Hot! Buying a Condominium in Thailand

Buying a unit in a condominium is one of the easiest ways for foreigners to acquire an ownership interest in Thailand real estate.

Generally, foreign persons and entities, including Thai entities owned by more than 49% foreign persons or entities, are prohibited from acquiring a freehold interest in land in Thailand.  Exceptions include ownership permitted by treaty (of which there are currently none) and ownership permitted by special permissions and approvals, such as the ownership of a limited amount of land by persons investing at least 40 million baht in specified Thai investments.

Because title to a condominium unit includes co-ownership of the common property of the condominium, which in turn includes the land on which the condominium is situated, Thai law places limits on the number of units in a condominium that can be owned by foreign persons or entities.

Background of the Condominium Act

By way of background, the law governing condominiums was enacted as Condominium Act, B.E. 2522 (1979).  This law was liberalized to allow foreign investment in condominiums by Condominium Act (No. 2), B.E. 2534 (1991), which allowed foreign persons and entities to own condominium units on a freehold basis, but limited foreign ownership to 40% of the total area of the units of the condominium.  This law was again further liberalized to promote foreign investment in condominiums by Condominium Act (No. 3), B.E. 2542 (1999), which raised the foreign ownership limit to 49% (and indeed up to 100% in certain condominiums in certain urban areas, such as Bangkok and Pattaya, for the five-year period).  The condominium law was further strengthened recently by Condominium Act (No. 4), B.E. 2551 (2008), which was adopted to provide further protection for purchasers of condominium units from developers, by making developers responsible for the truth of their marketing materials, by making developers responsible for paying the ratable portion of fees and expenses for unsold units and by providing that contracts of sale had to conform to a form established by the Ministry of the Interior.  See “2008 Amendments to the Condominium Act” for more information about the 2008 amendments to the Condominium Act.

Furthermore, additional protection for buyers of condominium units was provided this year through the enactment of the Escrow Act, B.E. 2551 (2008).  Although the provisions of the Escrow Act are optional for condominium purchases, it does provide a way for a potential purchaser to protect deposits for condominium purchases from being used (and potentially lost) by a developer when short of funds.  See “Escrow Business Law” for more information about the Escrow Act.

Unit Title for Owners of Condominium Units

Under the Condominium Act (including No. 1 – 4),

a “condominium” is defined as “a building that persons are able to divide the holding of title to in parts where each part comprises title to personal property and co-ownership of common property”;

“personal property” is defined as “a condominium unit and includes structures and land provided for each condominium unit owner”; and

“common property” is defined as “the parts of the condominium that are not units, the land on which the condominium is situated and other land and property provided for use by or for the common benefit of the co-owners”.

The developer registers the condominium with the Land Department, and a juristic person representing the condominium is created.

Each owner of a unit has title to his or her own personal property and co-ownership of the common property, as evidenced by a unit title deed.  The unit title deed will contain at least the following information:

  1. the position of the land and the area of the land belonging to the condominium;
  2. the site, the area and a plan of the unit showing the width, length and height;
  3. the ratio of the title to the common property;
  4. the personal and family names of the person with title to the unit;
  5. the abstract of title;
  6. the signature of the Competent Official; and
  7. the seal of office of the Competent Official.
  8. Section 15 of the Condominium Act clarifies that common property includes:
    1. the land on which the condominium is situated;
    2. the land provided for use or for common benefit;
    3. the structure and structures for stability and for preventing damage to the building;
    4. the building and its parts and the accessories that are provided for use or for common benefit;
    5. implements and instruments provided for use or for common benefit;
    6. premises provided for common services to the condominium;
    7. other property provided for use or for common benefit;
    8. office of condominium building juristic person;
    9. immovable property bought or acquired under Section 48(1);
    10. structures or systems built for maintaining security or environments within the condominium building, for example, the fire prevention system, lighting, air ventilation, air-conditioning, the drainage system, waste water treatment, or disposal of garbage and refuse; and
    11. property using the money under Section 18 for maintenance thereof

    Therefore, the owner of a unit is a co-owner of the land on which the Thailand condominium is situated.  The proportion of a co-owner’s ownership interest in common property is based on the proportion of the area of the co-owner’s unit to the total area of all units of the condominium.

    Limitation on Foreign Ownership

    Although the Condominium Act is designed to promote foreign ownership in condominium projects, there are still restrictions on foreign ownership that cannot be ignored.  Section 19 bis of the Condominium Act (as amended by No. 4) provides that aliens or alien juristic persons may own up to forty-nine percent of the total area of the units of the condominium at the time the registration application for the condominium was filed.  There are also further rules that define which foreigners may acquire ownership interests in condominium units and that specify when foreigners who have acquired ownership interests in condominium units are required to divest themselves of those units.

    Which Foreigners May Own Units in a Condominium

    The Condominium Act permits five classes of aliens to own condominium units, namely:

    1. aliens with a residence permit under the immigration laws;
    2. aliens allowed to enter Thailand under the laws for the promotion of investment in Thailand;
    3. juristic persons deemed to be aliens under the Land Code and registered as juristic persons under Thai law;
    4. juristic persons with a certificate of promotion of investment under the laws for the promotion of investment; and
    5. aliens or juristic persons deemed by Thai law to be aliens, who have brought into the Kingdom foreign exchange or withdrawn the money from the non-resident Baht account or withdrawn the money from the foreign currency deposit account

    Compulsory Dispositions of Condominium Units

    If an owner of a condominium unit is an alien and any of the following occurs, such owner will be required to notify the Land Department within sixty days and divest himself of that unit within one year of acquisition or change in status:

    1. an alien or juristic person deemed to be an alien acquires a unit by legacy through inheritance or otherwise, and when such alien’s or juristic person’s ownership is included in the calculation of the percentage of foreign ownership in the condominium units, the percentage limitation is exceeded;
    2. an alien is no longer permitted to reside in Thailand or his residence permit ceases to be valid;
    3. an alien is deported and has not received a relaxation;
    4. an alien allowed to enter Thailand under the laws for the promotion of investment is not permitted by the Board of Investment to stay in Thailand; or
    5. the certificate of promotion of investment of a juristic person deemed to be an alien is revoked.

    Conclusion

    Although the Condominium Act has been amended numerous times to encourage foreign investment and protect purchasers of units in condominium developments, using experienced advisors, including legal advisors, is even more important for foreigners than it is for condominium purchases in their more familiar home countries.

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