Buying a house

[SoiledCowboy]

Hi gunneruk and hope that you are on the mend with the shoulder op...It's a reality that purchasing a property in LOS is a whole lot different to what we know back in our own home countries and not much can be applied to the Thailand experience - and that's the very reason to hold back from grabbing too early for us foreigners until a compulsory learning period about the Thai real estate market has been served. Everything looks attractive in LOS to us, and much of it is comparatively, but there can be the odd viper out there to bite us if we rush in too quick or under-informed. While I don't share the doom and gloom scenarios with some other people, I do now understand where they are coming from...and that's the reason that the most valuable advice I keep on reading is, if you/me are going to move to LOS for the foreseeable future and buy your main property, then it is to rent for the first couple of years first. Use that time to get to know the local markets inside out, the proper value of properties etc and then with that knowledge, pick up a wise investment bargain and then be very happy for years to come. Buying a dud property that you then can't offload ever will ruin your enjoyment! Personally, there is no logical reason that I wouldn't buy something in selected areas of LOS and expect to be satisfied - as long as I followed that golden LOS rule - "Don't do in LOS what you wouldn't do back home" basically. Those farangs that seem to get burnt in Thai property always seem to have done all the wrong things, followed no advice, had nothing checked out thouroughly by experts, done no basic research, listened to spivs and barflys for their advice and gone straight on in and regreted it shortly thereafter. Believe not one single real estate agent be they Thai or farang - do your due diligence beforehand and you will be just fine and get many years of pleasurable residence until you are ready to sell and are able too. I always think now, that buying a good home or condo is quite like the thousands of beerbars that are sold nationwide - 95% of buyers rush in and buy on emotion only, to buy a dud that is then up for sale within six months after draining them financially- the other 5% of purchasers do their homework and buy because it is a valid business decision and they make an ongoing income, no drama. The real money to be made is from the sale of these dud bars to farang buyers! And homes and condos are not much different, be part of the successful 5% by making informed and reasonable purchasing decisions!

[think_too_mut]

gunneruk said:

Here is some info,but it does not answer my questions,but i hope it may help others.

 

Gunneruk, was it you who published a shorter version of your post in the Hua Hin Today, issue 1-31 October 2004?

The subject and wording is almost identical as in there.

 

www.huahintoday.net

 

(the issue is November's one, not October's that I reffered to)

 

Never mind if it were not you (the article was not authorized, no name), same as your post was published as a legal advice in the "Property Today" section of the papers.

 

So, I guess it can be trusted, from the legal point of view.

 

Properties at HH are expensive. Condos are more expensive than in Oz (8 - 15 mil Baht). Brand new houses (in a gated community, not on the sea) can be had from 2-8 mil baht.

 

Saw a sign on a block of land that Lotus Tesco construction is due to start this quarter. With that, the prices would go even further up.

[Guest]

Nope it was not me who posted in Hua Hin Today but i did find some more info there,that might help others,i guess the problem is that i do not have a Thai wife etc, its usual to buy the property in their name.

It is highly likely that by the time i die i will have,who i would obviously want to inherit any property in Thailand.

I have owned a condo in Hua Hin for three years,so i do know the area very well,and have kept an eye on the property market,as i knew,as soon as i move full time to Thailand, i will want something bigger,and not another condo,for a number of reasons.

I will be leaving my money in the uk,and a succesfull business that will continue to trade.

I am financially secure,but i simply do not want to just through away money,that possibly could go to my children in the result of my death.

If i can buy this house and there is some way of my kids being able to sell it and get the money,then i feel its worth looking into,if there is no way,then i am prepared to accept it.

I am just suprised that with so many tourists couples buying property in Thailand,i can't find the information i am looking for,but i shall obviously take legal advice when i return to Thailand,and i do know that many lawyers can't be trusted.

I found this and hope it may be of help to someone:-Ownership, Work Permits, and Investing in Thailand

Printer friendly version Send to a friend

 

Posted by admin / 28. March 2004, 20:10

Question : Can I , as a foreigner, Purchase Land in Thailand in my own name?

Answer : A foreigner cannot own land in his own name. He can purchase the land through his company ( Thai limited company ) or he can lease the land for 30 years, usually with extra 30 year options.

 

Q. What is the maximum number of shares I can hold if I register a Thai Limited Company?

A. All foreigners, other than Americans, can hold a maximum of 49% shares in a Thai limited company.

Q. If I purchase a bar or restaurant, but do not work in that business do I need a work permit ?

A. Thai law stipulates that as a foreigner, if you are working and do not receive an income you still need a work permit. If you purchase a business and do not physically work, but you receive an income from that business, you still need a work permit.

Q. How many Thai Shareholders do I need to form a Thai Limited Company?

A.This depends on the number of foreign shareholders. The minimum requirement is a total of 7 shareholders, 1 foreign 6 Thai, 2 foreign 5 Thai etc.

Q. What are the advantages of having a work permit ?

A. Having a work permit means you are legally allowed to work and receive an income in Thailand, you can obtain a 1 year multiple entry visa, open a bank account and purchase a telephone in your own name.

Q. I want to purchase a business, purchase a plot of land and build my own house. How do I get started?

A. Easy, as you would in your own country, you should most definatley leave it to the professionals. A good broker can guide you through the whole process, from finding the appropriate business, registering a company, acquiring the land, design and construction. They can even find you a rental home whilst your dream home is being built.

Q. How is landmeasured in Thailand . What is a Rai ?

A. One rai is 1,600m2 or 2/5 of an acre.

Q. How can the foreigner set up company in Thailand?

A. Under Thai Law there are many formats of business that the foreigner can set up company such as sole proprietorships, partnerships, representative office, branch offices, limited & public companies. The registration processing are hardly similar, depending on what type of business you wants to run.

Q. How long does it take to set up a limited company?

A. It should usually take approximately one month.

Q. How many shareholders are required under Thai Law?

A. A limited company is pratically at least 7 shareholders.

Q. How many authorized director is required under Thai Law?

A. There is no limit, but at least one director to authorize.

Q. Is there any promotion for the foreigner who want to invest in Thailand ?

A. Promotion is variously offered through responsible government Department, for example, the Board of Investment (B.O.I.).

Q. What advantages is foreigner granted from promotional investment?

A. Variously wide range of advantages, which the government grants to qualified foreigners, both of fiscal and non fiscal incentives.

Q. Is foreigner allowed to

have majority share holding or 100 percent ownership of a company?

A. Yes, if its business is notreserved for Thai people. In addition a company?s business is to be regulated under the Alien Business Act 1999, the company must obtain an Alien Operation License from the Ministry of Commerce of Thailand or B.O.I.

Q. Are there any restrictions foreigners doing business in Thailand?

A. Yes. The Alien Business

Act 1999 restricts foreigners from having majority ownership of companies engaged in the businesses listed therein. Join Venture

Q. Do they need to be registered with government registrar when joint venture agreements or shareholders agreements are formed ?

A. No, they don?t. They are regarded as private agreements enforceable between/among the parties.

Q. Can foreigners and Thai partners make joint venture agreements in Thailand?

A. Yes, as long as the provisions are not prohibited by law, are impossible or are contrary to public order or good morals. Work Permit & Immigration

Q. Is the foreigner pemitted to work in Thailand?

A. Yes, it is but must obtain a work permit prior to commence working in Thailand, unless exempted.

Q. In case the foreigner works in Thailand, and the mother company pays salary from an office or location which is outside Thailand, he still needs a work permit?

A. He most definitely requires for a work permit, regardless where the salary is paid from or where the salary is paid to.

[think_too_mut]

gunneruk said:

Nope it was not me who posted in Hua Hin Today but i did find some more info there,that might help others

 

No drama at all, you brought to us even more info.

 

Thanks for your effort and wish you are up and kicking soon.

 

Cheers.

[Guest]

The foreigner can personally own maximum 49% of the company shares, and the remaining 51% must be in the names of Thai nationals, all of whom sign undated Share Transfer Contracts at the time the company is being registered. This effectively puts 100% control of the company and its assets in the hands of the foreigner - the sole executive director.

Doesn't that make them nominees? I thought nominee shareholding to evade restrictions under Thai law (particularly the property code) was illegal? Indeed, that was one of the issues in the constitutional trial when Thaksin was elected. There was a story in the press a few years back where a sale of land to a corporation was set aside precisely on the basis that the Thai shareholders had executed undate share transfer deeds.

 

Also when you sell the property, the profits will need to be distributed as dividends. If this occurs the Thai owners of 51% of the shares will be entitled to 51% of the dividends, won't they? If you pay part of the sales price off shore I am pretty sure that is tax evasion (it seems to go beyond legitimate tax avoidance to me).

 

I am no expert in this area, but wouldn't it be safer to simply have the Thai shareholders hold their 49% in the form of preference shares with limited voting rights and limited rights to dividends? As long as the Thai shareholders actually pay in for their shares, they are not nominees since they have a true beneficial interest. To keep the shares affordable for the Thais, you simply keep the registered capital low. If the company that actually owns the land may need high capital, you put a thinly capitalized holding company above the company that owns the land. This is how I have always seen it done.

 

I guess the bottom line here is that I wouldn't rely on any free advice offered over the internet, including my own comments above.

[MaiLuk]

>>I guess the bottom line here is that I wouldn't rely on any free advice offered over the internet, including my own comments above.<<

 

About a year ago a farang explained to me that his thai lawyer set it up the way its been explained in this thread: the 51% thai shareholders have no rights because they signed a power of attorney in favor of the farang (same effect as the share transfer contracts). So it seems that lawyers are/were establishing farang corporations that way, not just internet rumours.

 

>>There was a story in the press a few years back where a sale of land to a corporation was set aside precisely on the basis that the Thai shareholders had executed undate share transfer deeds.<<

 

Holy shit gadfly. If this is true then any of the farang owned corporations could be undone if challenged in court, and the thais would end up with 51% (maybe 100%?) ownership of the property. Hard to imagine a mass appropriation of farang ownership interests, not a good way to impress foreign investors ::

 

But if I were doing this, I would get a second lawyer to confirm that what the first lawyer is doing will hold up if challenged. In fact you could request a formal legal opinion, and if the structure does not hold up then you can sue the second lawyer (that is the way it works in the west anyway). The first lawyer would also be a target for a malpractice claim.

 

About the idea of issuing preference (non-voting) shares to the thai shareholders, the 51% thai ownership requirement must not allow for this otherwise why go thru the trouble of issuing share transfer contracts?

[MaiLuk]

Another thing I would add here is that in the US we have a concept called "looking thru the form of the transaction to get to the substance." In the context of a farang corporation in thailand, if the corporation were challenged in court, a judge could do one of two things:

 

1. He can rule that the share transfer contracts are a recognized and enforceable form of contract in thailand and therefore there is nothing wrong with thais signing the same in favor of a farang. Farang should be treated equally before the law The ownership structure is a legitimate and legal way to operate a corporation

 

2. OTOH, the judge can look thru the form of the structure and say "the substance of the transaction clearly violates the thai laws restricting farangs to a maximum of 49% corporate ownership. Share transfer contracts are a thinly veiled attempt to unlawfully evade the purpose of the law which is to ensure that thai nationals have majority control of all thai corporations. And since this corporation was set up solely to own realestate, it is merely a paper facade designed to evade other thai laws that clearly prohibit farang ownership of real estate. I hereby find that the corporate structure is contrary to thai law and therefore invalid. mr farang has no ownership interest in this corporation, and therefore no ownership interest in the real estate."

 

:: Can you say "nightmare"? The beautiful thing about the law often times is that a judge could flip a coin, rule for one party or the other and still find in the law a justification for either ruling.

 

The real question here is what would motivate the judge to rule for #1 instead of #2? Good luck!

[MaiLuk]

I'm still thinking about this ::

 

In the news forum it was pointed out a judge in kanchanaburi released on bail the thai cop who shot to death two farangs in front of 16 witnesses. The judge did so even tho it was an extremely high profile case being watched by the international and local media. The female farang he murdered by shooting her in the head (twice) as she lay bleeding in the street AFTER he had run her over with his car.

 

So what will a judge in buriram or other province do when a connected thai comes to court to challenge a farang who claims to own some realestate? Personally I would not invest in property in thailand, at least at this time. Farang are at a major disadvantage when the legal shit hits the fan.

[Guest]

what those legal hurdles, insecurities and complications boil down to me personally is that it is not really worth buying a house, unless:

 

1) i would not need to care too much about the money. if it's lost i would not lose everything

 

2) it is in the name of my thai wife, and in case of divorce, or other circumstances, i would not mind it going into her full posession

 

why would i invest all, or a major part of my savings in buying overpriced real estate i cannot fully own, have to find unstable loopholes in the law to do so, while at the same there is an oversupply of cheap rental property?

[SoiledCowboy]

Sorry fly, but the big multi-national corporations down to the farang small villa, condo, home or business owner use the above methods of purchase and have done so for many years quite successfully and without the slightest hickup - if you are aware of anyone or any farang case who has had the procedures be turned against them in a Thai court then we need to know...The point I'm trying to make is that you are effectively more secure in the farang buying process of Thailand real estate/business than for example, my own and probably yours too, share market, who no longer issue paper shares but electronic receipts for $thousands/$millions/$billions/$trillions of share transactions in the market. There's a lot of implied trust in that kinda paperless system but we seem to accept this and buy and invest. And our own counties reliance of electronic records only for Real Estate Title/Ownership etc doesn't make the Thai paper-based record system look bad at all. Thailand relies heavily on foreign dollars being invested into their country and if the big multi-national foreign corporations utilise the near exact same procedures to acquire real-estate assets in Thailand, then I feel reasonably assured in any any of my little ventures - I'd be more worried about living out as many years of a 99 year leasehold than their legal system changing overnight to f**ck over a farang.