Are there any disadvantages?
Many foreigners consider hiring or using Thai shareholders to act as their nominees when using a Thai company to buy land. The use of nominee shareholders is illegal and has come under increased scrutiny by the Thailand Land Department and other governmental agencies.  A 2006 regulation requires Land Department officials to investigate the contributions of Thai shareholders when companies comprised of more than 40% foreign shareholders purchase land.

In the past, mechanisms such as registration of dual classes of shares, have been used to protect the interest of foreign minority shareholders.  If proposed amendments to the legislation regulating foreigners' business activities go into effect, some of these mechanisms may no longer be possible. See the Thailand Law Forum for a fuller explanation of the proposed changes.

Another issue to consider before registering a Thai company to purchase land or buy property, is maintaining regulatory compliance of the company. Thai law requires balance sheets to be filed yearly and a company address must be maintained. Technically, inactive companies (companies not earning income) are subject to de-listing.

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Needing some advice on land leases in Thailand? Our Thailand law firm can provide you with the assistance required to deal with the legalities of land leases in Thailand.

For a foreigner, dealing with land leases in Thailand may prove to be quite a task. Registration procedures of land leases, maximum lease term allowed and lease extensions, pros and cons of land leases in Thailand – these are some of the questions only an experienced law firm can answer. We have been specialists in land leases for over 20 years in Thailand. Our lawyers have helped many foreigners secure land leases with well-drafted agreements, and provided valuable advice for leasing land in Thailand. Let our expertise be your hassle-free path to land leasing in Thailand.

Land Lease FAQs:

1) Can a foreigner obtain 100% interest for a land lease in Thailand?
2) Do I have to register the land lease at the Land Department?
3) What is the maximum lease term available?
4) Why is land leasing favored by foreigners who wish to own property in Thailand?
5) What are the advantages of having a land lease over purchasing land with a company?
6) What are some of the drawbacks of land leases?

1) Can a foreigner obtain 100% interest for a land lease in Thailand?
Yes. A foreigner can obtain 100% interest for a land lease in Thailand. Unlike direct land ownership, the law allows foreigners to obtain long-term land leases.

2) Do I have to register the land lease at the Land Department?
Leases up to three years need not be registered but registration at the Land Department is mandatory for leases that are three years or more.

3) What is the maximum lease term available?
The maximum lease term available is 30 years, with an option to renew for an additional 30 years. Each lease renewal that is agreed upon with the landowner must be registered at the local land office. For each new registration, taxes will be levied. Land for industrial or commercial purposes may be leased for up to 50 years by a foreign company under certain circumstances, with the possibility of extending the lease thereafter.

4) Why is land leasing favored by foreigners who wish to own property in Thailand?
There are numerous obstacles faced by foreigners who wish to buy land or purchase property in Thailand. To avoid these obstacles, many foreigners choose to acquire land on a 30-year leasehold with an option for extension. This is the simplest and most straightforward way for foreigners to acquire property in Thailand. In addition, a lease stays valid even in the event that the property or the land is sold.

5) What are the advantages of having a land lease over purchasing land with a company?
A foreigner’s lease rights are formally recognized by the Thai law. The land lease is executed and registered only once, after which very little legal maintenance is required. In comparison, a limited company has several shareholders who may have interests that are different from yours, and this could translate into potential risks for you and your objectives. Also, a company requires regulatory compliances such as yearly balance sheets to be filed with the Tax Department.

6) What are some of the drawbacks of land leases?
Even a well-constructed land lease and a separate option agreement to extend the lease between the landowner and the lessee cannot guarantee the timely renewal of the lease. A landowner may refuse to sign any registration for the lease extension beyond the 30-year expiration. Although the lessee can sue the landowner for breach of contract, the legal process entailed may be costly and time-consuming. Other drawbacks include the difficulty in obtaining a mortgage for a lease (as opposed to direct ownership); a lower resale value; and potential lawsuits from the landowner for lease violations.

Entering into a lease, or forming a company to buy land or purchase property - both methods have its advantages and disadvantages. It would be wise to examine your individual needs and obtain legal counsel from knowledgeable and trustworthy attorneys before you make a decision.

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Sor Por Kor 4-01: This is an agricultural title deed, usually found in rural areas. Government land is transferred for agricultural purposes to needy families. Residence is allowed on a portion of the land. It is difficult for a non-Thai to obtain an interest in this type of land deed.

How do land mortgages work in Thailand?

Land mortgages in Thailand must be made in writing and registered with the Land Department of Thailand. Mortgages do not include the buildings built on the land after the mortgage date unless they were agreed upon before the mortgage documents were signed. In addition, buildings and other immovable structures may be mortgaged separately and should be registered with the Land Department or local Amphur (province). The fee for registering a mortgage is 1% of the amount declared in the mortgage agreement.

What types of taxes must be paid when purchasing land or property in Thailand?

The transferring fee, withholding tax and the stamp duty or Specific Business Tax (SBT) must all be paid by either the buyer or seller when a property is purchased. Although Sale and Purchase agreements differ, the buyer is typically responsible for the transfer fee, while the seller pays the stamp duty or specific business tax and the withholding tax.

Transferring Fee: 2% of the registered value of the property; paid at the Land Office on the day of transfer of ownership

Stamp duty: .5% of the appraised value of the property or the purchasing price, whichever is higher

Specific Business Tax (SBT): 3.3% of the appraised or actual price of the property, whichever is higher; Imposed only if the property is transferred less than five years after its purchase (If the SBT is levied, stamp duty will not have to be paid.)

I am buying land in the provinces outside of Bangkok. Should I hire a local law firm or a Bangkok-based law firm to help me?

If you intend to hire a local law firm, be sure that the local law firm you contact does not have a pre-existing working relationship with the seller and/or Land Department officials. Such law firms may be biased in their assessment. In most Western countries, it would be deemed a serious conflict of interest and breach of ethics for the same company to act as a real estate broker and a lawyer for the same client. However, in Thailand, certain companies marketing to non-Thais do exactly that. Alternatively, Bangkok-based law firms can be retained to travel to the provinces to execute the land deal. You may feel more confident that the Bangkok-based law firm will operate independently and 100% in your interests.

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Are foreigners allowed to buy land or property in Thailand?
According to the strict letter of Thailand land law, foreigners are, in general, prohibited from owning freehold land in Thailand. However, there are various exceptions in the law regarding this issue. There are also other methods available for acquiring ownership interest in land or property in Thailand that do not amount to outright ownership.

What are the different ways of buying or owning land or property in Thailand?

2.1 Land Leases: Although Thailand property law largely restricts land ownership rights to citizens, foreigners may hold 100% interest in a Thailand land lease. Thailand lease law allows a 30-year maximum lease period, with the possibility of renewing the lease for additional 30 year periods.

2.2 Company Ownership: Thailand registered companies with majority Thai ownership are able to buy land in Thailand. In the past it has been common for foreign nationals to acquire an interest in Thailand land as minority shareholders in a Thai majority company.

2.3 Investment: Thai property law may allow foreigners to buy and own a limited amount of land based on investment of 40 million baht for five consecutive years, provided that the land is used for residential purposes.

2.4 Thai Spouse: A Thai spouse of a foreigner may be allowed to buy land or property in Thailand in his or her own name. However the married couple may be asked to sign declarations at the Land Department to state that the funds used are the separate property of the Thai spouse. This may have the effect of waiving any claim on the land or property by the non-Thai spouse. This may become problematic in a divorce case as it may be difficult for the non-Thai spouse to prove that the land was marital property. In this case, a skillfully drafted prenuptial agreement may come in handy to minimize the risk to the non-Thai spouse.

Can Thai nationals buy land or property in their name and then execute an agreement that the land is held for a foreigner?
This is a risky approach because it is technically illegal for a Thai national to act as a nominee of a foreigner to buy land or property. Therefore, the agreement may be illegal and problematic.

Can foreigners own houses in Thailand?
Yes, there are no nationality restriction on ownership of houses or buildings in Thailand.

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Buying a condo in Thailand is an attractive option for many foreign nationals.  There are less nationality restrictions on condo ownership than land ownership and it is possible for a foreigner to own a condo outright.  As one of the few property rights allowed to non-Thai nationals, condo-ownership is popular for investment as well as residence and retirement purposes.

What condo units are foreign nationals legally permitted to purchase?
In general, non-Thai nationals may purchase condo units in condo buildings throughout Thailand, as long as their purchase would not cause the foreign ownership ratio of combined units in the building to exceed 49% of the total floor area.  Certain condo buildings in the Greater Bangkok Metropolitan Area may not be subject to the 49% foreign ownership ratio restriction.

What are the requirements for a foreign individual to purchase a condo unit in a building in which foreign purchases are permitted?
Foreigners who do not have a Thailand residence permit must show proof that the funds for purchase of the condominium were brought from outside of Thailand.  Non-Thais who have legal residence permits are not required to show evidence of funds coming from abroad.

What is the most typical way for a foreigner to purchase a condominium in Thailand?
Most foreigners purchase a condominium by showing evidence of an incoming remittance of foreign currency into their bank account from abroad.  This is typically demonstrated by requesting the issuance of a certifying document from a bank in Thailand.

Can foreigners inherit ownership of a condo?
Property ownership of a condo may be inherited by either Thai or non-Thai descendents under normal circumstances.

Are condominium long-term leases available?
Yes. Condominiums may be leased to foreigners for periods of up to 30 years and may have options to renew. Leases of greater than 3 years are required to be registered with the Land Department.  This option may be useful to acquire condominiums in buildings that have exceeded their foreign ownership ratio quota.

Why is important to have a qualified lawyer supervise your condo purchase transaction?
Thailand laws regulating real estate transactions do not provide as many inherent consumer protections as those in most western jurisdictions.  For example, in Thailand, real estate agents are not licensed and title insurance is not commonly used.  Thailand is very much a "Buyer Beware" jurisdiction.

Credit : thailand-lawyer.com