Can I own an apartment?

[nathan christian]

Hi all,

I will be signing a contract to purchase an apartment. This is a building that has 2 apartments above and two below. I will be buying one of these.

I will be paying for it over two years.

The lawyer has sent a contract to check and sign. It states that I will be leasing the apartment for 30 years.

I thought I was able to own the apartment outright (not leasing it). The land that the apartment is built on I understand I cannot own. This is what i thought I would be leasing not the actual apartment.

I will ask the lawyer all these questions but hoped to get some input before I do.

Thanks

[Globalist]

You can only own a "condominium" as a foreigner, but from your description it doesn't sound like the property is classified as a "condominium".

I suggest that's the first point you should check.

[nathan christian]

Thanks for reply,

Just had a look around, i wasn't sure if apartments and condo's came under the same ruling. They don't ! which is why I guess the contract is structured around a leasing agreement.

I should have done my homework before posting!

[RAZZELL]

There are some condos on long leases in Bkk as they are on land owned by the Crown.

RAZZ

[nathan christian]

I guess it's just the way it is. I only intend to live in it for 4 years and then will probably sell it. Saves renting, which I just see has dead money. If I can get my initial outlay back I'm happy already.

[KittenKong]

I guess it's just the way it is. I only intend to live in it for 4 years and then will probably sell it. Saves renting, which I just see has dead money. If I can get my initial outlay back I'm happy already.

Leasing is NOT ownership. It's just long-term rental with the rent paid in advance.

In Thailand it can be hard to sell a real farang-name condo with its own chanote (title deed) that is owned outright. Selling a lease on an apartment at cost price will probably be much harder.

In your shoes for a short period like 4 years I would rent somewhere with a yearly contract. Rental prices are very negotiable. It will cost you far less in the long run (no fees, no costs, no taxes) and if you want to leave the place one day for whatever reason you can. Your long lease may just turn out to be a costly millstone.

[nathan christian]

I considered renting but the place I wanted was around £600 per month, £7,200 a year. 4 years £28,800. I doubt I would lose this on an apartment. The apartment has been set up under a company. I will have a percentage share in this company.

I realise nothing is 100% safe and will be tied in with it.

[fileeep]

Seems a bit strange...I would get another lawyer to look at it, wont cost much to do this.

[falkan]

I guess it's just the way it is. I only intend to live in it for 4 years and then will probably sell it. Saves renting, which I just see has dead money. If I can get my initial outlay back I'm happy already.

none will buy a lease when you can buy and own in your name (condo) another way is set up a company and buy if we talking about land/houses..

just arrived here hehe..?

[KittenKong]

I considered renting but the place I wanted was around £600 per month, £7,200 a year. 4 years £28,800. I doubt I would lose this on an apartment. The apartment has been set up under a company. I will have a percentage share in this company.

Good luck.

[nathan christian]

The idea of the owner setting up up the company was to give a little more security for the buyers of the apartmants. There will be 12 in total, each owner will receive 4% share in the company, equaling 48%. 1% will be in the name of the owner (foreigner) and the remaining 51% Thai shareholders.

My initial concern was the what happens after 30 years, how do I know the lease will be renewed. His answer to this was that the company would renew the lease of which all owners have 48% combined.

I'm not new here, I lived in Thailand for 8 years a long time ago and I did have land then, owned by a company I set up but I never knew about the condo/apartment regs. With the new laws regarding companies being set up solely to own one house I have decided to not go down this route in case of possible problems.

I've looked a few condo's but don't really like any of them so decided on this apartment. I know it's not fool proof!

[TobiasML]

The idea of the owner setting up up the company was to give a little more security for the buyers of the apartmants. There will be 12 in total, each owner will receive 4% share in the company, equaling 48%. 1% will be in the name of the owner (foreigner) and the remaining 51% Thai shareholders.

My initial concern was the what happens after 30 years, how do I know the lease will be renewed. His answer to this was that the company would renew the lease of which all owners have 48% combined.

I'm not new here, I lived in Thailand for 8 years a long time ago and I did have land then, owned by a company I set up but I never knew about the condo/apartment regs. With the new laws regarding companies being set up solely to own one house I have decided to not go down this route in case of possible problems.

I've looked a few condo's but don't really like any of them so decided on this apartment. I know it's not fool proof!

Sorry but where is the security in this equation. You would only own 4% of a company, whereas the current owner with the Thai shareholders own 52%. In my opinion this seems to be a bad deal as they would be able to vote you out of the company or decide against your interests. Except the contract is stipulating something different. But what I understand from the newest laws is, that you are not able to restrict the voting rights of the Thai shareholders. If you do that clause would be void.

Sent from my iPad using Thaivisa Connect Thailand mobile app

[nathan christian]

Could this not happen with any house owned with a 51% Thai shareholding?

[trogers]

I guess it's just the way it is. I only intend to live in it for 4 years and then will probably sell it. Saves renting, which I just see has dead money. If I can get my initial outlay back I'm happy already.

Only 4 years? Present rental yield is 5% or lower. Takes at least twenty years to recover outlay. If you are hit with a wrong timing on a property cycle, you can expect to sell your unit at 20% below purchase price four years later.

[KittenKong]

The idea of the owner setting up up the company was to give a little more security for the buyers of the apartmants. There will be 12 in total, each owner will receive 4% share in the company, equaling 48%. 1% will be in the name of the owner (foreigner) and the remaining 51% Thai shareholders.

I see no security in this arrangement at all. In fact I only see "scam" written all over it.

Even assuming that the 51% Thai ownership doesn't rip you off by selling the building behind your back (an assumption I would never make), I am curious as to who you think would actually buy this 4% share from you in 4 years time? I cant see anyone doing it when they could just buy a perfectly legal condo in their own name instead.

Is this apartment really unique or cheap to the point of being irresistible? If so why hasnt someone else already bought the share you are thinking of buying?

If I was that keen to waste money I would just put it in a pile and burn it.

[KittenKong]

I guess it's just the way it is. I only intend to live in it for 4 years and then will probably sell it. Saves renting, which I just see has dead money. If I can get my initial outlay back I'm happy already.

Only 4 years? Present rental yield is 5% or lower. Takes at least twenty years to recover outlay. If you are hit with a wrong timing on a property cycle, you can expect to sell your unit at 20% below purchase price four years later.

He means that he hopes to recover the initial purchase price after four years, during which time he will be living in the unit not renting it out. So rental returns don't come into his calculation at all.

Personally I think he will have trouble selling such an odd company holding at any price when there are so many straightforward freehold condos for sale. Unless as I mentioned this place is so unique as to be highly desirable.

[SDM0712]

I guess it's just the way it is. I only intend to live in it for 4 years and then will probably sell it. Saves renting, which I just see has dead money. If I can get my initial outlay back I'm happy already.

The problem with the 30+30+30 leasehold arrangement commonly referred to as 90 years by my "brother" real estate agents is that in reality it's a 30 years lease (which is the maximum permitted in Law for this type of thing) and two further promises of renewals in 30 and 60 years times. The renewals are usually only relevant because they lend value to the property. For example buyers in my UK agency are very comfortable with the leasehold system as UK Law provides a great of legal protection. A property with a 99 year lease will have greater value then one with say 68. It is not because they plan to own it in 68 years time but it brings the point closer that it will need to be renewed.

Over here in Thailand with my agency here, because (as far as I know) the renewal "promises" have never been tested in Court, we don't know if they would be upheld as technically they circumnavigate the spirit of the Law restricting non-Thai held leases to 30 years. So with that in mind you have have an assured 30 years and if you plan to sell on in 4 years will only be selling on the safe benefit of 26 years.

Personally for this short period I would rent, or buy an apartment/condo registered under the Condominium Act and put it in your name.

SDM

[KittenKong]

The problem with the 30+30+30 leasehold arrangement commonly referred to as 90 years by my "brother" real estate agents is that in reality it's a 30 years lease (which is the maximum permitted in Law for this type of thing) and two further promises of renewals in 30 and 60 years times.

As far as I know various Land Offices have said repeatedly that these lease extension promises have no validity at all.

I would never touch a leasehold property here.

[Strangebrew]

Depending on how much it going to cost you I think best option is buy a condo that's freehold then in 4 years if you want sell or rent out for steady income There are some good management companies here. I'm not sure but Thaivisa has such a company.

[Robert24]

If I understand this correctly, the owner of the building has registered the building as apartment and not condo and hence he cannot sell apartments. So basically you are paying a lumpsum for renting the place for 30 years. Now maybe you can sell this contract to someone else after 4 years but I doubt this will be easy.

I would stay well away from this.

I would not do that and also I don't understand the owner why he didn't register it as condom

[nathan christian]

I will be seeing the owner today so will ask some of these questions.

He said as the 12 owners have a total of 48%, him or director of company 1% and Thai 51%, the apartments owners shares will include directors shares or something like that, giving the apartment owners a majority. So in 30 years it will be in the best interests of the apartment owners to renew the lease as it benefits them.

Is there such a thing as directors shares?

He has built on 90% of this land which includes lots of other apartments and villa's. These have been occupied for a few year already using the same structure with the other apartments,

Is it possible to build a block of 4 apartments and register them as condo's?

[Robert24]

I have built a block of 32 apartments and registered it as condo as it gives me the possibility to sell or rent out and tax wise it is cheaper as well even if you only rent them out, hence my comment about not registering it as condo.

About the company's legal structure. Sounds normal that 51% has to be with Thais and 49% can be in foreign hands, same with my company. So are you saying that with the purchase you get 4% shares (48% divided in 12 owners) and you become a director of the company?

I haven't done this before - maybe worthwile to hire a lawyer to give you advise.

[nathan christian]

Hi Robert,

Yes this is what will happen with the purchase, a 4% share and be a director along with the other 11 owners.

My biggest concern is why hasn't he registered these units as condo's?

I am due to sign the contract tomorrow but with the info I've received that looks doubtful now, especially as you say "it might be difficult to sell in 4years"

it will be interesting to see why he hasn't registered these units as condo's, will let you know his answer.

With a condo I understand I can own it, what happens to the land that the condo's are built on, is that just a 30 year lease and what happens to that at the end of the lease term?

Cheers

[Suradit69]

If I understand this correctly, the owner of the building has registered the building as apartment and not condo and hence he cannot sell apartments. So basically you are paying a lumpsum for renting the place for 30 years. Now maybe you can sell this contract to someone else after 4 years but I doubt this will be easy.

I would stay well away from this.

I would not do that and also I don't understand the owner why he didn't register it as condom

"...why he didn't register it as condom "

I assume you were aiming for "condo." Freudian slip ??

Edited June 29, 2014 by Suradit69

[trogers]

I guess it's just the way it is. I only intend to live in it for 4 years and then will probably sell it. Saves renting, which I just see has dead money. If I can get my initial outlay back I'm happy already.

Only 4 years? Present rental yield is 5% or lower. Takes at least twenty years to recover outlay. If you are hit with a wrong timing on a property cycle, you can expect to sell your unit at 20% below purchase price four years later.

He means that he hopes to recover the initial purchase price after four years, during which time he will be living in the unit not renting it out. So rental returns don't come into his calculation at all.

Personally I think he will have trouble selling such an odd company holding at any price when there are so many straightforward freehold condos for sale. Unless as I mentioned this place is so unique as to be highly desirable.

Doubt that the selling price of a 30-year lease apartment is so cheap that rental yield is 25% pa. Either asking rent is too high or remaining lease period is short.

Prices of brand new apartments are usually at 65-70% of freehold condos, thus giving yields of less than 10% pa.

[Robert24]

If I understand this correctly, the owner of the building has registered the building as apartment and not condo and hence he cannot sell apartments. So basically you are paying a lumpsum for renting the place for 30 years. Now maybe you can sell this contract to someone else after 4 years but I doubt this will be easy.

I would stay well away from this.

I would not do that and also I don't understand the owner why he didn't register it as condom

"...why he didn't register it as condom "

I assume you were aiming for "condo." Freudian slip ??

555....more typing too fast on my smartphone.....apologies.

[Strangebrew]

I think but not 100% sure on if you buy a freehold condo I believe you do own the land or should I say a share of it so if condo building was torn down and land sold you would get a share of the price on the land. But if it were a high rise with several hundred units. Say IE: 100 units sitting on 1 rai of land you might get your money back or not.

[Robert24]

Strangebrew is correct. So Nathan Christian in your example of 12 apartments, this would give you 1/12th of the property freehold, incl any land around it that belongs to the condo. You would own 1/12th of everything. Normally condos are being sold freehold. Apartments (in apartments buildings) are usually not sold, they are only rented out, hence why the government makes a differentiation between apartment and condos and only allows condos to be sold.

Maybe this legal structure is absolutely legitimate, a smart way to get around the government restriction of an apartment building. if you are interested suggest you speak to a lawyer first to double check. Personally I wouldn't bother buying a leasehold/lease contract type condo.

[nathan christian]

I think this is smart advice, I have requested a meeting with the owner tomorrow morning but whatever reason he gives, the fact remains I am buying a rental period of 30 years. The dotted line will not be getting any of my ink on it tomorrow. Will look for a nice apartment registered as a condo.

If I decide to buy some land and build a house will i still be up "shit creek" as the government aren't keen on setting up a company for the sole purpose of owing a house?

This apartment would have cost 3.6 million, I think I could buy a small plot and build a reasonable sized house for this, just not sure about the ownership problems

[Robert24]

Nathan Christian, with regards to the purchase of land/house option as a foreigner you mentioned, I suggest you speak to a lawfirm who can help you with this.