Purchase Of Land From "alien"controlled Development Coy.

[medina]

Hi everyone,

I have a technical question for the legal beagles on TV.

A)Imagine that a "foreign"controlled Thai company purchases land and then subdivides it into smaller plots for resale. A purchaser acquires one of these plots "legally", ie as a Thai national or using a properly constituted and genuine Thai company.

B)The Thai authorities decide to investigate the original land purchase and the developer is found to have violated Thai land ownership laws.

What is the legal situation of the people who bought plots from the developer?

I should add that I have been preparing a business plan to develop a quality tourist facility in Thailand but due to the problems of land ownership, political uncertainty and excellent advice I have received from contributors to TV, I have put my plans on ice.

Look forward to hearing your views.

Regards,

Medina

[wood]

Hi everyone,

I have a technical question for the legal beagles on TV.

A)Imagine that a "foreign"controlled Thai company purchases land and then subdivides it into smaller plots for resale. A purchaser acquires one of these plots "legally", ie as a Thai national or using a properly constituted and genuine Thai company.

B)The Thai authorities decide to investigate the original land purchase and the developer is found to have violated Thai land ownership laws.

What is the legal situation of the people who bought plots from the developer?

I should add that I have been preparing a business plan to develop a quality tourist facility in Thailand but due to the problems of land ownership, political uncertainty and excellent advice I have received from contributors to TV, I have put my plans on ice.

Look forward to hearing your views.

My post on 03/10 asks a similar question, now that i have thought more on this subject, we are in fact, attempting to discover the Holy Grail.

I guess that many parties with land / property bought through a "foreign shared company" are sitting low wondering the same question.

I doubt if we will receive any legal views on this.

Time will tell.

keep in touch on this subject - you can pm me if needed.

[Dragonman]

Hi everyone,

I have a technical question for the legal beagles on TV.

A)Imagine that a "foreign"controlled Thai company purchases land and then subdivides it into smaller plots for resale. A purchaser acquires one of these plots "legally", ie as a Thai national or using a properly constituted and genuine Thai company.

B)The Thai authorities decide to investigate the original land purchase and the developer is found to have violated Thai land ownership laws.

What is the legal situation of the people who bought plots from the developer?

I should add that I have been preparing a business plan to develop a quality tourist facility in Thailand but due to the problems of land ownership, political uncertainty and excellent advice I have received from contributors to TV, I have put my plans on ice.

Look forward to hearing your views.

Regards,

Medina

Technically the contract would be void or at least voidable. But "in good faith" would be a reasonable defence. It is unlikely that the Judge would allow "unjust enrichment" to the developer which is likely if the contract was void. As these violations from case law normally involve fines or imprisonment but frequently do not involve assets. In fact the judgement purely says the land has to be sold.

[medina]

Hi everyone,

I have a technical question for the legal beagles on TV.

A)Imagine that a "foreign"controlled Thai company purchases land and then subdivides it into smaller plots for resale. A purchaser acquires one of these plots "legally", ie as a Thai national or using a properly constituted and genuine Thai company.

B)The Thai authorities decide to investigate the original land purchase and the developer is found to have violated Thai land ownership laws.

What is the legal situation of the people who bought plots from the developer?

I should add that I have been preparing a business plan to develop a quality tourist facility in Thailand but due to the problems of land ownership, political uncertainty and excellent advice I have received from contributors to TV, I have put my plans on ice.

Look forward to hearing your views.

Regards,

Medina

Technically the contract would be void or at least voidable. But "in good faith" would be a reasonable defence. It is unlikely that the Judge would allow "unjust enrichment" to the developer which is likely if the contract was void. As these violations from case law normally involve fines or imprisonment but frequently do not involve assets. In fact the judgement purely says the land has to be sold.

Hi Dragonman,

Thanks for your reply. I'm still not clear on this. Which contract would be voided? Can the Thai authorities force an owner who has purchased a plot of land "legally" to sell the plot because the

original land purchase by the developer was done using a "foreign"controlled company?

The follow on to this particular question is what is going to happen to the very large number of people who have bought property using "nominee" shareholders? If the Thais say they have to sell the properties many people are going to find themselves in a fire-sale situation.

Alternatively, if the Thais say that you have to make your company legal, where are all the genuine Thai shareholders going to come from and how are foreign owners caught in this situation going to react to losing 51% of their equity in a property?

The expression "can of worms" comes to mind. All of this suggests that the Thai propery market in the principal areas where foreigners buy, apart from legitimate condo purchases, is going to go through a very sticky patch.

Regards,

Medina

[watchoutfarang]

This is certainly interesting times in the property market, particularly for foreign developers who have sub-divided and 'sold' house and land to fellow farangs using the 'nominee' route. It is very feasible that every developer is to be investigated under the enforcement of current Thai law and it is questionable where they will draw a line in the sand under their investigations. The new government have to do something about Foreign land 'ownership' or the entire Kingdom is heading for a massive economic crash. Time will tell and you are doing the right thing putting any plans on ice.

Just my opinion

watchoutfarang

Edited October 4, 2006 by watchoutfarang

[medina]

This is certainly interesting times in the property market, particularly for foreign developers who have sub-divided and 'sold' house and land to fellow farangs using the 'nominee' route. It is very feasible that every developer is to be investigated under the enforcement of current Thai law and it is questionable where they will draw a line in the sand under their investigations. The new government have to do something about Foreign land 'ownership' or the entire Kingdom is heading for a massive economic crash. Time will tell and you are doing the right thing putting any plans on ice.

Just my opinion

watchoutfarang

Thanks Watchout. It strikes me that the Thai property market is now in uncharted territory. I live in Spain where the construction industry forms a very significant part of the economy. We have more than our share of dodgy agents, lawyers and developers but at least there is no bar on owning a freehold. It will be very interesting to see how the Thais react to the problems that have been created by the use of "nominee" structures by both developers and buyers. A "head in the sand" solution will just make matters worse. Like a good Martini, my plans are firmly on ice!

Cheers,

Medina

[watchoutfarang]

Medina,

My advice would be to be careful of who you are dealing with out here in LOS. I for one have been taken in by glossy makreting material and sweet talk from estate agents. There are always good buys out here if you are actually in the country- living and breathing the culture and dealing independently. Slowly,slowly. I think that foreign development will be limited in the future and that Thai's will be given more freedom to develop with the view to selling single houses or condo's to farang. Farangs must eventually be able to legally own land, butonly on asmall scale. The days of vast profits made by farang developers are soon to be gone.

Something has to happen....and quick or everyone who has invested in property are going to come unstuck.

watchoutfarang

[what next?]

^ yes interesting times ahead, cheap charlies, monthly border runners and borrowers of visa show money could be the winners as they have lost nothing whilst staying in LOS

as for me ... forget real estate....the school holidays started this week

So I've got my 2 daughters to entertain don't need to think about much else

[Dragonman]

Hi everyone,

I have a technical question for the legal beagles on TV.

A)Imagine that a "foreign"controlled Thai company purchases land and then subdivides it into smaller plots for resale. A purchaser acquires one of these plots "legally", ie as a Thai national or using a properly constituted and genuine Thai company.

B)The Thai authorities decide to investigate the original land purchase and the developer is found to have violated Thai land ownership laws.

What is the legal situation of the people who bought plots from the developer?

I should add that I have been preparing a business plan to develop a quality tourist facility in Thailand but due to the problems of land ownership, political uncertainty and excellent advice I have received from contributors to TV, I have put my plans on ice.

Look forward to hearing your views.

Regards,

Medina

Technically the contract would be void or at least voidable. But "in good faith" would be a reasonable defence. It is unlikely that the Judge would allow "unjust enrichment" to the developer which is likely if the contract was void. As these violations from case law normally involve fines or imprisonment but frequently do not involve assets. In fact the judgement purely says the land has to be sold.

Hi Dragonman,

Thanks for your reply. I'm still not clear on this. Which contract would be voided? Can the Thai authorities force an owner who has purchased a plot of land "legally" to sell the plot because the

original land purchase by the developer was done using a "foreign"controlled company?

The follow on to this particular question is what is going to happen to the very large number of people who have bought property using "nominee" shareholders? If the Thais say they have to sell the properties many people are going to find themselves in a fire-sale situation.

Alternatively, if the Thais say that you have to make your company legal, where are all the genuine Thai shareholders going to come from and how are foreign owners caught in this situation going to react to losing 51% of their equity in a property?

The expression "can of worms" comes to mind. All of this suggests that the Thai propery market in the principal areas where foreigners buy, apart from legitimate condo purchases, is going to go through a very sticky patch.

Regards,

Medina

The voidable contract would be the original purchase you made from the Developer. In other words the land would go back to the Developer, you'd get your money back, and then he would have to sell it within 1 year .This is why the law allows for "in good faith", so that any innocent party does not lose from an illegal act. In fact the Developer would receive a large fine or a prison sentence and you would go on as normal, unless you coluded.

[medina]

Medina

The voidable contract would be the original purchase you made from the Developer. In other words the land would go back to the Developer, you'd get your money back, and then he would have to sell it within 1 year .This is why the law allows for "in good faith", so that any innocent party does not lose from an illegal act. In fact the Developer would receive a large fine or a prison sentence and you would go on as normal, unless you coluded.

Morning Dragonman,

Thank you. Does "blink" suggest the developer probably wouldn't have to sell the land? But what happens if I have built a house on the plot? Will the developer have to refund the cost of this as well? And, what is the situation if the developer has not got the financial means to buy back the land and/or building? Do you know of any situations where what you describe, has happened? Lots

of questions! Look forward to learning more.

Regards,

Medina

[Dragonman]

Medina

The voidable contract would be the original purchase you made from the Developer. In other words the land would go back to the Developer, you'd get your money back, and then he would have to sell it within 1 year .This is why the law allows for "in good faith", so that any innocent party does not lose from an illegal act. In fact the Developer would receive a large fine or a prison sentence and you would go on as normal, unless you coluded.

Morning Dragonman,

Thank you. Does "blink" suggest the developer probably wouldn't have to sell the land? But what happens if I have built a house on the plot? Will the developer have to refund the cost of this as well? And, what is the situation if the developer has not got the financial means to buy back the land and/or building? Do you know of any situations where what you describe, has happened? Lots

of questions! Look forward to learning more.

Regards,

Medina

The Developer will likely have to sell the land which he has not already disposed of. If he has sold to you before him being declared "illegal", you would be declared having purchased "in good faith". Thus you would maintain ownership.

If under some totally insane Judgement (there have been a couple over here, but not as many as people think ) the contract is voidable then you would have to go through Civil Court to get your money back. Extremely rare due to"in good faith", and the law allows for innocent parties not to suffer financial penalties. There have been judgements where assets must be sold in illegal Companies, and also fines (don't know of any prison sentences yet). But I do not know of a case where contracts have been deemed voidable. When you think of it logically to follow "the letter of the law" where there is an illegal Company, everyone who ever purchased goods would have void contracts, hence the blink.

[medina]

Medina

The voidable contract would be the original purchase you made from the Developer. In other words the land would go back to the Developer, you'd get your money back, and then he would have to sell it within 1 year .This is why the law allows for "in good faith", so that any innocent party does not lose from an illegal act. In fact the Developer would receive a large fine or a prison sentence and you would go on as normal, unless you coluded.

Morning Dragonman,

Thank you. Does "blink" suggest the developer probably wouldn't have to sell the land? But what happens if I have built a house on the plot? Will the developer have to refund the cost of this as well? And, what is the situation if the developer has not got the financial means to buy back the land and/or building? Do you know of any situations where what you describe, has happened? Lots

of questions! Look forward to learning more.

Regards,

Medina

The Developer will likely have to sell the land which he has not already disposed of. If he has sold to you before him being declared "illegal", you would be declared having purchased "in good faith". Thus you would maintain ownership.

If under some totally insane Judgement (there have been a couple over here, but not as many as people think ) the contract is voidable then you would have to go through Civil Court to get your money back. Extremely rare due to"in good faith", and the law allows for innocent parties not to suffer financial penalties. There have been judgements where assets must be sold in illegal Companies, and also fines (don't know of any prison sentences yet). But I do not know of a case where contracts have been deemed voidable. When you think of it logically to follow "the letter of the law" where there is an illegal Company, everyone who ever purchased goods would have void contracts, hence the blink.

Dragonman,

Many thanks. Most helpful. I have a supplementary question. What in your opinion is going to happen to all those who have bought property using a company with "nominee shareholders"?

Am I correct in thinking that to make an "illegal"company "legal" you would have to find genuine Thai shareholders which would mean surrendering 51% of the equity in your property. Hardly an enticing proposition. Or, is it more likely that Thai purchasers will benefit from a massive "farang firesale".

A fudged solution will not solve anything as everyone should now be aware of the problem of using "nominees". In other words, the market in the places where foreigners buy will just stagnate.

Regards,

Medina