HOW TO PURCHASE A PHUKET CONDOMINIUM
Phuket is one of the most popular places to purchase a condominium for its tropical and resort-like environment. With over 3500 condominium owners in Phuket, the market growth for property investments is rapidly increasing at a yearly rate and in turn, the long-term return on investment can be seen as a sure success. Many foreign buyers come to Phuket and fall in love with the environment, the hospitality of the locals, and the lifestyle and end up with the dream of purchasing a property. Foreign buyers a drawn to Phuket property for a variety of reasons as this destination offers a wide range of property types, from affordable condos for sale in Phuket, luxury villas, and resort units, to beach condos for sale. Most condos are usually fully equipped with swimming pools, gyms, saunas, jacuzzies, and other communal spaces for residents to enjoy without having to leave their homes. Condos make it also hassle-free and uncomplicated to move in as generally they come fully furnished with all the necessary appliances. The safety and security of the condominiums and the area, in general, allow for great peace of mind for foreigners who are looking to retire or relocate to another country. All condominiums use key cards, security staff, and security cameras throughout the properties. The west coast used to be the pinnacle of development for the island. However, over the years the east coast has seen a higher increase in development as the prime real estate of the west has become more and more occupied. The most expensive property market in Phuket is Patong, with prices in Karon and Kata following as a close second. Many property owners in these areas have been able to see a 20% to 50% capital appreciation on their real estate and sometimes even a 100% ROI for prime beachfront property in Phuket.
Some Regulations Are Confusing
The process of buying a property in any country as a foreigner can be tricky, and Thailand’s regulations and procedures for foreigners can be a bit confusing to learn if they are new to the property investment industry and so this article discusses some of these basic factors and breaks down some of the processes into steps to purchasing condos and other properties for sale in Thailand.
Ownership Types
Expats looking to buy property in Phuket have different ownership types to choose from, which depending on what they are looking for, what their reason is for purchasing, and how long they intend to have the property can vary on what is better suited for the potential buyer. It is strongly advised to get a property lawyer in Thailand to guide you through the process and make sure that the lease or sale agreement includes all that is necessary for a hassle-free and peaceful stay as a property owner. Below are the 3 most common property ownership types that foreigners use when purchasing property in Thailand.
The three major types are:- Leasehold
- Freehold
- Thai Freehold Or Thai Company
Leasehold
If you are not married to a Thai citizen or don’t have any Thai
children or relatives, the most common and next easiest way of owning a
freestanding structure or house would be by Leasehold. The property on which
the land stands is owned by the foreigner and the land would be leased to
the property owner. Note that by law, a non-Thai can never own land in Thailand
and therefore a Leasehold is there in order to maintain Thai ownership of the
land, and also the rights of the foreign property owner. A 30-year lease or
otherwise known in Thai as a “Chanote” will be included in the Land Title Deed
when registered at the Land Office upon purchase of the property. The lease
period cannot exceed the maximum of 30 years; however, it is able to be renewed
twice allowing the property owner 90 years of occupation on the land.
Uncertainty of land lease renewals is usually the most concern to lessees and
usually tends to add a guaranteed buy-back clause in the terms of the lease
agreement for assured renewal. If you would like to acquire a plot to build on,
it must be noted in the lease agreement or leasehold of what your plans are of
building in detail in order to prevent restrictions on construction designs and
plans. Leaseholds can be unpopular at times for foreign buyers due to its
certain limits or risks, however many ex-pats still choose this method for
purchasing a property once they have their minds made up on a great home. A leasehold is by Thai law a set of guaranteed rights to the lessee and a property owner that protects them from cancellation, negation, or basically any
other interference from the lesser that violates the lessee’s rightful
occupation of the land and ownership of the property.
Freehold
Freehold property purchases are usually the most advised or
suggested form of property ownership. The process usually is an easier route to
take and typically provides the property owner with much more security. The
regulations and legal requirements are also much more black and white to
non-Thais wanting to buy property. Foreigners can make property purchases for
condos at a complete freehold with 100% perpetual ownership of the property
until the owner decides to sell the unit again or as there is no time limit,
can pass it onto their heirs. As long as 51% of the total saleable area of the
condominium is owned by Thai citizens or entities, foreigners are able to make
purchases of up to 49% of the units above the ground level for those allocated
quotas. Once a Phuket freehold condo is purchased, the owner of the unit will receive a CAM fee
which is due each month or year depending on the asset type. The CAM fee, or Common Area Maintenance fee, is for day-to-day
maintenance and management of all shared areas and facilities available among
co-owners in the condominium as well as the general upkeep of the development
itself. The CAM fee is calculated by multiplying the total area of the unit (in
square meters) by the condo's CAM fee rate. Currently, the CAM fee on a
condominium in Phuket is around 50 Thai Baht per square meter however, this fee
varies depending on the different classes and sizes of the condos. For Example, luxury condos and
resorts for sale in Phuket would have higher CAM fees than one of those in a low to the mid-class range. This might seem like an additional expense at first, however, in the long run, it protects and creates more safety on the value of your
investment and also allows the owner to have a vote regarding all related
matters to the condominium and common areas at the owner’s association
meetings.
Thai freehold or Thai company ownership
As previously mentioned, non-Thai residents are not able to
purchase land, however, if you are married to a Thai citizen there are ways to
put the property in the name of your Thai spouse. The same method could also be applied when
purchasing a property in the name of a very trustworthy Thai friend. This can
be risky as the name of the property on the title deed will be that of your
friend or spouse. So, as a foreigner or non-Thai spouse, you would be wavering
all rights to the claim of the property. As a way to minimize such risks for
non-Thai spouses, a carefully and detailed Thai prenuptial agreement should be drafted for
the protection of both parties in order to clearly specify and list all
property, other assets, and debts among parties to ascertain each spouses’
rights and stipulate the financial obligations after a dissolution of marriage.
Many foreigners choose this method as it is quite quick and easy to purchase
the property, but please be aware that legally the property would not be yours,
it would be in ownership of the Thai national whose name is on the deed.
Therefore, the title owner would have the right to sell, rent, or otherwise make
any land or property decisions without your consent.
If there is a preference for land freehold, in other words
owning the building and the plot of land on which it stands, the property can be
purchased through a Thai company. Here, a Thai Ltd. company will be established
where the foreigner would be a shareholder of 49% of the company and 51% Thai owned
by shareholders of at least 2 nationals. It is important for all directors
involved in the company to be well aware of the Thai foreign business laws involved in owning a
company and be fully informed of their liabilities. As this company would be
officially recognized as a legitimate and existing company, it still needs to
act as such. It needs to conduct business, generate revenue, and follow the same
income tax procedures and other Thai revenue requirements as any other Thai
company, so it would be handy to have an accountant or bookkeeper to assist in
these matters when providing necessary documentation for annual tax purposes.
This is usually the more preferred method of property ownership as the
foreigner would have the majority share in company ownership. Further
protection on the property is provided through this route as the non-Thai shareholder would be the sole signatory and have control over the company and
therefore would provide actual legal rights and authority to the foreign
majority shareholder over the property owned by the said company.
Drawing up a contract
When a foreigner buys a Phuket condo for sale by the owner, the seller will
provide the buyer with a “Sale and Purchase Agreement” or also called a
“Contract of Sale”. It important to note that a Title Deed and a Sales contract
are two different and separate documents which many people tend to confuse as
the same, and both need to be processed for all real estate transactions. A Title Deed is an official document which states information based solely about the land and/or property
i.e., the current owner of the property, the location, and total area of the
land and/or total interior volume of the property, and for condo purchases
would also include the common areas and assets such as swimming pools, gyms or
other social condo facilities. A sale and purchase agreement is a contract that
stipulates the terms and conditions of sale of a property between the buyer and
the seller. Because these are two separate documents, it is important to make
sure that all information about the property and names of persons stated in
these two documents are identical to avoid legal issues with the property in
future.
A Contract of Sale is commonly used for real estate
transactions. This document is a legally binding contract between the buyer and
the seller that is signed once the buyer makes their first deposit for the
property. The seller could provide the contract in English or in Thai so
sometimes the document would need to be officially translated first. It is crucial
that the document be carefully reviewed by both parties before entering into
the agreement, and make sure that both parties understand that this is not a
“standard” sale agreement, meaning it is an agreement open to negotiation and
change. These reviews and negotiations should not go without the professional
assistance of a lawyer who is specialized and has up-to-date knowledge of the
most current property practices and laws of Thailand. To a more serviceable
extent, a professional in this matter would be able to identify whether the
agreement withholds or omits any information that would be advantageous to the
seller, include any terms or conditions that might be unfair or unreasonable
towards the buyer, and recognize any provisions or terms that are contradictory
or unenforceable in Thai law. For these reasons among many, finding a reputable property lawyer in Phuket to guide you through
each step of the purchase process is strongly advised in order to have full
transparency and familiarity with the agreement for both parties and their
responsibilities. The agreement needs to clearly state the terms and conditions
of sale among the parties and also state how and when the transaction would
occur. It should indicate clear provisions for which parties are responsible
for any additional expenses such as tax or transfer fees regarding the property
transfer and any outstanding liabilities connected to the property. When
purchasing a condo in Phuket the agreement also needs to mention that the unit
is being purchased as Foreign Freehold.
When Leasing land for purposes of building a home or other
structure, a clause in the sales agreement or a separate legal document known
as the “Right to Superficies”, absolutely needs to
be included. This clause will ensure your right to construct the planned
structure on the land of the leaser without any legal complications. Once the
right to superficies is official upon registration of this particular right,
the “superficiary” would then be responsible for maintaining and upholding the
land in good standard.
Once all negotiations and changes have been made, a thorough
professional review of the final agreement needs to be done to ensure the
contract not only protects but is also within the best interest of the foreign
buyer. The final contract will be given to both parties, and a copy will be
given to the Land Department along with the Title Deed and any other supporting
documents.
Making Your First
Deposit
The first deposit to purchase a property or condominium in
Phuket is usually considered as a “reservation deposit”. This deposit would be
seen as securing or reserving the property from other interested buyers and
proof of the buyer’s genuine intent on purchasing the unit. Generally, the
amount required for a deposit to reserve a property is 30% of the total sale
price of that property. By law, every foreign buyer additionally needs to
provide a FET or Foreign Exchange Transaction
form
(also known as a Forex-form) to qualify for foreign ownership of property in
Thailand. This form serves as proof of the foreign buyer remitting foreign
currency into Thailand and exchanging it into local currency within The Kingdom
of Thailand. This form will include information such as the amount of foreign
currency, the exchanged amount in Thai baht, the information of the sender and
receiver as well as the reason for transfer. Before setting your heart on a
specific property, it is important to refrain from making any impulsive
decisions or payments in desperation of securing the property for yourself. No
payments, including a deposit, should be made before seeing the property,
having a property inspection done, and consulting a lawyer for due diligence.
Your first deposit should only be made once the inspection has been cleared and
an official agreement has been drafted. There needs to be terms and conditions
written in the agreement of the buyer’s deposit regarding the amount required
and the provisions included in order to make sure that the buyer’s deposit
would be refundable. Under Thai law, a property deposit is regarded as
non-refundable unless there is a failure of the seller to fully satisfy its obligations
and responsibilities stated within the contract. Under this special
circumstance, Thai law would then recognize this as the fault of the seller and
the right of the buyer to reclaim its deposit and possibly enforce impositions
for any damages.
The Transfer at The Land Office
The transfer of ownership of the property that the foreigner
purchases will be done at the land office once all installments have been
completed depending on the stipulations of the sales agreement, or the final
and the outstanding amount is paid on the day that the registration of title is
done at the land office.
The land office is responsible for enforcing Thai laws such as:
·
the Land Code;
·
the Land Development Act;
·
the Act on Leases of Immovable Properties for Commerce and
Industry Purposes;
·
the Private Surveyors Act; and
·
the Condominium Act.
Therefore, foreigners looking to purchase Phuket condos for sale
should also register their property at the land office as they govern the
registration for all real estate transactions within the country. The land office in Phuket is based in the Kathu
District, central to Phuket. Both the seller and the buyer need to be present
at the time of transfer at the land office unless either party has permitted
power of attorney to their property lawyers.
The general documentation required for transfer of ownership at the land office would be ID
documentation, the Land Title Deed, Sales Agreement, Superficies Agreement, building permit (for any planned development on the land), and the House Registration Book. The house book in Thailand is known as a Ta Bien Baan, which includes information about the address of the property and registration of the resident of that property.
Transfer Fees and Taxes
Along with the remaining balance of the property purchase price
that must be paid on the day of Transfer of ownership, there are additional
fees and taxes that need to be paid before registration can be processed. Generally, the buyer is considered to be responsible
for the transfer fee of the property. However, the liabilities among other
taxes could be negotiable or shared between parties within the provisions set
in the sales agreement. On certain occasions, it has been seen, especially
where the buyer makes an offer that is lower than the asking price of the
property, that both parties could come to an agreement where the buyer offers
to share the responsibility of all taxes included in the transfer process, and
the seller agrees that the opposing parties’ lower offer will be accepted only
under these written conditions.
These transfer fees and general taxes are as follows:
·
Transfer fee: This fee is normally a 2% fee that is levied on
the property value stipulated in the registration by the land office.
·
Withholding Tax: 1% of the registered purchase price of the
property, if the seller is a company. If the seller is a private individual,
the percentage will be calculated based on the sale price of the property and
how long the property has been owned by the seller.
·
SBT (Specific Business Tax or Special Business Tax): This is
3.3% of the value or selling price of the property, whichever would be higher.
This fee is applicable to both parties, however, an individual can be exempt
from this fee if the individual has owned the property for a consecutive time
of 5 years or more. A company cannot be exempt from this fee, regardless of the
time of ownership.
·
Stamp Duty: 0.5% of the registered value of the property. This
tax is only applicable if the SBT is not levied in the registration. This fee
is usually considered to be liable to the seller.
Taxes and Transfer fees should be discussed and added into the
terms and conditions of the sales agreement in the initial stage of the buying
and negotiation process, to be fully aware of one’s individual financial
obligations at the time of property registration.
Now that you have your property, just enjoy it!
Not only do foreigners purchase property in Phuket for its
guaranteed return on investment, but this is a property that you can personally
love to live in. Condominiums are usually developed in areas that are a stones’
throw away from shops, bars and restaurants, and other amenities and
entertainment for you to enjoy. The island of Phuket is undoubtedly the most
popular holiday destination in Thailand which makes for a great home away from
home for its resort-like lifestyle, amazing tropical climate, and
luxury living
at a fraction of the price. With over 115,000 ex-pats living on the island, there’s no real culture shock or feeling of isolation as you are sure to make new
friends, especially with the warm and welcoming locals. The area is also
supported by its constantly developing infrastructure, providing everything you
need to make an easy transition.
Looking For Property in Thailand?
We have four properties right now on our blog that are undervalued properties based on appraisals and good for buyers in the current "buyer"s market.
1. Land In Chiang Rai Click here (Pending Sale)
2. Land In Surin, Thailand Click Here
3. Land In Doi Lo Chiang Mai (Pending Offer)
4. Condo in Patong Beach, Phuket
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