarding home ownership. There have been several new articles in the local papers about limited companies being illegal and I read that the land office has stopped transfering land until they get clarification. Needless to say this is not good news.

I have a signifacant investment in my home here as do my neighbors in this village and the thought of loosing this investment does not make me happy.

I purchased my house in December. I was told by the realitor and the seller that setting up a company was the way to go and my understanding at the time was that this was not only accepted practice but legal. The company was set up by the realitor at a cost of 20,000 baht. I than paid a Thai lawyer another 25,000 to check it all over and make sure it was legal and that my interest was protected. The lawyer actually did the transfer at the land office here in Pattaya.

Given that this is Thailand I'm not going to panic, but I would like to kick around some options so I can be ready to make a move if necessary and I have many questions.

1. If the land transfer was illegal than shouldn't it be considered void and the developer responsable for returning the money? I can't see the logic behind distributing the property amonst the shareholders if the deal that made them shareholders was illegal.

2. Obviously my first thought being a good American is to sue the lawyer I hired to protect my interest. Nobody told me, including him, that there could be a problem down the road.

3. My neighbor, who has been trying to sell his place for months had a buyer who has backed out over this news.

4. One option I am considering is to move up the date of my marrage to a Thai lady who I want to marry anyway. This has obvious risks involved. She is a wonderful middle class Thai lady that has only demonstrated integrity for the 6 months I've known her, but lets face it money does things to people, Thai or otherwise.

5. If this law is enforced it will effect thousands so the question of a class action law suit against the Thai govenment comes up. They have to be blind to not be aware that limited companies were being used to allow foreginers to buy property. It has been because of LTD companies that has been driving the real estate market for years. This amounts to a nationalization of foreign assets no different from stealing money.

Finally, who can we write to. If this comes to pass and why is it so quiet out there?

Sorry about your predicament. I'll try and answer a few queries.

1.I'm afraid under Contract Law "in good faith" is a complete defence. Hence the Developer would claim this in any Court Action.

2. This is obviously an option, but one needs to be extremely carefull with regard to the normal criminal defamation "defence". Also being able to find a lawyer to undertake the case. :o

5. I'm afraid "class actions" are not yet legal in Thailand. I'm also sure that they would comment that ignorance of the law is no defence. If the law is not being upheld it does not change the Statute.

The Government could pursue the lawyers of course! Hey there goes another flying buffalo :D

With regard to your final paragraph, I think people are trying presently to keep a low profile and hope things go away. :D

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There is nothing wrong with forming a Ltd Co. Many legit. companies do this i.e. Tesco etc etc. All shareholders have to prove themselves. Proper Articles of memo. set up dividends paid or not paid. AGMS etc. The problem is many are set up to give 100% control to foreigners after Co formed. The Thai Gov are on to this and I believe will treat them as a sham Co. The bigger problem will arise if the Co is closed or transfered The assets ie house money will be divided up and given to shareholders which will be 51% Thats hurts! I think there will be a lot of Thai happy girls soon. If there were not so many beautiful Thai girls around we would not have this problem! IMO

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What I don't understand is, once the company owns the house why would you ever need to go back to Land and House again? In a sale it's just the company shares changing hands, the house remains owned by the same company?

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In my opinion, from now on when a Co /shares are being sold to another, the Thai gov will make sure there are no amendments after giving us foreigners any power. Shareholders, 51% being Thai will control. No point in forming Co anymore. I believe the Gov have already stopped any Co transfers pending further investigations.

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Keep it simple and within the family...my co directors are wifie ...and nieces....Bo,Ba,Boo,Som,Ting and Sing Aling (likes to be called that...I dont know why)

Yearly directors meeting are held at the big table in front of the band of the Londoner Bar on a Wednesday night (buy 1 get 1 free) where they can stuff there faces and drink as much cola as they like.

Ba and Ting are permitted by K.W to have one beer each otherwise she would......heavens forbid....but they are nice kids.....They know the rules...and thats it... :o ...k.i.s.

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What I don't understand is, once the company owns the house why would you ever need to go back to Land and House again? In a sale it's just the company shares changing hands, the house remains owned by the same company?

As a potential buyer....

Do you know......By accepting 49% of the shares changing hands, you're also automatically accepting 49% of the liabilities which came with the company (seen or unseen). Why would anyone want to do this? Would you still trust your lawyer "again" in finding this out for you? :o

Edited by BKK90210
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"What I don't understand is, once the company owns the house why would you ever need to go back to Land and House again? In a sale it's just the company shares changing hands, the house remains owned by the same company?"

There is no need to transfer shares. You can simply change the name of the "managing director", and the money that you make is kept from roving eyes.

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I agree that it is too early to panic over this change. I read on line that one option might be to give my home to my future Thai wife and put it in her name. As I understand it I would have to relinquish any claim to the asset however I can restore my claim through a well written prenuptual agreement in case something should go wrong.

I would be interested in any opinions anyone may have on this approach.

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In reference to our question to the Land Dept " is this new policy for companies buying land now or will it affect as well existing companies?"

The Land Dept has stated they have already started checking companies that were set up previously. If they find that it was formed solely to purchase land with the objective of buying land and the Thai shareholders not having paid for their shares, the foreign MD will have a time period to either satisfy the requirements of having legitimate Thai shareholders or transfer the land. Their attitude on this matter must be commended

Companies that are using the premises for a office and are legitimate, are not being targetted. Land developers are. Land for Thai Limited Companies continue to being registered after a number of questions asked and they feel its a real company. One thing is for clear, Foreign Land Developers beware, your business is not wanted in Thailand.

There is no need to transfer shares. You can simply change the name of the "managing director", and the money that you make is kept from roving eyes.

The managing director is voted on by the shareholders and can be replaced. This would not protect the buyer from being kicked out.

Transferring shares is a simple matter. However a contract that protects the buyer and indemnified them is another matter. It is normal for a portion of the funds to be held in escrow to offset any liabilities for a certain time period after the closing.

read on line that one option might be to give my home to my future Thai wife and put it in her name. As I understand it I would have to relinquish any claim to the asset however I can restore my claim through a well written prenuptual agreement in case something should go wrong.

I would be interested in any opinions anyone may have on this approach.

If you have a Prenuptual Agreement in Thailand, it must be registered with the registrar upon marriage, for the legal arrangement of the community property. In reference to land, your future wife can own the land under the condition that you and your future wife make a joint declaration to the Land Office upon registration of the ownership of land that the money spent for the purchase of the land coming from the pocket of your future wife only, and that the land purchased accordingly will be her private property, whereby you may not share it. In case of divorce, you will have nothing from the land.

However if you as the future foreign husband show it was your money and then declare that the joint declaration signed jointly with the Land Office was a agreement during the marriage which can be terminated by either spouse. You could petition the court to dispose of the land by public auction and you would get 50% of the funds while you are in most cases in jail. Why jail? You could be prosecuted for providing misleading information to the Land Department officers.

www.lawyer.th.com

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Sunbelt,

That's very interesting and makes sense.

Can you clarify though, whether or not the land offices are looking into the limited companies with a foreigner involved who purchased a small plot of land to have their 'office' on, but are not strictly operating a business yet in that 'office' ?

They are clearly not the developers and are not going to sub-divide as they only have say 100-200 square wa.

Do you know if thet are going to be looked into or not ?

Cheers,

Edited by rockytimeshere
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AS I have mentioned in a previous post,a similar thing happened in Mallorca Spain about 6 years ago. Spainish Gov. let the Germans buy, buy buy. Many with Ltd offshore Cos. Germans built very nice houses and I mean nice! Then, they pounced. A lot of the injected money was found to be BLACK. Check facts for yourself, Mass exodus of Germans. Properties sold quickly before caught. Guess who picked up many properties -yes- the Spainish. Thailand is al aw unto its self. Everybody knows deep down they were skiming the edge when trying to work around the Thai law. Sorry to be a doom and gloom guy but the writing is on the wall. If these Thai girls were ugly we would not have this problem! You know what I mean guys.

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In reference to our question to the Land Dept " is this new policy for companies buying land now or will it affect as well existing companies?"

The Land Dept has stated they have already started checking companies that were set up previously. If they find that it was formed solely to purchase land with the objective of buying land and the Thai shareholders not having paid for their shares, the foreign MD will have a time period to either satisfy the requirements of having legitimate Thai shareholders or transfer the land. Their attitude on this matter must be commended

Companies that are using the premises for a office and are legitimate, are not being targetted. Land developers are. Land for Thai Limited Companies continue to being registered after a number of questions asked and they feel its a real company. One thing is for clear, Foreign Land Developers beware, your business is not wanted in Thailand.

There is no need to transfer shares. You can simply change the name of the "managing director", and the money that you make is kept from roving eyes.

The managing director is voted on by the shareholders and can be replaced. This would not protect the buyer from being kicked out.

Transferring shares is a simple matter. However a contract that protects the buyer and indemnified them is another matter. It is normal for a portion of the funds to be held in escrow to offset any liabilities for a certain time period after the closing.

read on line that one option might be to give my home to my future Thai wife and put it in her name. As I understand it I would have to relinquish any claim to the asset however I can restore my claim through a well written prenuptual agreement in case something should go wrong.

I would be interested in any opinions anyone may have on this approach.

If you have a Prenuptual Agreement in Thailand, it must be registered with the registrar upon marriage, for the legal arrangement of the community property. In reference to land, your future wife can own the land under the condition that you and your future wife make a joint declaration to the Land Office upon registration of the ownership of land that the money spent for the purchase of the land coming from the pocket of your future wife only, and that the land purchased accordingly will be her private property, whereby you may not share it. In case of divorce, you will have nothing from the land.

However if you as the future foreign husband show it was your money and then declare that the joint declaration signed jointly with the Land Office was a agreement during the marriage which can be terminated by either spouse. You could petition the court to dispose of the land by public auction and you would get 50% of the funds while you are in most cases in jail. Why jail? You could be prosecuted for providing misleading information to the Land Department officers.

www.lawyer.th.com

Agree 100%! Schooner, stop reading those rubbish web sites and forums, you know only thaivisa has the answers. :o

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Just to add some info - I bought a house in Samui 3 years ago via the Ltd Co. route. I have since had a lease drawn up so that I lease the house from the company, and pay tax as well as the usual accountant fee.

Having just returned from Samui - visited my accountant who claims no problem as have lease.

I would like to believe him - but at least I'm trying to make a trading company.

May have the option to transfer to future wife - but for the moment would rather not- for reasons already discussed in the forum!

Any comments re leasing via the company would be welcome

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tornado40 wrote

Just to add some info - I bought a house in Samui 3 years ago via the Ltd Co. route. I have since had a lease drawn up so that I lease the house from the company, and pay tax as well as the usual accountant fee.

Having just returned from Samui - visited my accountant who claims no problem as have lease.

That sounds interesting, you as an individual lease the land off your own limited company for 30 years, thus not drawing any attention from the land office ??

Then surely the 30 year option to extend would be pretty safe/guaranteed, as you have the majority vote on the company.

Any comments ?

Cheers,

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tornado40 wrote
Just to add some info - I bought a house in Samui 3 years ago via the Ltd Co. route. I have since had a lease drawn up so that I lease the house from the company, and pay tax as well as the usual accountant fee.

Having just returned from Samui - visited my accountant who claims no problem as have lease.

That sounds interesting, you as an individual lease the land off your own limited company for 30 years, thus not drawing any attention from the land office ??

Then surely the 30 year option to extend would be pretty safe/guaranteed, as you have the majority vote on the company.

Any comments ?

Cheers,

As long as the Company is not wound up or sold it is pretty safe. Doesn't stop the Company being investigated, and if found to be "not trading", and hence illegal, it could well be found that the lease is "void". Unless you could prove an "in good faith" acquisition.

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tornado40 wrote

Just to add some info - I bought a house in Samui 3 years ago via the Ltd Co. route. I have since had a lease drawn up so that I lease the house from the company, and pay tax as well as the usual accountant fee.

Having just returned from Samui - visited my accountant who claims no problem as have lease.

That sounds interesting, you as an individual lease the land off your own limited company for 30 years, thus not drawing any attention from the land office ??

Then surely the 30 year option to extend would be pretty safe/guaranteed, as you have the majority vote on the company.

Any comments ?

Cheers,

As long as the Company is not wound up or sold it is pretty safe. Doesn't stop the Company being investigated, and if found to be "not trading", and hence illegal, it could well be found that the lease is "void". Unless you could prove an "in good faith" acquisition.

This won’t protect you in any way!!! A common used argument by the property dealers and property related legal consultants is that the foreigner can loan his company money to buy the land and the land will be leased from the Thai company to the foreign director who will pay a yearly amount into the company's account to move some money around to show some activity and 'pay some taxes to keep the government happy'. The lease in effect is owned by the company and becomes an asset of the company and can be depreciated (land cannot be depreciated) and paid back to the foreigner. In my opinion it will only be seen as clear proof that the company is formed for one single undertaking and to circumvent existing regulations against foreign landownership. The only benefit I see is that the company will (maybe) not be seen as dormant so it would be less likely that the ministry of commerce would strike your company off the register for being 'defunct'.

The lease construction won't protect you against the Foreign Business Act or the provisions in the Land Code but will rather point out the landholding purpose of your company. And yes the lease could be deemed void.

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NADIA 2------You are absolutly correct. In my opinion the party is over. There is one good thing that will or should come from this ,is anyone who has purchased with ILLGOTTEN gains from whichever country will now be exposed. What comes round comes back

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Hi all,

I've been trying to read and sort out on the forum what my fate is. I am going to Pattaya in 3 weks to supposedly close on a condo I purchased. I was buying it with the dual intetions of investment potential and future retirement. My contract is via the Thai LTD. I've only give some initial funds to the builder but now I can't decide if I should follow through. My other concerns is that if somewhere down the road I wish to sell there may be no buyers other than Thais as who would want to get involved in the LTD stuff. Should I just cut my loses early? I keep wondering what this will do to the Thai economy and jobs. What builders are going to want to invest millions of baht in some project when they can only have 49% western money. What's going to happen to all the Thais who need thier constuction jobs? It's very confusing for me and any advice would be greatly appreciated.

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Anyone having the possibility to leave anything that have with company owned land or condos to do should do so and consider themselves lucky. For condos try to find a condo where you can get the title of deed in your name which is ok unless the condominium project do not already have 49% farang owners.

Edited by tominchaam
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Anyone having the possibility to leave anything that have with company owned land or condos to do should do so and consider themselves lucky. For condos try to find a condo where you can get the title of deed in your name which is ok unless the condominium project do not already have 49% farang owners.

I agree 100% with this reply. Also, do not trust any lawyer. They like many people in Thailand are only in it for the money at that time. Do not go down the route of a Ltd co. Cut and run! You are one of the lucky ones. My advice is rent for the time being and watch it all unfold during the next 6 months. The beautiful girls and blue sea will always be there. I say again if the girls were ugly we would not have this problem. All in my opinion.

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Thanks for the replys. I'm going to get hurt some but I know I'm not alone. I just can't concieve of giving them any more money at this time. The system has lost it's credibility. Even if I followed thru with the purchase, who on earth is going to buy any property associated with one of these corps. The Thai govt has left everyone hanging out there twisting in the wind.

I'm not sure the Thai govt at this time or really anywhere down the line can come forward with any kind of position to restore confidence. What are developers going to do after they have sold off 49% of a condo project? Hope the minority of wealthy Thais break down their doors to buy the remaining units at market rates? They have to be worried as well I would assume. Then to further play this out, what about the hundreds of Thai contruction workers? I saw them work so hard on the Northshore project in Pattaya. They did a beautiful job. But their future prospects for steady employment have to be affected as wll. F&*king Thailand. You either love it or hate it!

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Then to further play this out, what about the hundreds of Thai contruction workers? I saw them work so hard on the Northshore project in Pattaya. They did a beautiful job. But their future prospects for steady employment have to be affected as wll. F&*king Thailand. You either love it or hate it!

If you can understand the language, you can tell that at least half of them are combodians (illegals?), especially in Pattaya area

Further more, when I had a chat with the the manager (son-in-law of the owner) at "View Talay Marina" project, he said most of his constrcution workers are in fact the cambodians because they're more reliable and harder workers than the thais from Isaan region.

Edited by BKK90210
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The only house you should ever buy/build in Thailand is the last one you intend to live in for the rest of your life.

As has been said plenty of times, the target of this crack-down is farang developers. There are too many powerful Thais who's interests would be hurt if they cracked down on farang that just wanted a house to live in. Not to mention the unemployment created if the construction industry was affected. Not just construction employees, but, builders merchants, transport companies, manufactures of building materials etc. the crack-down on private residences bought with a Ltd company, is just not going to happen. Think of the tax revenue the government will lose. It is in nobodies best interest. The shutting down of farang developers though, is definitely in the interests of powerful people.

Edited by Sir Burr
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