5 Legal Tips @ Koh Phangan
With the imminent arrival of high season, Koh Phangan anticipate a significant increase in the number of visitors and a corresponding increase in the number of real estate transactions as visitors seek to acquire a more permanent presence in paradise. Christian Glanville-lawyer, sets out five "Legal Tips" for potential investors to consider when investing in real estate in Koh Phangan.
1. Check the Developer in Off-Plan Transactions
It important make independent enquiries into the indentity and substance of the property developer in off-plan real-estate transactions. Investors should consider asking the developer to provide a resume, setting out its prior experience in the real estate sector, whether in Thailand or overseas, and listing previous projects which have been completed by the developer. Investors should consider making independent third party enquiries to corroborate the information provided by the developer, such as visiting completed projects.
it is also important to ascertain how the developer intends to finance the construction of the project, if the developer is relying solely upon deposits paid by buyers to finance the build, it is important to establish what the consequences will be if the developer fails to sell out the project or existing buyers are unable to maintain payments.
if a development is "Branded" by an internationally recognised brand, it is important to check the terms of the agreement between the developer and the brand and to determine the consequences of the brand terminating the agreement with the developer and rendering the project "Unbranded"
2. Check the Land
It is important to avoid assumptions with regards to the legality of the title to the land that investor is seeking to acquire an interest in. The existence of a number of previous owners does not automatically mean that the land has good title. Land Titles in Thailand require professional review of original land title documents actually physically present at the relevant land office to determine whether or not the seller actually owns the land and whether or not there are any encumbrances registered over the land.
The history of the land title undeneath the property should be thoroughly reviewed by a legal representative and a comprehensive report should be issued with a clear opinion on the quality of the land title. It is important to establish whether or not the land has full legal rights of access both on foot and by vehicle and access to the electricity grid, water supply and drainage. Careful consideration must be given to the zoning, environmental and planning restrictions which apply to the land.
3. Check the Legal Structure
It is important for potential investors to be aware that with limited exceptions, there is a general prohibition against foreign investors acquiring ownership of freehold land in Thailand. Foreign investors can legally acqquire a condominium unit "foreign freehold" long leasehold with renewal period of 30 years renewal; collective ownership leasehold schemes (where owners committees share indirectly the freehold interest through corporate management structures) and in select and qualified circumstances, through investment into Thai companies ( subject to strict qualifying criteria ). As an additional protection, investors should be aware that foreigners can legally own buildings in Thailand.
It is important for a foreign investor to ensure that the legal structure of the project complies with Thai law, maximizes the investor's legal protection and is appropriate to the purchase transaction in question. It is also imortant to ensure that the legal structure actually works, for example, in long term lease structures, very careful consideration must be given to the lease renewal provisions to ensure that the risks of the lease not being renewed at the end of the first 30 years registered lease term are minimized.
4. Check and Negotiate the Terms of the Sale and Purchase Agreement.
THe Sales and Purchase Agreement should clearly set out the key terms of the agreement between the parties including the price, payment terms, descriptioin of the property and the interest acquired and provisions relating to the registratioin of the legal transfer of ownership to the buyer.
The Sale and Purchase Agreements should also clearly stipulate who shall be responsible for taxes and registration frees relating to the transfer of the legal interest in property and stipulate the consequences of a breach of the Agreement by either party.
All significant verbal representations or assurances made by the seller/developer should be expressly incorporated into the terms of the sales contracts so as to minimize any ambiguity as to what was agreed between the parties.
Investors can protect beneficiaries, reduce tax liabilities and have a more saleable set of documents relating to their investment through the effective negotiation of the terms of the Sale and Purchase Agreement with the seller/developer.
5. Avoid Surprises Through Research and Understanding.
Foreign investors into real estate in Thailand must acknowledge and adapt to the difference in law and commercial practice in Thailand. Being prepared is an essential part of a safe investment. Finally, whilst advice form friends who may already have acquired an interest in property in Thailand can help, it is always prudent to instruct independent legal advisor to guide you through the differences in law and commercial practice and assist you to understand the nature and potential hazards of the intended investment.
(This artical was written by Christian Glanville )
