• Use of Escrow Accounts in Thailand
• Corporate Ownership of Property in Thailand
• Key Points in Thailand Property Purchase Agreements
• Pre-construction Acquisition in Thailand
• The Need for Due Diligence for Thai Property Purchase
• Steps in Exercising Due Diligence in Purchasing Property in Thailand
• The Importance of Title Search in Acquiring Property in Thailand
• Common Problems Encountered in Purchasing Property in Thailand

• Thailand Condominium Act
• Buying Condominium  in Thailand

• Usufructs in Thailand
• Thailand Leasehold – As viable Mode of Property Use

• Marital Property Relations in Thailand
• Ownership of Thailand Property by Thai Spouse

• Thailand Property Outlook for 2010
• Under-Declaring the Value of Properties in Thailand
• Landlords in Thailand
• The Right of Superficies in Thailand

The Thailand Real Estate industry has experienced a stable yet strong growth in recent years. As a result, property values have gone up and interest in Thai real estate has caught international attention. Unfortunately, this trend has brought about an increase in the number of unscrupulous real estate developers who have failed to comply with their obligations thereby resulting in a deluge of civil litigation.

As it once stood, Thai civil and commercial law permitted the use of an escrow-like account. This account outlined the terms and conditions of payment between the purchaser and the seller particularly the mode and manner of payment. However, this has proven inadequate in protecting the interest of the buyer by allowing unfettered discretion on the part of the account agent and the lack of any legal means in guaranteeing the agent’s impartiality. Also, regulation back then was lenient as banks themselves rarely, if at all, complied.

In order to address these concerns, the Thai Parliament has recently passed a law in December 2007 which eventually took effect on May 2008 recognizing and regulating the use of escrow accounts through a neutral third party provider. It provides additional security requirements such as limiting the entities who may engage in escrow service to recognized financial institutions. In addition, any escrow provider must secure previous authorization from the Ministry of Finance before opening an escrow account. Moreover, it is now obligatory for any escrow provider to keep a separate account for the escrow funds in order to prevent its commingling with his or her personal funds. All of these features have been put into place in order to avoid the previous excesses encountered.

Although the law was welcomed for its attempt to regulate the use of escrow accounts, some dealers and developers have raised their concern about the added pressure it has placed on their financial and operational management considering their restricted access to funds so heavily rely upon. Irrespective of such apprehension, the utilization of escrow accounts has now become a recognized and widespread practice in the country. It is therefore only a matter of time before the use of escrow accounts become the standard mode of payment.

At present, the use of escrow accounts has expanded to other industries including law and sales. An increasing number of established firms have take notice of its advantages and have begun to use it for their daily transactions. A favoured approach is the creation of offshore escrow accounts in jurisdictions that have developed Escrow regulation laws. All of these, however, have led to the increased operational complexity of escrow account agreements as they are now embedded in the stipulations of most purchase and sales contracts.

Precautions abound, the utilization of an escrow account in one’s commercial dealings still requires the expertise of a trained legal professional. The guidance of a dedicated legal analyst in unravelling the intricacies involved in this prevalent commercial practice may prove to be an invaluable tool for those who would want to avail of its benefits.

In conclusion, the Thai legal system has embraced the use of escrow accounts in order to facilitate secure commercial trade and activity. As more regulatory measures are expected to be passed, the use of Escrow accounts become all the more enticing. It may therefore be the standard mode of payment in the real estate sector and the key to its continued success in the future.

Despite the gains and advantages of becoming a landlord, there are still a few details to bear in mind in order to avoid any pitfalls in letting real property. The following are some of the most important considerations to take note of:

First, every potential lessor should have a working knowledge of the legalities surrounding a rent contract. Under the Civil and Commercial Code, a rent agreement is unenforceable unless evidenced by a writing signed by the party liable. In case of one exceeding three (3) years or existing during the lifetime of either party, it shall be enforceable only for three (3) years unless it is made in writing and registered by the competent official.

Second, every rent agreement cannot exceed a period of thirty (30) years and any excess shall be reduced. Moreover, note that the law does not allow any extension and any renewal is entirely voluntary on the part of the lessor despite any stipulation calling to that effect after the lapse of thirty (30) years.

Third, any potential landlord should bear in mind the different duties and obligations prescribed by the law. As a rule, the lessor is liable for the expenses incurred in repairing the property except only in two situations. First, when the expenses incurred was related to the maintenance of the property and second, where the nature of the expenses are by law or custom, to be borne by the tenant. As to costs however, the law requires that both parties answer in equal shares.

Another duty imposed is the delivery of the premises to the tenant in a “good state of repair”. The law gives the tenant the right to terminate the contract if the property delivered is not suited for the purpose for which it was let.

Fourth, deposits are securities in favour of the landlord and It is usual practice to demand one (1) month in advance and a security deposit amounting from two (2) to three (3) months prior to occupancy. As a rule, the return of a deposit is made one (1) month after the termination of the lease. The deposit may also be used as a fund from which unpaid expenses and other costs may be recovered.

Last, the terms for terminating the agreement should be provided. Under the Code, a rent arrangement is terminated upon the expiration of the agreed period without notice. If no period is agreed upon or presumed, either party may terminate the agreement at the end of each payment period with notice. Note that if at the end of the agreed period, the tenant remains in the property and the lessor knowing thereof does not object, they are deemed to have renewed the contract for an indefinite period.

Irrespective of the imbalance present in the current legal system, renting out property still remains one of the most lucrative endeavours in the country. As such, any individual wishing to take advantage of this situation should understand the responsibilities and obligations involved in order to ensure a continuous return of investment.

Under the Thailand Civil and Commercial Code, it is required that the agreement creating such a right appear in writing, contain the terms and conditions regarding its exercise and such be registered with the Land Office. Registration entails the presentation of the Superficies contract along with other relevant documents including the land title deed, house registration book, ID cards and passports. Upon payment of the required transfer tax, the right of Superficies is deemed created.

Constituting a right of Superficies over a parcel of land has its advantages, the most salient of which is that it allows foreigners to participate in its creation and permit the exercise of real rights over property. It is one of the few rights in the Thai legal system accorded to foreigners concerning immovable property. Another advantage of the right is that being a real right, it does not cease to exist even if title over the land on which it was constituted had been subsequently transferred. Eventually, the right may be enforced even against third persons not a party to the Superficies contract. Moreover, since a right of Superficies is a transferrable right, a holder may eventually transmit it in favour of his heirs in order to extend its period. Thus, the right has been known to constitute an alternative form of estate planning where interest over the right is transferred from the holder to his or her heirs.

Nevertheless, the right of Superficies, though transmissible, remains a temporary right. Thai law limits its exercise for only thirty (30) years or for a period of time terminating upon the death of the owner of the land or Superficiary. Any possible extension would require the parties to renegotiate and enter into another Superficies contract. Moreover, any transfer of the right requires prior consent of the land owner. Perhaps considered as its biggest disadvantage, the use of the right of Superficies has not yet gained wide acceptance in local commercial dealings. The reason lies in the fact that most landowners prefer disposing their property entirely rather than merely constituting a right of use over it and that most buyers prefer having absolute ownership over the land and not only on the improvement on it.

In order to remedy these perceived inadequacies, an unorthodox practice has been developed wherein a foreigner married to a Thai citizen makes the latter acquire a freehold on real property which shall then be subject to the right of Superficies in favour of the foreigner spouse. This in effect gives added protection in favour of the foreigner spouse by ensuring that the right of Superficies shall be respected during its operation.

In summary, despite its advantages, the right of Superficies in Thailand as a means for foreigners to acquire interest in real property remains underutilized as it has yet to achieve widespread use. Nonetheless, the advantages this right offers to foreign investors makes resort to such a grant worthwhile.

The availability of a loan arrangement depends on the kind of property to be acquired. Access to financial services for the purchase of Thailand Condominium units is relatively easier. On the other hand, loans for housing purposes are available only to Thai individuals or companies as provided by just a handful of local banks. In addition, no loans are advanced in order to finance properties held under leasehold as banks have yet provide this service.

Aside from these, the maximum amount that a bank can furnish usually extends up to seventy percent (70%) of the purchase price. Note that every bank has their own mode of property valuation hence every applicant should be aware of a potential variance in the amount a loan would provide. Furthermore, the amount of a loan accommodation usually ranges from one hundred thousand (100,000 USD) to eight million dollars (8,000,000 USD) depending on the bank. Moreover, the total loan term and age of the applicant must not exceed sixty (60) years except in certain rare instances extending up to sixty-five (65). Furthermore, the usual payback period lasts for five (5) years while some banks have adopted the policy of requiring a minimum of seven (7) years. Additionally, it is required that an applicant have a monthly salary amounting to three (3) times the amount of a monthly instalment. Also, any loan applicant will have to undergo a comprehensive credit check in order to guarantee that the applicant has the capacity to remain in sound financial condition.

Aside from these, foreign applicants are also required to exhibit the following documents as prerequisites for the extension of any financial assistance:

1. A work permit existing for at least one (1) year depending on the bank or a Thai resident permit;
2. A documented salary including pay stubs and bank records for at least one (1) year depending again on the bank applied;
3. A copy of the passport including the visa page;
4. An ID card or government official ID card;
5. House registration certificate and
6. Marriage certificate if applicable.

Interest on loans usually extended to foreigners amount to eight point seventy five percent (8.75%) and are set at prime plus point five percent (.5%). Some banks use different rates depending on the type of currency loaned.

In mortgaging the land purchased as a means of security, the provisions of the Civil and Commercial Code require the following:

1. The borrower must have a right of ownership over the property;
2. The contract must be in writing and registered by a competent official in the proper office and
3. It must contain a statement, in Thai currency, of either the sum or a maximum amount for which the mortgaged property was assigned as security.

In conclusion, any attempt on the part of foreigners to procure a loan from local banking and financial institutions will encounter restrictions and limitations that can, with proper preparation and information be resolved with ease.