Property land ownership loophole closed

[Guest wowpow]

Bangkok Post Breaking news

 

Bangkok (dpa) - Thailand's booming property sector has been thrown into confusion by a new regulation issued this month that requires all partly foreign-owned companies to prove the source of their funding before purchasing land, industry sources said Tuesday.

 

The new Interior Ministry regulation that went into effect on May 25 has already started to slow sales of housing estates in Thailand's popular seaside resorts, such as Pattaya, Phuket, Hua Hin and Samui Island, which have been specifically targeting well-to-do foreigners as vacation getaways or retirement homes. "The property boom ended on May 25," said Ronachai Krisadaolarn, managing director of Bangkok International Associates, a Bangkok-based legal consultancy firm that caters to foreign clients.

 

Thailand has strict laws prohibiting foreigners from directly purchasing property themselves although loopholes in the law allow them to own land and their houses through long leases or a "nominee company," providing the company is majority Thai-owned. It is common practice for such "shell companies" to include Thai nationals who have been paid to act as nominees to facilitate the deal and who have invested nothing in the purchase.

 

The new regulation, signed by Suraart Thoingniramol, deputy permanent secretary of the Interior Ministry, is designed to halt the use of such companies for property purchases in the future. "If it appears that an alien holds shares or is a director or it is reasonable to believe that a Thai holds shares as a representative of an alien, the officers shall investigate the income of Thais holding shares, delving into the number of years [they have spent] in the current profession and monthly salary," reads a translation of the law. "The provision of necessary evidence is required."

 

The new regulation is actually an enforcement of Thailand's existing laws, legal experts said. "It's not a radical change. It's a radical implementation," Ronachai said. The regulation has already started to stall home sales to foreigners, sources said.

 

"There's a lot of confusion," said Simon Landy, managing director of the Primo Co, a property-development firm. "Some land offices don't know what to do with it, and many have simply stopped transferring land."

[Guest Hedda]

It's just another example of the double standard that the Thais use in addressing reciprocal relations with the rest of the trading world. They give lip service to patents and trademark protection of foreign intellectual property, and then act like Caesar's when anything Thai is involved in facing foreign competition.

 

It's my understanding that the Thai informally promised various international funding agencies that helped bail Thailand out of the 1997 meltdown of the Baht that Thailand would open its real estate markets to full foreign ownership once the crisis passed. It never happened and this latest regulatory scheme looks like a full retreat from that promise.

 

 

[Guest irish1972]

What happens to exisiting property owned by foreigners through a company?

 

Is it true you can own an appartment?

 

 

 

[Gaybutton]

What happens to exisiting property owned by foreigners through a company?

 

Is it true you can own an appartment?

 

Nobody knows yet what will happen with existing property. What we do know, so far, is that at least in Chonburi province, which is Pattaya's province, they are now refusing to issue deeds to corporations with "farang" ownership. Whether that policy will continue is anybody's guess.

 

What they have said is that they are going to inspect corporations with "farang" ownership to see if the Thai corporation members have sufficient means to be a member of the corporation. Maybe someone else knows, but at this point I have no idea what constitutes sufficient means or what will happen if it is determined that any of the Thai members do not have sufficient means. I am guessing that means the corporation would be quashed. I have no idea what is supposed to happen after that. Does the "farang" end up losing the property? I don't know. If the "farang" does end up losing the property, what happens to the property? Who ends up with it? I don't know the answers to those questions either.

 

At this point there is still very much confusion as to what's going on, why it's going on, how far this will go, where it will lead, and everything else involved with it.

 

The main thing is that Chonburi is presently refusing to issue deeds to corporations with "farang" ownership. Apparently, from now on any corporation that forms, it will require more than getting several Thai citizens to sign as members. It is my understanding that they will have to be personally present at the land office at the time the land transfer occurs and will have to show up with proof of sufficient means.

 

What we also know is this has no effect on condominiums owned by "farang" provided that no more than 49% of the units are "farang" owned. So, yes, you can still buy an apartment as long as you are within the 49% of "farang" ownership.

 

For a long time I felt as if I had made a mistake by buying my home under my boyfriend's name, rather than a corporate name, and taking out a long-term lease in my name. Now that this is going on, I am comfortable with my decision. My lease is legally valid and I am fully protected for the duration of the lease. My boyfriend has already agreed to another lease, assuming I am even still alive once the term of the lease runs out. My lease also includes subletting privileges.

 

I don't understand why Thai authorities suddenly came up with this decision. Technically, this law has always been in effect, but has never been enforced. That's somewhat like the bar scene. Technically, prostitution of any kind is against Thai law, but as long as the boy one wants to "off" is at least 18 years old, nobody gives a damn. It's been like that with property too. "Farang" are usually advised that buying property under the corporate method is not totally legal, but it is a safe thing to do. Now it doesn't seem so safe.

 

To my mind Thai logic comes into play yet again. Thailand is quite dependent on foreign money and wants "farang" to come to Thailand, and yet they seem to do everything they can think of to drive "farang" away. For those who bought property in Thailand, now the 1:00 AM closing rule seems like nothing in comparison with the prospect of losing one's property.

 

A close friend suggested that maybe big money is behind this. If a "farang" loses his property, then a well-to-do Thai citizen can buy the property, probably at a very cheap rate. He would become the owner and if the "farang" wishes to remain at the property, now he'll have to start paying rent on property his money bought in the first place.

 

Maybe something like that is behind this and maybe it isn't. I don't know. Also, maybe I am misunderstanding this and someone will correct me, but I hear several condo construction companies are up in arms because this will drive away a great many potential "farang" customers. For example, many condos are being built with "farang" in mind. Thai citizens are unlikely to buy 51% of the units. The idea has been to sell 49% of the units to "farang" and most of the remaining 51% to "farang" who buy under a corporation. Now, how can that 51% of the units be sold? Chonburi won't issue the deeds. I don't know what's going to happen with that either.

 

It seems to me that the answer to the question as to whether "farang" can buy an apartment still remains yes, provided that he falls within the 49% limitation. The problem is what's going to happen to the other 51% of the units? Suppose they can't be sold? What happens to the building? If you buy a condo that is under construction, and then the construction is halted as a result of this, what kind of hassle will you have to go through to get your money back? Can you get your money back at all? Answer . . . another one that I don't know.

 

Another thought that occurred to me, and nobody seems to be discussing this aspect of it, I would think Bangkok Bank, one of Thailand's largest banks, would be upset about this too. They got into the business of providing mortgages to "farang," remember? You have to go through their Singapore branch to get the mortgage, for reasons I don't understand, but now this is going to put a gigantic damper on their mortgage business, won't it? Also, "farang" who decide to cut their losses and get out might simply default on their mortgage loans.

 

So, there is plenty of confusion, fear, and anger over this. I don't get it. All these years nobody has worried about "farang" buying under a corporation. Now, suddenly a law that has been overlooked all this time is going to be enforced and nobody seems to know what to expect. Along with the questions about what will happen, I think another big question is why. Why is Thailand suddenly doing this? There must be a reason. I'd like to know what it is.

[Up2u]

Well the timing of this decision couldn't be much worse for me and many of my farang friends now living in Thailand. From what I've read on the Internet the intent was not to damage the real estate market but to go after several high profile foreign land developers. The unintended consequence of course has thrown the housing and condo market in chaos. I'm sure everything will sort itself out in the end but in the meantime there are a lot of nervous folks. I purchased a construction contract at View Talay 7 and supposedly am one of the "chosen" 49 percenters. Make me feel better if a had something in writing. Hopefully this isn't going to be a bumpy ride.

[Gaybutton]

Well the timing of this decision couldn't be much worse for me and many of my farang friends now living in Thailand. From what I've read on the Internet the intent was not to damage the real estate market but to go after several high profile foreign land developers. The unintended consequence of course has thrown the housing and condo market in chaos. I'm sure everything will sort itself out in the end but in the meantime there are a lot of nervous folks. I purchased a construction contract at View Talay 7 and supposedly am one of the "chosen" 49 percenters. Make me feel better if a had something in writing. Hopefully this isn't going to be a bumpy ride.

 

That's the whole point. Confusion and chaos reigns, as usual. This entire matter just wasn't properly thought through. Nobody, apparently including Thai authorities, seems to know what this means. If you are correct and the intent really is to go after certain high profile foreign land developers, then what would have been wrong with making that clear? They haven't made that clear, so people are frightened, sales are taking a plunge, and even the province of Chonburi is taking a knee-jerk reaction by declining deeds.

 

I don't know who thought this one up, but all I can say is . . . way to go.

[Gaybutton]

The following letter-to-the-editor appears in the Friday, June 9 edition of the PATTAYA MAIL:

_____

 

The Sky is Not Falling

 

Letter to the editor:

We represent a group of prominent real-estate agencies in Pattaya. This (email) is sent to a number of property magazines and related media publishers.

There is a lot of commotion and confusion over the new property regulation (issued this month by Suraart Thoingniramol, deputy permanent secretary of the Interior Ministry) that requires all partly foreign-owned companies to prove the source of their funding before purchasing properties.

We expect quite a bit of media response with readers

[Gaybutton]

My latest information is that "farang" limited corportions, the type of corporation most often used when a "farang" needs a corporation in order to buy property, are being inspected. Because the corporation must be at least 51% Thai-owned, the Thai corporate members are being checked for sufficient funds at the time the corporation was formed. Sufficient funds means that they had enough money to buy their share of the property, and the source of that money can be established.

 

In other words, suppose a foreigner bought a property for 1-milion baht. The corporation would have had to be formed with Thai citizens who had at least 510,000 baht in their bank accounts at the time, and they have to substantiate that the money wasn't in there because some "farang" stuffed their account. They have to show evidence that they really did have that amount of money.

 

If they did not, then they are subject to fraud charges and a three-year prison sentence. The "farang" will lose the property through confiscation and the property will go up for government auction.

 

Some people are saying that there won't really be such inspections because too much money is involved and there are just too many corporations to inspect. I believe that is wishful thinking. My information is that these corporations are being inspected.

 

You are safe if you did what I did, and that was to buy property under the name of a Thai, who remains the owner, and take out a long-term lease on that property. That is perfectly legal because the property is completely Thai-owned.

 

You are also safe if you bought, or will be buying, a condo, provided you fall within the 49% "farang"-owned limitation. No problem about that either.

 

We have had several "beach chatter" discussions about this. Some of us believe that this enforcement was planned a long time ago and accounts for the seemingly unlimited condo construction taking place in Pattaya, and that the authorities were waiting for what they considered to be the right time to spring this. Most of those construction boom buildings are now completed or are close to completion. Enforcing this long ignored law forces "farang" to buy those condos, rather than houses, if they wish to purchase property in Thailand. Chonburi will no longer issue deeds to "farang"-owned corporations, but there is no problem about a deed to a condo, provided that the law is being followed to the letter.

 

It is my understanding that if a corporate-owned property is found to be in violation of the law, then the "farang" is given thirty days to either sell or put things right.

 

Please note that this is the way I understand things to be. I might not be right or I might be misunderstanding something. My advice is that before you buy any property in Thailand, consult a Thai attorney to make sure you are buying legally and can get a deed for the property. I would never advise simply taking a salesperson's word for it or relying on the word of someone posting on a web site. Make sure you are in full compliance with the law and you won't have a problem.

[Up2u]

My latest information is that "farang" limited corportions, the type of corporation most often used when a "farang" needs a corporation in order to buy property, are being inspected. Because the corporation must be at least 51% Thai-owned, the Thai corporate members are being checked for sufficient funds at the time the corporation was formed. Sufficient funds means that they had enough money to buy their share of the property, and the source of that money can be established.

 

In other words, suppose a foreigner bought a property for 1-milion baht. The corporation would have had to be formed with Thai citizens who had at least 510,000 baht in their bank accounts at the time, and they have to substantiate that the money wasn't in there because some "farang" stuffed their account. They have to show evidence that they really did have that amount of money.

 

If they did not, then they are subject to fraud charges and a three-year prison sentence. The "farang" will lose the property through confiscation and the property will go up for government auction.

 

Some people are saying that there won't really be such inspections because too much money is involved and there are just too many corporations to inspect. I believe that is wishful thinking. My information is that these corporations are being inspected.

 

You are safe if you did what I did, and that was to buy property under the name of a Thai, who remains the owner, and take out a long-term lease on that property. That is perfectly legal because the property is completely Thai-owned.

 

You are also safe if you bought, or will be buying, a condo, provided you fall within the 49% "farang"-owned limitation. No problem about that either.

 

We have had several "beach chatter" discussions about this. Some of us believe that this enforcement was planned a long time ago and accounts for the seemingly unlimited condo construction taking place in Pattaya, and that the authorities were waiting for what they considered to be the right time to spring this. Most of those construction boom buildings are now completed or are close to completion. Enforcing this long ignored law forces "farang" to buy those condos, rather than houses, if they wish to purchase property in Thailand. Chonburi will no longer issue deeds to "farang"-owned corporations, but there is no problem about a deed to a condo, provided that the law is being followed to the letter.

 

It is my understanding that if a corporate-owned property is found to be in violation of the law, then the "farang" is given thirty days to either sell or put things right.

 

Please note that this is the way I understand things to be. I might not be right or I might be misunderstanding something. My advice is that before you buy any property in Thailand, consult a Thai attorney to make sure you are buying legally and can get a deed for the property. I would never advise simply taking a salesperson's word for it or relying on the word of someone posting on a web site. Make sure you are in full compliance with the law and you won't have a problem.

 

Your third to the last paragraph makes no sense to me. Enforcing this law does not force farangs to buy condos rather than houses but denies farangs the opportunity to buy either houses or condos. These new developements that you describe aren't cheap by Pattaya standards. The 49% foreign ownership is already sold out. Using 10 M baht as an example do you think a farang is going to find legal Thai partners for 5.1M. Would any foreigner agree to such an arrangement? Why would a Thai, assuming everything is done legally?

 

I wish you would state the source of your information. I heard from "sources" that the only "farang" companies being investigated are those purchasing quantities of land. In other words they're after foreign land developers. Also, reportedly Pattaya real estate companies will meet with Thai officals shortly in Chonburi and hopefully come to some sort solution to all this. Right now the only source I want ot hear is a Thai official speaking in an official capacity.

 

 

 

[Gaybutton]

My sources of information are the English language newspapers. Most of what I have written is my interpretation of what is in those newspapers. My own Thai attorney also is one of my sources.

 

As for that third to last paragraph, it makes plenty of sense to me . . . at least in light of Thai logic. I don't know why you think "farang" can't buy condos, unless I am misreading what you mean. You said, "The 49% foreign ownership is already sold out." Are you saying that the 49% is already sold out in all the new condos? If that is what you mean, and if it turns out that you are correct, then yes, potential "farang" owners would indeed be out of luck. I agree with you that the chances of finding reliable Thai partners who would be interested in helping out "farang" buyers, even for a fee, would be virtually non-existent.

 

The big question will be what will happen to those condos if they can't sell more than 49% of the units. Most of the condos that "farang" would want are not the kinds of places that many Thais would buy for themselves, even if they had the money. A scenario I can envision is that Thai investors might buy those units in hopes of renting them out to "farang" rather than selling them to "farang." If that doesn't happen, and if no other solution is found, then there's going to be a hell of a lot of vacant units.

 

According to today's PATTAYA MAIL, real estate sales in Pattaya have already experienced a sharp drop in sales due to this.

 

It doesn't even matter who is right about how many units are already sold. The result of this seems to be, at least according to the way I am interpreting the news reports, is that "farang" have stopped new buying whether they fit into the 49% or not.

 

I don't think anybody really can be certain about what's going on, why it's going on, or where this is going to lead. The only thing I know for sure is that the only "farang" who can consider themselves safe from this mess are those who bought a house in the name of a Thai citizen, took out a long-term lease, and registered that lease with the land office. If they didn't register the lease, then they better do so.

 

The best two descriptive words I can think of are "chaos" and "confusion." Nobody out there seems to be able to reliably answer any of the most urgent questions. One person tells you one thing and another person tells you something completely different.

 

To my mind, at the moment two of the more important questions are why this enforcement is being done after so many years of ignoring the law and why now?

[Up2u]

As for that third to last paragraph, it makes plenty of sense to me . . . at least in light of Thai logic. I don't know why you think "farang" can't buy condos, unless I am misreading what you mean. You said, "The 49% foreign ownership is already sold out." Are you saying that the 49% is already sold out in all the new condos?

Yes, that's my understanding, for example View Talay 5 & 6, not sure about VT 3.

 

The big question will be what will happen to those condos if they can't sell more than 49% of the units. Most of the condos that "farang" would want are not the kinds of places that many Thais would buy for themselves, even if they had the money. A scenario I can envision is that Thai investors might buy those units in hopes of renting them out to "farang" rather than selling them to "farang." If that doesn't happen, and if no other solution is found, then there's going to be a hell of a lot of vacant units.

With the prices they're asking for the newer projects I don't think the numbers support these units as good rental units for investors, except of course for the choice front-corner seaview units. I could envision the developer keeping these units and renting them in hope of minimizing his losses.

 

If in fact there is or will be a condo glut in the real estate as there was in 1999 I could see another revision to the Land Act similar to Section 2 (see link). I understand View Talay 2 just missed out on this exemption (Section 2.2B) in 2004 and also lost their appeal. Well anyway the saga continues.

 

http://www.dol.go.th/guide/foreigner_Eng_ver.htm

 

 

[Guest Hedda]

May I suggest that the only thing "clear" about the current situation regarding ownership of property in Thailand is that chaos reigns and the reasons are clouded in mystery. Just another dimension to why it's called Amazing Thailand.

 

Before anyone panics and sells his Thai company to some friendly Thai, in order to sign one of these 30 years leases, it might be helpful to remember that no one has yet tested the legality of the lease option when things get nasty between the Thao owner and farang tenant.

 

Has it occurred to anyone urging that action that a lease in which a farang pays no market rental could just as easily be labelled a "sham" as a company with minority farang ownership ? And if the farang claims that he pays no market rent to the Thai because it was his money that was used to buy the property, there's nothing to prevent an unsympathetic Thai court from declaring the entire transaction a "scheme" to avoid the law prohibiting farangs from owning real estate. That would leave the farang out in the cold, without the property or a lease.

 

Remember, when you put a property in some Thai's name, whether it's your current boyfriend or some nameless title holder, you have effectively given the property away as a gift. What happens, if and when the Thai owner claims that the farang should be evicted for lease violations such as non-payment if rent, noise, drugs or damage to the property.

 

If you were that farang on the wrong side of that lawsuit, how safe would you feel in a Thai court that's being asked to evict you by a Thai intent on throwing you out and a Thai lawyer who knows just how to break a lease ? It's not a pleasant thought that the only thing standing between you and living on the sidewalk is a piece of paper, probably written in Thai.

 

Although I am out of Thailand right now, which is why i can post on this forum from overseas, I have seen no evidence in the available press reports or anywhere on the internet that there is any active review going on of all Thai companies with minority non-Thai shareholders, especially where the non-Thai holds less than 40%.

 

On the contrary, what seems to be happening is that companies applying for new deeds where the farang owns 49% are being scrutinzied. That had been a practice for many years, prompting smart planners to avoid the magic 49% that once triggered an automatic audit, and why it's been resurrected now is anyone's guess.

 

In that connectiom however, the Thai press has been full of reports for the past six months showing a real slowdown in real estate sales, especially on the luxury end of the market. High oil prices, inflation and rising interest rates are the usual suspects in killing a real estate boom, or bursting a bubble, if that's what it is, and the political vacuum in Bangkok isn't helping the situation to stabilize.

 

Whatever the reasons, it seems obvious that the prudent thing to do, if you own a minority interest in some Thai company, is to sit tight and wait for the dust to settle. If and when your holdings in the company are challenged, which appears unlikely, there should be nothing to prevent you,if it ever comes to that, from transferring your shareholdings to the appropriate Thai in exchange for a 30 year lease.

 

Finally, if you are in the market to buy a house or condo, just remember that any event that scares folks out of a market is most likely to dampen prices, not increase them. Holding off from buying may save you money if, as some suspect, prices have now peaked and are heading south.

If there's a property you crave, and fear losing a bargain, think about getting an option to buy in some Thai's name, but that 's assignable.

 

Above all, get good legal advice from a good Thai real estate lawyer.

[Gaybutton]

Has it occurred to anyone urging that action that a lease in which a farang pays no market rental could just as easily be labelled a "sham" as a company with minority farang ownership ? And if the farang claims that he pays no market rent to the Thai because it was his money that was used to buy the property, there's nothing to prevent an unsympathetic Thai court from declaring the entire transaction a "scheme" to avoid the law prohibiting farangs from owning real estate. That would leave the farang out in the cold, without the property or a lease.

 

Actually, yes it did occur to me. I've double checked with my Thai attorney. According to him, at least in my case, there is nothing to worry about. When I took out the lease I prepaid the thirty years. It was, of course, a very small payment. He reminded me that it was the land office itself that set the minimum, not the Thai owner. It was all recorded, registered, and signed for at the land office. According to the attorney, there is nothing the owner can do, whether we have a falling out or not, until the lease expires thirty years later. Even if the owner sells the property, the buyer would, by Thai law, have to honor the lease. If I ever decide to leave, I have subleasing rights as part of the contract. From what he is telling me, it seems to be as iron clad as it is possible to be within Thailand. Also, he explained this with the owner sitting right next to me. So, even if what he said turns out to somehow not be correct, the owner believes it is correct. I doubt it would ever occur to him to try to dispute the lease even if there was ever a reason for him to do so.

 

The thing is, according to my Thai attorney, you have to do it as I did. The lease was created at the same time the final payment was made on the house and it was all signed and recorded concurrently.

 

It is my understanding that if a "farang" who bought under a corporation decides to transfer the property to a Thai, and then take out a similar lease, that won't work. I am told that such a lease will not be accepted by the land office.

 

It is also my understanding that a lease is not legally safe unless it has been accepted and recorded at the land office. A private lease between two individuals, whether "farang" or not, isn't worth the paper it's written on unless it is recorded at the land office. That's where many of the scenarios you are pointing out, Hedda, would be most likely to occur.

 

Of course, my attorney is primarily a real estate attorney, so I am taking him at his word. At least for now, I see nothing that will cause me to ever have to find out the hard way. Things like an owner claiming that the property is being damaged, drug use is going on, or something like that . . . he would have to show evidence of that, wouldn't he? Don't forget, the owner is not the only one who can hire a lawyer.

 

There is one little fly in the buttermilk, though. My plan now is to take out another thirty-year lease, assuming the owner and I still are getting along at the time the lease expires and if I am even still alive. However, a "farang" friend told me he had read somwhere that Thailand has a law that permits a thirty-year lease, at least for "farang," only once. According to him, when that lease expires Thailand will not permit another one and they will not permit an extension of the current lease. You would have to go year-to-year. I have not yet checked that with the Thai attorney. It sounds absurd to me, but then again for something absurd to be the case in Thailand would hardly be out of the ordinary.

 

In any case, the long term lease, taken out at the time the property is first paid for, seems to be the safest alternative if you can't buy a condo within the 49% limitation or prefer a house in the first place.

 

I suppose we could all come up with a million possibilities and "what if's." I prefer to go with the advice a close friend, an American attorney, once gave me: "Don't worry until you have something to worry about."

[Gaybutton]

Yes, that's my understanding, for example View Talay 5 & 6, not sure about VT 3.

With the prices they're asking for the newer projects I don't think the numbers support these units as good rental units for investors, except of course for the choice front-corner seaview units. I could envision the developer keeping these units and renting them in hope of minimizing his losses.

 

If in fact there is or will be a condo glut in the real estate as there was in 1999 I could see another revision to the Land Act similar to Section 2 (see link). I understand View Talay 2 just missed out on this exemption (Section 2.2B) in 2004 and also lost their appeal. Well anyway the saga continues.

 

http://www.dol.go.th/guide/foreigner_Eng_ver.htm

 

If you are referring specifically to View Talay, then you are probably right. But there are a lot more condos than just View Talay. If you are saying that the 49% limitation has already been met by all the condos in town, then I'll have to take your word for it. I have no idea.

[Up2u]

If you are referring specifically to View Talay, then you are probably right. But there are a lot more condos than just View Talay. If you are saying that the 49% limitation has already been met by all the condos in town, then I'll have to take your word for it. I have no idea.

 

Yes, I'm referring to View Talay. I suspect the vast majority of condos are less than 49% foreign owned. But let's face it foreigners gravitate to the newest, nicest projects with best beach front locations. Many older buildings I crossed off my search list simply because they lacked sprinkler systems, ggod location or 24/7 security which is important to me. I wonder how that new Royal Hill Condotel on the road to Jomtien will fair. I wondered why purchase there when there are so many others options available.

 

 

[Guest Hedda]

"It is my understanding that if a "farang" who bought under a corporation decides to transfer the property to a Thai, and then take out a similar lease, that won't work. I am told that such a lease will not be accepted by the land office."

 

GB, I would be interested to know where that understanding originated, because i have seen nothing in any press account or public statements that say or even suggest that. Indeed, I have seen no facts that suggest that companies with something less than 49% farang stockholders have had any problem registering deeds.

 

As far as I know, where a farang owns a minority interest in a Thai corporation, whether it does commercial business or simply holds real estate, the task of reporting and effecting changes in the company and paying annual taxes and fees is accomplished with the corporate bureau, not land office.

 

For example, as i understand the procedure, if you want to change stockholders, you file the change with the corporate bureau, not the real estate office. Once a farang was removed as a stockholder, the company presumably becomes 100% Thai owned, and capable of giving a lease to anyone it chooses.

 

Frankly, I'm not sure how the land office could even determine the history of a land parcel in the way suggested, declining to register a lease because the company once had a 49% minority farang stockholder. What do they do if his interest is 39 % ? Moreover, even if that happened, andf the land office rejected lease because of a former farang stockholder, the simplest way to avoid that problem would be to transfer the ownership of the land to a new 100% Thai owned company, which would then subsequently and legally lease it for 30 years.

 

If it were my investment, I would feel much more comfortable going the condo route, which keeps the property in your sole control, or using the corporate form for land, placed in legitimate Thai majority control, with the added protection of a lease, if it makes you feel better, because it allows you to maintain a degree of control over the asset that you lose when you effectively give it away to get back a lease.

 

When you put the land in a Thai's name and control, which is obviously a goal that the Thai government and authorities are very interested in promoting, you are relying to some degree on the good graces of your landlord to honor the lease and leave you in peace. Things can change, including relationships and landlords, especially over 30 years.

 

Remember, there is nothing to stop the guy to whom you give the deed in exchange for a lease, from selling the property and leaving you with a new landlord, who may have other plans for the property. If trouble comes between you and the landlord, you may or may not prevail ultimately in the end before some Thai court, but who wants to live a happy life in retirement in legal battles with the landlord ?

 

There's been a lot of talk in the press and even on some posting boards that may be designed simply to drive potential buyers into the arms of condo owners and developers with unsold new spaces who may soon be under pricing pressures to sell , what with too many units coming online and rising interest rates in a falling market. These folks would like nothing better than to have farangs think that owning a home in corporate form is not available or advisable.

[Gaybutton]

GB, I would be interested to know where that understanding originated, because i have seen nothing in any press account or public statements that say or even suggest that. Indeed, I have seen no facts that suggest that companies with something less than 49% farang stockholders have had any problem registering deeds.

 

We have a mutual friend (I believe you won't have any problem figuring out who I mean) who originally brought that to my attention. I don't know whether he is right or wrong, or where he got that from, which is why I said 'it is my understanding,' but he certainly seemed to know what he was talking about. I haven't checked it with my attorney. At the moment, I have no need to check it with my attorney because it would not affect me personally.

 

I agree, the condo route is certainly the safest, and if I had to do it all over again, that's what I would do. I've had this house for a number of years. At the time I bought it, it seemed like the thing to do and the corporate idea was a non-issue for me. It still is, really, for me. I know my circumstances and I feel secure that the legal owner isn't going to hassle me in any way.

 

That's me. I'm speaking only for myself now. I'm not trying to say that others wouldn't end up running into the kinds of legal problems you are bringing up, but I am definitely saying that if the contracts are all done by a competent Thai attorney and legally registered, then under Thai law you are protected whether the landlord wants to create problems or not.

 

If you want a house, then I would suggest buying as I did. It doesn't matter who the landlord is, or how many times the ownership of the property changes hands if the lease is prepaid and legally resistered in the land office. That comes directly from my Thai attorney. Nobody can touch the lease or force me out until either the lease expires or I voluntarily relinquish the lease. That, according to my attorney, is Thai law. So, if someone wants to go to court with that, let them. Thai law is Thai law. Until and unless my attorney tells me otherwise, that's good enough for me. As I said, I have already double checked with him since the corporation matter became an issue and he is still telling me that I am perfectly safe and in full compliance with Thai law.

 

I agree with you that buying a condo within the 49% limitation is the safest way to go. I believe a prepaid long-term lease is the second safest. I think third safest is to simply rent. The reason I place that third on the list is because whenever the rental contract runs out, whoever you are renting from can jack up the rent. You would either wind up paying his price or looking for something else. Of course, one positive aspect of renting is that you can simply walk away any time you wish without losing an investment.

 

For me, the bottom line is that if I knew then what I know now, then I would have bought a condo. Well, what can I say? I didn't know then what I know now, but I at least had sense enough to protect myself legally as best as I could. When I took out the lease, I really wasn't thinking too much about what my boyfriend would do. I was thinking about his family. If anything ever happens to him, those leeches would have me out on the street the same day, since ownership of the property would revert to them. The lease protects me against that possibility. The lawyer pointed out that I have complete control and my lease even entitles me to throw out the boyfriend for the duration of the lease if I so choose. If he sells the property, according to the lawyer, that wouldn't make any difference to the terms of the lease. The new owner would have to honor the lease under any circumstances.

 

So, I'm going to follow my USA attorney friend's advice about not worrying until I have something to worry about. The new corporation enforcement has nothing to do with me or my lease. For me nothing has changed . . . except for one thing. I had plans to form a corporation and transfer the ownership of my property to the corporation, which my boyfriend was quite willing to do. Now, since the enforcement issue came up, I can no longer do that. As it now turns out, it's a good thing I hadn't already done that.

 

You said, "Frankly, I'm not sure how the land office could even determine the history of a land parcel in the way suggested, declining to register a lease because the company once had a 49% minority farang stockholder."

 

I would imagine, if my information is correct, that they would do the same thing that is being done with property purchases. The corporate members would have to be personally present at the land office with documentation to prove they had sufficient means to be shareholders at the time the corporation was formed. If they can't do that, then no lease registration. Again, I have not checked that aspect with any attorneys because I have no need to. But if anyone is considering doing that, I would advise taking no further steps until you do check with a competent Thai attorney, one who is well versed in Thai real estate law.

[Gaybutton]

Yes, I'm referring to View Talay. I suspect the vast majority of condos are less than 49% foreign owned. But let's face it foreigners gravitate to the newest, nicest projects with best beach front locations. Many older buildings I crossed off my search list simply because they lacked sprinkler systems, ggod location or 24/7 security which is important to me. I wonder how that new Royal Hill Condotel on the road to Jomtien will fair. I wondered why purchase there when there are so many others options available.

 

I'm sure you are right about the majority of "farang" gravitating to those sorts of condos, but if someone wants to live in the Pattaya area, and if because of the new regulations they cannot buy into the condo, then they have no choice other than to look for alternatives or not buy at all.

 

Fortunately, one thing Pattaya does have is an abundance of condos. There is something for everyone. Not everyone wants to live near the beach. Not everyone can afford a top-of-the line condo. I know several people who bought in far less expensive condos, but they do have the means to live in top-of-the-line condos. They simply prefer not to, for whatever reasons. Some people are choosing to buy condos outside of Pattaya completely, where the prices are much less expensive.

 

One problem, as I see it, will be what can the developers of new top-of-the-line condos do now with the buildings under construction? If they can no longer sell 51% of the units to "farang" due to the regulation enforcement, then what will become of those units? I have no idea. While you are correct that "farang" usually want to buy units in these condos, not very many Thai people do, even when they have the means to do so. So, who will buy those units? What happens if nobody buys them? I don't have any idea.

 

The same holds true for condos that are already fully occupied. Many "farang" did buy via a Thai corporation. If the shareholders are not valid in accordance to the regulations, are these people going to lose their condos? According to my interpretation of the situation, that is exactly what will happen. If these investigations are truly taking place, then it seems to me that it is only a question of time before we start reading about "farang" who are losing their condos.

 

Then the units will be placed for government auction. If that happens, who will bid and buy? Obviously it can't be "farang." What will the buyers do with the units? The only thing that makes any sense to me is that they will try to rent back the units to those who lost them, probably at premium prices, or try to rent them to someone else. I don't know what else a Thai investor would do with the units, if it comes to that.

 

The brouhaha over this has caught the attention of Pattaya officials. There is an interesting article in this week's PATTAYA MAIL. See www.pattayamail.com/current/news.shtml#hd1 .