Usufruct and Proxy Ownership

[chiang mai]

I'm having difficulty convincing a friend that his usufruct is not safe and I'm hoping this forum can set matters straight.

 

Fred built his house fourteen years ago on land that was owned by his Thai company that was set up specifically to own property. Two houses were built on the land, one for each of two farang friends. Half a dozen years later or so, as a part of their clamp down, the Land Office found out the company was a front to own real estate and the two friends were given six months to dissolve the company and make new arrangements for ownership of their houses, one of them formed a real Thai company and structured it properly, the other went for an usufruct.

 

A very well known lawyer in CM charged Fred and his wife a very large fee to write an usufruct. At the bequest of the lawyer, Fred approached a farang friend and asked if he would persuade his Thai wife to be the chanotte owner and although very reluctant, she agreed.

 

Fast forward ten years: Fred and his wife don't have a blue tabien bahn, the lawyer didn't bother to get one as a part of his earlier work and now Fred needs one for a number of reasons (new electricity supply, TM30, yellow book application). The Thai chanotte owner has been asked to go to the Land Office to get one but she is reluctant to do so fearing they will realise she is the proxy owner (which she now believes she is). So Fred decides to go to the Land Office himself to see if he can get one and in doing so, the good people at the Land Office don't understand why a farang is asking for a blue tabien bahn. So Fred decides to open up and tells them the entire story and Land Office staff smile! The chanotte owner is now aware that the Land Office knows the ownership structure yet Fred thinks everything is OK and that they don't mind.

 

The first point that Fred doesn't understand is that whilst an usufruct is legal, proxy ownership is illegal - the second point that Fred doesn't get is that whilst proxy ownership is illegal there's a fair chance he might get away with it as long as the Land Office is not made aware, telling them what he' done is therefore probably not the smartest thing to do.

 

Your thoughts? Is the above proxy ownership or not and is it legal AND is Fred and the proxy owner in trouble - over to you.

 

 

[trogers]

Ahhh... the things people go way out to do to get sleepless nights.

 

I thought brains are smarter from farangland...

[blackcab]

The Land Office does not issue tabien baans. They are issued by the district office.

 

It's a very simple procedure to get a new tabien baan. If the owner doesn't want to do it she can complete a letter of authority that enables someone else to act on her behalf.

 

Whoever goes needs to take a copy of the company DBD, company shareholder (Bor Or Jor 5), Director's ID card, Director's tabien baan and copy of the sale contract. Every page of these documents needs to be signed by the Director and have the company stamp affixed.

 

Cost is 20 baht.

Edited November 16, 2016 by blackcab

[chiang mai]

Just now, blackcab said:

The Land Office does not issue tabien baans. They are issued by the district office.

 

It's a very simple procedure to get a new tabien baan. If the owner doesn't want to do it she can complete a letter of authority that enables someone else to act on her behalf.

 

Whoever goes needs to take a copy of the company DBD, company shareholder (Bor Or Jor 5), Director's ID card, Director's tabien baan. Every page of these documents needs to be signed by the Director and have the company stamp affixed.

 

Cost is 20 baht.

 

There is no company involved, it's a simple usufruct between Fred and a Thai female.

 

Good point about the LO not issuing tabien bahns however.

 

But the questions I asked at the end of the OP remain, is that proxy ownership and is it legal.

[blackcab]

2 minutes ago, chiang mai said:

 

There is no company involved, it's a simple usufruct between Fred and a Thai female.

 

Good point about the LO not issuing tabien bahns however.

 

But the questions I asked at the end of the OP remain, is that proxy ownership and is it legal.

 

Apologies, I haven't had a cup of coffee yet. It's really easy then. Just letter of authority, her ID card, her tabien baan and a copy of the sale contract.

[chiang mai]

2 minutes ago, blackcab said:

 

Apologies, I haven't had a cup of coffee yet. It's really easy then. Just letter of authority, her ID card, her tabien baan and a copy of the sale contract.

 

There is no sales contract, she (the Thai name on the chanotte) is just a person on the street as it were, a name picked out of a hat.

[blackcab]

Sorry, I mean the sales document issued by the Land Office on completion of the sale (Tor Dor 13). The single page A4 printed document with the big red ink stamps on it.

Edited November 16, 2016 by blackcab

[chiang mai]

1 minute ago, blackcab said:

Sorry, I mean the sales document issued by the Land Office on completion of the sale. The single page A4 printed document with the big red ink stamps on it.

 

OK thanks for that, I'd now like to get back to the issue of legality of the arangement and whether it is or isn't.

[blackcab]

2 minutes ago, chiang mai said:

 

OK thanks for that, I'd now like to get back to the issue of legality of the arangement and whether it is or isn't.

 

No, it isn't. As you stated, proxy ownership is illegal.

 

Will the land office do anything about it? Who knows, but Fred should refrain from going there again. 

[chiang mai]

11 minutes ago, blackcab said:

 

No, it isn't. As you stated, proxy ownership is illegal.

 

Will the land office do anything about it? Who knows, but Fred should refrain from going there again. 

 

Thanks BC, I appreciate your input as always.

[chiang mai]

I now have a follow on question and that is, how does Fred make his current situation legal, he is after all not trying to do anything devious, he simply wants to live in his house under an usufruct but he wants to make sure that the Thai chanotte owner isn't seen to be a proxy owner?

 

One approach that occurred to me is that maybe he can sign the Land Office form declaring that he has no interest in the property other than through his usufruct?

 

Another approach might be to be seen to pay the chanotte owner a monthly rent which would normalise the commercial arrangements and reduce the fear of proxy ownership?

 

I'm sure there are other ways Fred can de-risk this scenario, ideas?

[blackcab]

32 minutes ago, chiang mai said:

I now have a follow on question and that is, how does Fred make his current situation legal, he is after all not trying to do anything devious, he simply wants to live in his house under an usufruct but he wants to make sure that the Thai chanotte owner isn't seen to be a proxy owner?

 

One approach that occurred to me is that maybe he can sign the Land Office form declaring that he has no interest in the property other than through his usufruct?

 

Another approach might be to be seen to pay the chanotte owner a monthly rent which would normalise the commercial arrangements and reduce the fear of proxy ownership?

 

I'm sure there are other ways Fred can de-risk this scenario, ideas?

 

Stay away from the Land Office.

 

Surely Fred has a receipt for the cash he paid to purchase the right of Usufruct, as stated in his contract?

[chiang mai]

1 minute ago, blackcab said:

 

Stay away from the Land Office.

 

Surely Fred has a receipt for the cash he paid to purchase the right of Usufruct, as stated in his contract?

 

I'm sure he probably does since it was all done through a well known CM lawyer. But that doesn't eliminate or safeguard against a claim of proxy ownership and that's the issue that needs safeguarding against. The risk at present is more to the Thai Chanotte holder, as I understand it the penalty for proxy ownership is that the foreigner must sell the property but for the Thai, the penalty is 6 months and a 20k fine.

[blackcab]

29 minutes ago, chiang mai said:

...But that doesn't eliminate or safeguard against a claim of proxy ownership...

 

I rather think it does.

 

The Thai owner purchased the property and was then paid by the Usufructee for the right.

 

Assuming there is a paper trail, I don't see how that is any different to any other Usufruct between a Thai Usufructor and a foreign Usufructee.

 

I believe his arrangement is actually better than many, in fact, because the agreement is not with his wife.

[chiang mai]

10 minutes ago, blackcab said:

 

I rather think it does.

 

The Thai owner purchased the property and was then paid by the Usufructee for the right.

 

Assuming there is a paper trail, I don't see how that is any different to any other Usufruct between a Thai Usufructor and a foreign Usufructee.

 

I believe his arrangement is actually better than many, in fact, because the agreement is not with his wife.

 

The usufructor was unknown to the legal arrangement until after the Land Office ordered the split.

 

The land was originally purchased by the two farangs, way back when and subsequently its ownership has morphed from the original Thai owner some fifteen years ago (whoever that was, a cash deal I understand), through company ownership and then split into the current scenario. The usufruct didn't come into being until much much later.

 

We have to come back to proxy ownership and the Thai female who is on the chanotte. She never owned the property, she never purchased it, the funds used to buy the property cannot be attributed to her. She has no connection with it until magically her name appears on the chanotte following the land spilt ordered by the Land Office.

 

Apologies that I can't continue with this any further this evening due to other commitments, but I will pick it up again in the morning. I am aware that Fred is reading this so perhaps he wants to provide input and answer questions since he now accepts the proxy ownership arrangement is illegal?

Edited November 16, 2016 by chiang mai

[blackcab]

27 minutes ago, chiang mai said:

She has no connection with it until magically her name appears on the chanotte following the land spilt ordered by the Land Office.

 

That's the key point.

 

To clarify this, is she listed on the chanote as the owner?

[chiang mai]

Just now, blackcab said:

 

That's the key point.

 

To clarify this, is she listed on the chanote as the owner?

 

I've never seen the chanotte so I don't know, but I'm told the Land Office/Amphur computer system sees her as the owner.

[blackcab]

So we are back to what I said in post 14. What's the difference between this Usufruct and any other Usufruct?

 

She doesn't have proof of funds? A lot of Thai people don't because they pay in cash. I'm sure she has a receipt for the money that was paid.

 

Just because a buyer didn't use a bank cheque to purchase a property does not in itself make it to be proxy ownership.

 

What if my (Thai) wife purchased the property for cash, then granted a Usufruct. Would that be proxy ownership?

[chiang mai]

"What if my (Thai) wife purchased the property for cash, then granted a Usufruct. Would that be proxy ownership?"

 

No, because nothing was hidden. Although it would be unsafe because your wife could cancel the usufruct upon divorce."

 

AND

 

"She doesn't have proof of funds? A lot of Thai people don't because they pay in cash. I'm sure she has a receipt for the money that was paid".

 

No receipt is a plausible excuse, except when the female in question would have been only 16 years of age at the time!

Edited November 16, 2016 by chiang mai

[Paul944]

So the thai lady is a real proxy owner :). Not a big issue though I think as the situation already exists for 10 years. Telling officials about it is not the smartest thing to do.

 

If you consider the land lease, usufruct or superficies for private use. They all are an owner by proxy construction. It does not matter if the thai lady is your girl friend or just some one you did once.

 

The main reason to resolve this that the usufruct ends as Fred dies leaving his wife with nothing. If he has a thai wife they can transfer the chanote to be on her name. Of course this means paying the transfer tax.

 

Also if the thai lady dies and her heirs find out she owned a property it can give some stress full times for Fred.

[blackcab]

2 hours ago, chiang mai said:

"What if my (Thai) wife purchased the property for cash, then granted a Usufruct. Would that be proxy ownership?"

 

No, because nothing was hidden. Although it would be unsafe because your wife could cancel the usufruct upon divorce."

 

AND

 

"She doesn't have proof of funds? A lot of Thai people don't because they pay in cash. I'm sure she has a receipt for the money that was paid".

 

No receipt is a plausible excuse, except when the female in question would have been only 16 years of age at the time!

 

For the first part I don't think there is much to worry about. People hide things from the land office every day. For example the true sales price of a property is routinely hidden. As long as Fred keeps away from the land office he should be fine. At the minute it seems the only person worrying about things being hidden is you. Unless you've wound up old Fred to fever pitch that is.

 

Second part: If the owner was only 16 at the time then the receipt would be in her father's name, would it not?

 

Which sounds entirely reasonable, apart from the fact that a minor cannot normally grant a usufruct.

[chiang mai]

Hmm, at what point does illegal proxy ownership become an issue for concern?

 

I have an usufruct granted by my girlfriend, taken out at the the same time we purchased our home and I pay her a nominal amount every month for it. In that example, nothing is hidden because both usufruct and purchase were done simultaneously, we have been in a relationship for almost ten years prior, I pay every month hence the usufruct is not free plus I have willed all my assets to her in my Thai will, ergo there is no attempt to subvert ownership.

 

In Fred's case he had not no relationship to the proxy before the usufruct transaction date, the property transitioned from company ownership to an usufruct without any audit trail (no sale and purchase), no rent is paid hence the ususfruct is for free and the usufructor is unable to sell the property - in the now famous samuiforsale example, that is clearly proxy ownership: https://www.samuiforsale.com/knowledge/thai-nominee-property-ownership.html

 

On the basis of the above, I presume there's no question this is proxy ownership.

 

So now to risk: I agree that if everyone stays away from the Amphur and the Land Office there is very little risk but Fred has already been there once. The advice given above is to stay away from both and that's sensible although it's likely there will be further visits because Fred still needs his blue book. The question is therefore, what steps if any might be taken to legalise the above, before the Amphur/Land Office decide to pick up on it all and act?

[chiang mai]

6 hours ago, blackcab said:

 

Second part: If the owner was only 16 at the time then the receipt would be in her father's name, would it not?

 

Which sounds entirely reasonable, apart from the fact that a minor cannot normally grant a usufruct.

 

I exaggerate the age to make the point that a poor rural Thai female would have been highly unlikely to have acquired sufficient funds to buy the land, she was I believe circa 22 years old at the time.

[chiang mai]

10 hours ago, Paul944 said:

So the thai lady is a real proxy owner :). Not a big issue though I think as the situation already exists for 10 years. Telling officials about it is not the smartest thing to do.

 

If you consider the land lease, usufruct or superficies for private use. They all are an owner by proxy construction. It does not matter if the thai lady is your girl friend or just some one you did once.

 

The main reason to resolve this that the usufruct ends as Fred dies leaving his wife with nothing. If he has a thai wife they can transfer the chanote to be on her name. Of course this means paying the transfer tax.

 

Also if the thai lady dies and her heirs find out she owned a property it can give some stress full times for Fred.

 

A good point, except I believe the usufruct is in joint names hence the survivor has usufruct rights, plus a transfer has been written which covers the children and succession for a total of 30 years.

 

I'm fast coming to the view that whilst the ownership chain is clearly illegal, there would be little risk of anyone taking action as long as: the Land Office/Amphur don't find out; there is no crack down (such as the one with company purchases); and there is no unexpected personal events that could make this come to the surface and become visible.

 

The wild card in all of this is of course the willingness of the Thai chanotte holder to continue breaking the law, many Thai's are actually afraid to do so because of the penalties involved. This is something she is increasingly unwilling to do, much of it resulting from pressure from family and friends and the increased visibility this issue has been given by government. This thread and this subject is being discussed here in an attempt to help allay her fears and to help her find a suitable resolution to the problem.

 

Edited November 17, 2016 by chiang mai

[blackcab]

If she is unhappy the only solution is to sell the land. Either 1. Find another Thai person who is willing. 2. Put it in a (well structured) company name, or 3. Truly sell up and buy a condo.

 

Either way there are going to be fees, and Fred is going to have to pay.

 

I don't think you have to worry about proxy ownership. The real problem is the owner doesn't want to be involved anymore.

 

On a side note, the 30 year lease has to be registered at the land office while the Usufructee is still alive. From the date of registration, the clock is ticking. You can't do it any other way.

[khunPer]

House owner, which can be an alien (farang), can apply for a Blue House Book at Tessa Ban – they should actually make it, when construction is 80% to 100% finished; but maybe a Building Permission were never applied for – if no Thais live in the house, the Blue House Book will contain no names. Ask at Tessa Ban what they need of documentation, they may want a proxy from the Chanute land owner. Foreigners can have their name in a Yellow House, which at some areas can be a little bit complicated process to obtain. I believe only the Blue House Book is needed for permanent electric supply; but there might need to be a name in(..?). There are other, quite detailed threads in TVForum about obtaining House Books, both Blue and Yellow.

[blackcab]

1 hour ago, khunPer said:

I believe only the Blue House Book is needed for permanent electric supply; but there might need to be a name in(..?).

 

You don't need a name in the blue book to get an electricity supply. Just the basic house details on page 1 are enough.

 

It has to be this way because some people own more than one property - and they can only be in one blue book at any one time.

[KBsinter]

MY,MY, BLACKCAB, you are so knowledgeable,dare I say gifted

fascinating reading..........

 

[chiang mai]

1 hour ago, KBsinter said:

MY,MY, BLACKCAB, you are so knowledgeable,dare I say gifted

fascinating reading..........

 

 

The man knows his stuff, he's well worth following.

[sandemara]

Seeking what you identify as "legal advice" on an open forum is, probably, not a smart move in the first place. Your friend has made himself vulnerable (financially and legally) on a number of issues, based on your comments. One significant point many here might not be aware of is that the advantages (or security) a usufruct arrangement once offered to a farang resident in the past have not existed  since legislative changes made earlier this year.  These issues relate to the life of a usufruct, transfer of rights (through inheritance or other means) etc. The changes were not promulgated widely and I only became aware of them by accident about a month ago. Your friend needs to understand what and how Thai judges in civil courts understand or view interpretations of "legality", rather than lay farangs.  The best advice your friend could have is to contact an experienced, knowledgeable lawyer and get up to date, accurate information.