developers can sell condos 2 times?

[Frank67]

My developer does not provide the title deed. The costruction is finished and I moved in months ago. And certainly I paid a huge sum already.

 

Now I am curious: what if the developer sells off plan condos to customers, collects all the down payments and then goes to a bank and gives the title deeds to the bank for a huge loan?

I do not see a law stopping such practice. It might be illegal, but laws do not prevent. The bank would not have a risk and the developer has then almost double cash in hands. In big projects this can be very temptive - it is a lot of money.

In Pattaya most of the big developers are Israelis, so escaping to another country with a never-come-back-ticket should not be impossible.

Can anything prevent such practice?

[blackcab]

Generally, developers get bank loans on condos as soon as the chanote is created. This is part of the way they fund the project's construction costs.

 

Fast forward to the day you make the final payment for your unit: This should be done at the land office. You make the payment and the land office transfers the title deed to you.

 

You absolutely do not give the developer the final payment without receiving the title deed at the same time. Ever.

 

Did you do this?

[Frank67]

Let us say it this way: the last payment is pretty small.

 

If the developer expects let's say 20% from customer as last payment and gets 80% loan from the bank (asuming that they are giving the full market price as loan) for the same condo, than he has 160% cash in hands. This multiplied by a few hundred condos is quite some money...

Compared to finalizing the transfer to the buyer it means 60% more money in hand. Sure, the developer already spent some money and probably has depts at his suppliers. But this makes the difference even worse:

 

"honest" case: 80% collected from buyer, 80% spent = no money in hands.

"creative" case: 80% collected from buyer, 80% spent , 80% load = 80% money in hands.

 

A criminal would wait for project completion, then get the title deeds from land office, then go to bank to grab the loan and then leave the country leaving buyers and sub contractors empty handed...

Just to fear the hitman hired by the cheated thai buyers would impact the quality of life.

[trogers]

Another reason not to buy offplan...

[blackcab]

2 hours ago, Frank67 said:

A criminal would wait for project completion, then get the title deeds from land office, then go to bank to grab the loan and then leave the country leaving buyers and sub contractors empty handed...

 

I don't think you understand how most projects are financed. When the chanotes are created  (which is before building work commences) a bank will in principle loan about two thirds of the sale price to the developer. The cash isn't simply given to the developer to take away though.

 

Instead the bank keeps the money and the developer submits invoices from contractors that get paid direct.

 

At the same time the developer receiveds deposits and staged payments. These are either spent on overheads or debt repayment in what is essentially a balancing act where choices are made to ensure the least loan interest is paid.

 

On the day of completion the developer will often ask for two cheques. One is payable to the bank holding the loan on the chanote, and it is drawn for the exact amount to pay off the loan. The second cheque is made out to the developer and is their gross profit for the unit you are purchasing.

 

Often the total final payment is between 25 and 40 per cent of the sale price.

 

As you have learned, you shouldn't be paying over 75 per cent of the sale price before completion. In addition, the final amount is paid at the land office as part of the transfer of the title deed.

 

If the sales contract says something different then ask to change it. If the developer won't agree to the amendment then walk away. There are plenty of other condos to buy.

[KittenKong]

7 hours ago, blackcab said:

At the same time the developer receiveds deposits and staged payments. These are either spent on overheads or debt repayment in what is essentially a balancing act where choices are made to ensure the least loan interest is paid.

 

On the day of completion the developer will often ask for two cheques. One is payable to the bank holding the loan on the chanote, and it is drawn for the exact amount to pay off the loan. The second cheque is made out to the developer and is their gross profit for the unit you are purchasing.

 

Often the total final payment is between 25 and 40 per cent of the sale price.

 

As you have learned, you shouldn't be paying over 75 per cent of the sale price before completion. In addition, the final amount is paid at the land office as part of the transfer of the title deed.

 

That may be the case in Bangkok but rightly or wrongly it frequently doesnt happen like that in tourist areas like Pattaya.

[Delight]

 Given that you have your sales contract and receipts for monies paid-then I am convinced that every judge in the land will ensure that you will receive your Condo. Title Deed.

[blackcab]

18 minutes ago, Delight said:

 Given that you have your sales contract and receipts for monies paid-then I am convinced that every judge in the land will ensure that you will receive your Condo. Title Deed.

 

Not if the title deed has a loan registered against it by the developer and the developer cannot or will not repay the loan.

 

If this happens then it is a case of two different parties lending money to the developer. One party (the bank) secured their loan against the property. The second party (the unit purchaser) did not. In this situation the bank will eventually seize the property and dispose of it. Anyone living in the property would have to vacate at that point.

 

A loan registered on the property is a debt that is senior to a sales contract and any associated payments.

[trogers]

5 hours ago, blackcab said:

 

Not if the title deed has a loan registered against it by the developer and the developer cannot or will not repay the loan.

 

If this happens then it is a case of two different parties lending money to the developer. One party (the bank) secured their loan against the property. The second party (the unit purchaser) did not. In this situation the bank will eventually seize the property and dispose of it. Anyone living in the property would have to vacate at that point.

 

A loan registered on the property is a debt that is senior to a sales contract and any associated payments.

Buyers would just be unsecured creditors in bankruptcy suit, and would be lucky to secure and split among of themselves assets worth only 5-10% of amount owed to them...

 

Seen many cases during the Tomyum Kung crisis

[smutcakes]

On March 11, 2560 BE at 3:43 AM, blackcab said:

 

I don't think you understand how most projects are financed. When the chanotes are created  (which is before building work commences) a bank will in principle loan about two thirds of the sale price to the developer. The cash isn't simply given to the developer to take away though.

 

Instead the bank keeps the money and the developer submits invoices from contractors that get paid direct.

 

At the same time the developer receiveds deposits and staged payments. These are either spent on overheads or debt repayment in what is essentially a balancing act where choices are made to ensure the least loan interest is paid.

 

On the day of completion the developer will often ask for two cheques. One is payable to the bank holding the loan on the chanote, and it is drawn for the exact amount to pay off the loan. The second cheque is made out to the developer and is their gross profit for the unit you are purchasing.

 

Often the total final payment is between 25 and 40 per cent of the sale price.

 

As you have learned, you shouldn't be paying over 75 per cent of the sale price before completion. In addition, the final amount is paid at the land office as part of the transfer of the title deed.

 

If the sales contract says something different then ask to change it. If the developer won't agree to the amendment then walk away. There are plenty of other condos to buy.

On previous projects i have worked on the title deeds were not issued until an occupation permit was granted and the final As built drawings were passed to the Lands Department close to completion.

[Delight]

18 hours ago, blackcab said:

 

Not if the title deed has a loan registered against it by the developer and the developer cannot or will not repay the loan.

 

If this happens then it is a case of two different parties lending money to the developer. One party (the bank) secured their loan against the property. The second party (the unit purchaser) did not. In this situation the bank will eventually seize the property and dispose of it. Anyone living in the property would have to vacate at that point.

 

A loan registered on the property is a debt that is senior to a sales contract and any associated payments.

 Let me get this right

 

The OP,s project is finished. Safety certification is in place. The owner now lives there.

If title deeds have been issued to the developer -then the conversion to a condo has taken place.

 The only circumstance that I can see where a bank will lend money to the developer is to finance a 2nd project..

 

I still think that a  judge would rule in favour of the OP

 

Why -because judges in Thailand  are very pro consumer and if anything anti business

Edited March 12, 2017 by Delight

[KittenKong]

1 hour ago, smutcakes said:

On previous projects i have worked on the title deeds were not issued until an occupation permit was granted and the final As built drawings were passed to the Lands Department close to completion.

 

1 hour ago, Delight said:

The OP,s project is finished. Safety certification is in place. The owner now lives there.

If title deeds have been issued to the developer -then the conversion to a condo has taken place.

 

In Pattaya it seems to be quite common with some developers for most payments to be received and people to be living in the building for many months before chanotes are issued. These are the developers that I would shy away from if I was mad enough to want to buy an off-plan unit.

 

I also dont see how chanotes can be issued at all before the building is declared to be a condominium by the Land Office, as the two processes go hand in hand.

 

Major loan-based scams involving condos in Pattaya that I am aware of seem to revolve around the developer taking out loans on the land. Other types of scam are available.

[Delight]

21 hours ago, Delight said:

 Given that you have your sales contract and receipts for monies paid-then I am convinced that every judge in the land will ensure that you will receive your Condo. Title Deed.

 The best advice that I can offer the OP is to check with his local land office to see if the building has in fact been converted into a Condominium Juristic Person.

Better that it has -not the end of the world if it has not.

 

If it has and the developer is playing hard ball -the I would seek advice from a lawyer.

[smutcakes]

1 hour ago, KittenKong said:

 

 

In Pattaya it seems to be quite common with some developers for most payments to be received and people to be living in the building for many months before chanotes are issued. These are the developers that I would shy away from if I was mad enough to want to buy an off-plan unit.

 

I also dont see how chanotes can be issued at all before the building is declared to be a condominium by the Land Office, as the two processes go hand in hand.

 

Major loan-based scams involving condos in Pattaya that I am aware of seem to revolve around the developer taking out loans on the land. Other types of scam are available.

 

From what i have seen it is normally the buyer who pushes the developer to let them move in prior to the building being completed.  I have seen cases where Co-owners are literally walking up 15 flights of stairs to their unit so they don't have to pay for alternative accommodation. As part of this, the developers normally make them pay the final instalment if they want to use the unit, and at this stage the title deeds are not issued.

 

Developers don't want them to move in, it is far more hassle than its worth for them.

[KittenKong]

31 minutes ago, smutcakes said:

Developers don't want them to move in, it is far more hassle than its worth for them.

 

From what I have seen where I am, some developers just want to get the money and confirm the sale. They dont seem to care about anything else at all.

[Delight]

33 minutes ago, smutcakes said:

 

From what i have seen it is normally the buyer who pushes the developer to let them move in prior to the building being completed.  I have seen cases where Co-owners are literally walking up 15 flights of stairs to their unit so they don't have to pay for alternative accommodation. As part of this, the developers normally make them pay the final instalment if they want to use the unit, and at this stage the title deeds are not issued.

 

Developers don't want them to move in, it is far more hassle than its worth for them.

 Before co -owners can move in -the building must have its safety certification.

Given that this is in place and all the co -owners (who have now paid all their money) move in.

 Is there any legal pressure on the developer to issue the Title Deeds?

 

[HampiK]

I think the first problem with buying off plan is, when the prepayments are to high. In my mind if i should pay more than 20% upfront, then I never would go on with a off plan buying. Then the 80% will only be transfered (chashier cheque) to the developer when on the land departement office, when I receive the title deed.

 

Attached is an example of a condo presales offer which I would consider OK for the payment details. (I checked quite a few and most offers I found had a very similar percentages. But I checked mainly in Bangkok and not in Pattaya...).

Cost: 6'407'000

Prepayment 817'000 (12.75%) -> Reservation 30K, Contract signing 70K and 30 months payments at 23'900

Final Payment 5'590'000 (87.25%)

 

This 5.5M will only be given for a title. So when for some reason something goes wrong and hopefully you will notice this before you paid up the 30 monthly rates... then you can loose maximum 12.75% but of course, when you buy a condo off plan where you have to pay 75% or even more I never ever would do that and in that case would only walk away... even with the best known developer

 

[KittenKong]

3 hours ago, Delight said:

 Before co -owners can move in -the building must have its safety certification.

Given that this is in place and all the co -owners (who have now paid all their money) move in.

 

You are assuming that the letter of the law is being obeyed. In some places envelopes speak much more loudly.

[KittenKong]

2 hours ago, HampiK said:

Attached is an example of a condo presales offer which I would consider OK for the payment details. (I checked quite a few and most offers I found had a very similar percentages. But I checked mainly in Bangkok and not in Pattaya...).

Cost: 6'407'000

Prepayment 817'000 (12.75%) -> Reservation 30K, Contract signing 70K and 30 months payments at 23'900

Final Payment 5'590'000 (87.25%)

 

This 5.5M will only be given for a title. So when for some reason something goes wrong and hopefully you will notice this before you paid up the 30 monthly rates... then you can loose maximum 12.75% but of course, when you buy a condo off plan where you have to pay 75% or even more I never ever would do that and in that case would only walk away... even with the best known developer

 

In my experience in Pattaya (where, unless I'm mistaken, the OP has purchased) it is very common for farangs to sign sales contracts that allow for nearly all the cost to be paid in instalments during construction, with only a very small amount left at the end. Knowing what developers here can be like there would be snow on Jomtien beach before I would agree to any such terms, but many farang buyers here know no better and the terms are presented to them as being entirely normal and so they go along with it. Lies and deception abound here, and there is little or no consumer protection, and people are easily taken in.

Thai buyers often get much better terms such as you describe.

[HampiK]

34 minutes ago, KittenKong said:

 

In my experience in Pattaya (where, unless I'm mistaken, the OP has purchased) it is very common for farangs to sign sales contracts that allow for nearly all the cost to be paid in instalments during construction, with only a very small amount left at the end. Knowing what developers here can be like there would be snow on Jomtien beach before I would agree to any such terms, but many farang buyers here know no better and the terms are presented to them as being entirely normal and so they go along with it. Lies and deception abound here, and there is little or no consumer protection, and people are easily taken in.

Thai buyers often get much better terms such as you describe.

Unfortunately you are right, that in Pattaya many things are different.

Even that so many buy a property in thai names (company or gf's name)

[Frank67]

First of all thank you very much for the many and detailed replies!

Yes, it is about Pattaya and foreign ownership. AOR6 documents were granted, land office did the measurements. All the infrastructure is working (pool, elevators, aircons, water supply). People who live there are quite happy.

I hired a lawyer in Bangkok and he is doing the investigations right now.

 

I see manly these perspectives:

 

1.) Thai courts are customer friendly and will protect the buyer

2.) The buyer will be one of many the developer owes money to and will see a very very small return in case of developer's insolvency

3.) Bank has the title deed and the owner of the title deed owns the unit. Buyer gets nothing

 

to 1.) would certainly be most liked, but is least likely to kappen. Or has anyone a recent sample case to show where this happened?

to 2.) most likely if case variant 3 is wrong

to 3.) many countries have specific laws/regulations to have category 1 mortgage loans always to be first to be compensated. Not sure if Thailand has such rules in place.

 

I am not aware of any law which favors the buyer over other creditors. If this is the case than

- either buyers get nothing and the bank gets all the condos

- or buyer and bank have to share the leftovers and loose almost all of their money

 

Does not look very promising

Edited March 13, 2017 by Frank67

[KittenKong]

Just listening on the radio about someone who paid 4MB deposit for a unit in the Waterfront, which is probably Pattaya's highest profile condo development (it is certainly the most visible, due to its location).

I dont know what proportion of the total unit cost this 4MB is, but the chap is understandably worried that the developer of the building has recently become the subject of a rehabilitation petition to the central bankruptcy court. Work on the building shell has been abandoned for a year and a half following investigations about the building permit and design.