Hiring someone to build a house? Thai law now protects you.

After ten years of success of consumer protection for condominium units purchased from a developer in Thailand, consumer protection for the construction of residential houses is now celebrating its first year of enactment.

On 1 January 2017, by way of the Notice of the Contract Committee for the business of residential building construction which shall be contract-controlled (2016) (the “Notification”), residential house construction contracts were officially included among the list of contracts that are regulated by the Consumer Protection Act (1999) (the “Act”).

How can you benefit from this?

In short: if you hire a contractor to construct your house in Thailand, you now have rights that are applicable to your agreement with the contractor regardless of whether your agreement with the contractor explicitly includes these rights or even if your agreement with the contractor provides for terms contrary to these rights.

And these rights have teeth. The Act specifies that should your contractor fail to comply with the Notification the contractor may be subject to imprisonment for a term not exceeding one year, or a fine not exceeding one hundred thousand Baht, or both.

The Notification outlines several terms a contractor must now include in all residential construction contracts, such as:

  • the details of the parties to the contract with the parties’ addresses and identifications, the place and date of contract, the purpose of the construction, a description of the building, and the construction location;
  • the details of the construction costs, including VAT;
  • a description of the construction materials, including quantity and price;
  • the payment schedule in accordance with work progress;
  • the due date of the building permit application, to be measured from the contract execution date;
  • the completion date, to be measured from the date the building permit is received;
  • the contractor’s liability for defects, such as five (5) years for structure and one (1) year for component parts and equipment;
  • lists of the construction materials, including quantity and prices;
  • your right to have a third party remedy construction defects in case of any failure by the contractor to remedy the same; and
  • your termination rights in case of delays in starting construction or completion including a contractual penalty of 0.01% of the construction price per day (limited to 10% of construction price) for late delivery.

The Notification also provides that certain terms are now prohibited in residential construction contracts, such as:

  • the exclusion or limitation of liability for breach of contract by the contractor;
  • termination by the contractor without written notice or under any circumstances where you are not in material breach of the contract;
  • the contractor’s right to claim partial payments before the due date as set out in the contract if you are not in default of any payment or otherwise in breach of the contract;
  • the contractor’s right to amend the contract’s construction specifications, prices, or conditions, or to add any additional obligations with which you must comply, without your written consent;
  • the contractor’s right not to refund your payments;
  • restrictions to your inspection rights;
  • the contractor’s right to assign the contract without your consent;
  • that any of the construction and equipment for which you have paid will be owned by the contractor at any time; or that
  • should you fail to inspect the work within any specified time you will be deemed to have accepted the construction, including any construction defects.

Thailand’s inclusion of condominium development sale and purchase agreements in the list of contracts protected by the Act ten years ago has been of significant benefit to investors and, thereby, to Thailand’s real estate market and greater economy. We expect that this year’s inclusion of residential construction agreements under the Act will yield similar benefits.


DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in over 50 other countries. Visit them at: duensingkippen.com

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Using a Thai company to own a home is a bad idea (part 1)

This is part one of our two part article published in The Phuket News in 2012 on using a Thai company to own real estate in Thailand. It was a bad idea then, and its still a bad idea for all the same reasons.

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You have bought your dream house in Thailand, which includes an incredible ocean view. You couldn’t be happier. And then, it happens. Someone starts construction of their dream house, directly in front of yours which, when completed, will completely block your beautiful view. What, if anything, can you do?

There are legal measures that can address this issue. How successful those measures are depends on what steps you take and when. Most commonly purchasers fail to take any steps to protect that treasured view that was part of why and what they thought they were buying.


Sometimes parties will enter into a contract, which includes a provision to protect their view. This is already better than nothing. However, if your contract party is no longer the owner of relevant land at some point in the future (because they cease to exist or sell the land to someone else, etc.), then you are essentially in the same position as an owner who did nothing.

Furthermore, we often see contractual provisions that are intended to protect an owner’s view wherein such protection was dependent on some “owners committee”—that does not legally exist, and therefore, cannot be held liable to protect such view.


So what if you have no enforceable contract?

One possible option would be to file a case in civil court based on the loss of the full benefit of your property. However, your view might not be recognized as a compensable benefit. And, even it is, at best you would be awarded money, but not your view.


Another possible option would be to challenge the construction itself. A party who is affected by the government’s bureaucratic actions may challenge such action by administrative appeal. In our case, this would include the government’s issuance of a building permit to the party who is or will block your view. However, in order to succeed on such a claim, you will need to show that the building permit we issued illegally. If so, the construction may be halted or, if built, ordered to be demolished. However, if the permit was issued legally, your claim will not succeed.


As you can see, in none of the circumstances above could your action legally secure your view. There is, however, an alternative that will do that. A “servitude” is a real estate property right which allows you to restrict construction on the land that would block your view. If you wish you protect your view, and if such is a key component to your purchase, then it is recommended that you require such a servitude to be registered on the relevant land in favor of your purchase land as a condition of and prior to your purchase.

As a legal right (as opposed to a contractual right) a servitude is registered on the title of the land that could block your view. Thus, regardless of who the current or future owner of that land is, the owner will be restricted from blocking your view.

Furthermore, the legal servitude right will also be registered on your land title and be applicable to future owners as well, an obvious added benefit to your heir or your sale price should you decide to sell the property on later.


DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in over 50 other countries. Visit them at: duensingkippen.com

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Thailand’s Phuket Court declares long-term leases unenforceable, again

An investment in real estate in Thailand on a leasehold basis is commonly used by foreigners due to the stringent rules that are in place to restrict foreign ownership of land and apartment units in Thailand. Under Thai law the maximum lease term is thirty years, which may be renewed upon expiration of that term. Because thirty years is a relatively short duration, leases marketed to foreigners typically provide for an initial thirty‐year term plus two additional successive thirty‐year renewal terms or “30 + 30 + 30 leases” as they are often referred to.

The problem for investors in such a lease is that the renewal terms are generally not secured. Should the owner of the leased property change during the lease, the remaining renewal term(s) is not enforceable against the new owner. Thus, to address this issue developers have marketed “secured leases” to foreigners. However, five Phuket trial and appellate judges found such leases to be legally void in 2015 as we wrote about at that time. It was these judges’ opinion that such a lease is the legal equivalent of a purchase and that such a lease agreement is entered into by the parties in order to conceal another contract: a sale and purchase agreement for the same immovable property.

Now, in yet another surprising decision, the Phuket trial court has ruled that leases of immovable property with a term of thirty years with two successive thirty-year renewal options themselves are invalid for the same reason. In this court’s opinion, any thirty-year lease with two thirty-year renewals is void because it is not a lease but rather a sale.

What is also interesting (or perhaps, disturbing) is that in both the secured lease case as well as in the recent case involving a simple 30 + 30 + 30 lease, neither the plaintiff nor the defendant argued that they intended to conceal a sale and purchase agreement—-the courts found and concluded this on their own.

In the recent 30 + 30 + 30 case, the relevant law that the court was relying on is Section 155 of the Civil and Commercial Code of Thailand (“CCC”) which states:

A declaration of intention made with the connivance (wrongdoing) of the other party which is fictitious is void; but its invalidity cannot be set up against third persons injured by the fictitious declaration of intention and acting in good faith.

If a declaration of fictitious intention under paragraph one is made to conceal another juristic act, the provisions of law relating to the concealed act shall apply.

In lay terms what this means is that if two parties are “faking” a contract (for example, a lease agreement), in front of other people, but they really mean to and are entering into a different contract (for example, a sale and purchase agreement), then the fake contract (in this example, the lease agreement) is “void” —-that is, legally it never existed. A “lessee” that entered into such a void “lease agreement” would then have no right to the relevant immovable property itself and could be forced to vacate the premises at any time as provided by Section 172 of the CCC:

A void act cannot be ratified, and its nullity may be alleged at any time by any interested person.

The return of a property arising from a void act shall be governed by the provisions on Undue Enrichment of the Code.

As we discussed in our article regarding the court decisions on “secured leases” it makes no difference if the lease itself was already registered at the land department or not. The finding that a lease is void means that it never legally existed and, therefore, as far as the law is concerned, a void lease cannot be, nor ever could have been, registered. Even if the legally void lease went through the land office formalities of registration, with registration fees paid, papers signed and stamped by the land officials, it simply does not change the legal non‐existence of the void lease. If you have a void lease agreement, you have nothing.

What about the “actual” agreement the parties entered, according to the Phuket court, the sale and purchase agreement? Doesn’t the “lessee” at least have rights under that finding by the court? Not according to the court because, as Section 456 of the CCC provides:

A sale of immovable property is void unless it is made in writing and registered by the competent official.

And the courts, in the secured lease case and the recent simple 30 + 30 + 30 lease case, concluded that since the “sale” was not made in writing nor registered with the competent official, it too was void. In other words, as a legal matter, it never happened.

This is now the second case that we are aware of in which Phuket courts have declared long-term leases void. This must be extremely disturbing to many foreign investors investing or intending to invest in real estate in Thailand. Even though the present government is discussing an extension of the current 30 year lease to a maximum of 50 years, the problem of void leases will remain.


DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in 45 other countries. Visit them at: duensingkippen.com

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We detail Thailand’s Investment Visa in the current B&M issue

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DK on investing in Thai real estate in “The Address”

Our article on investing in real estate in Thailand appears on pages 37- 44 of the current edition of the international luxury life-style magazine ‘The Address’.

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Thailand Eases Restrictions on Properties Used for Short-Term Rentals

We have previously explained HERE (and with a further follow-up HERE) that most villa or condominium unit owners who are renting out their property on a short-term basis (that is, for periods of less than 30 days) are most likely violating the Hotel Act (2004) if they do so without having received a hotel license. The potential punishment for such violation includes significant fines, or imprisonment, or both.

Historically however, obtaining a hotel license for most such owners has been very difficult—if not impossible. A major reason why is that in order to obtain a hotel license the property must comply with the requirements for certification for use of the property as a hotel under the Building Control Act (1979)(“BCA”).

Yet, many are tempted to, and currently do, invest in properties to participate in this lucrative market without a requisite hotel license. On the other hand, tourism is one the most significant contributors to the Thai economy. This has created a tension between the need to enforce the law and the desire to maintain a robust tourism industry and investment market. As some, including us, have pointed out, one way to accommodate both of these very legitimate, and currently competing, concerns would be to liberalize restrictions applicable to so some number of such properties. Thus, we are pleased to see that the current government has recently taken one such step.

On 19 August 2016, Thailand’s Ministry of Interior Ministerial Regulation Prescribing Descriptions of Other Types of Building Used for a Hotel Business Operation 2016 under the Building Control Act (1979) (the “MR”), became effective. The MR should make it easier for more property owners to obtain a hotel license.

The MR will remain in effect for five years. However, it applies only to buildings that existed before it came into force and whose owners desire to use the property as “Hotel” (as defined by the Hotel Act) with either:

(a) rooms only; or

(b) rooms and food service/restaurant facilities.

The three categories of buildings that are eligible for this re-classification are as follows:

Type 1: a building with not more than two floors and not more than 10 rooms;

Type 2: a building that is not a Type 1 building and which does not have more than twenty rooms; and

Type 3: a building that is not a Type 1 building and which does have more than twenty rooms.

The MR liberalizes the various Hotel usage-building requirements under the BCA for these types of buildings. For example:

Minimum open/unused space

1, 2, and 3

Equivalent to 30% of “the area of the largest floor of the building
(MR. No. 55 Clause 33)
Equivalent to 10% of “the area of the largest floor of the building
Minimum width of the walkway
Type 1 1.5 M
(MR. No. 55 Clause 21)
1 M
Type 2 1.2 M
Type 3 1.5 M
Minimum width of stairs
Type 1 1.2 – 1.5 M
Based on area of the upper floor
(MR. No. 55 Clause 24)
0.9 M
Type 2 N/A
Type 3 N/A
Minimum Live Load
Type 1 200kg/SQ M
(MR No.6)
150 KG/ SQ M
Type 2 200 KG/ SQ M
Type 3 200 KG/ SQ M

An application to change the usage a building to a hotel under the BCA must be completed within five years from the date the MR came into force. However, if the building requires structural modification before applying to change its usage to a hotel, that application (or notification under Section 39(bis) of the BCA) must be filed within two years.

And it should be noted the building must still comply with other BCA regulations regarding hotel usage, in force at the time the building was originally constructed (or altered), regarding such matters as the building’s height, setback, and parking.

In closing, it should be noted that the MR does not mean that all owners who wish to rent their properties on a short-term basis and who’s properties do or can comply with the MR will now be able to legally do so. There are other laws that need to be considered and which may restrict such use—particularly with regard to condominiums, and all the more so with regard to foreigners. Thus, caution and clarity are advisable before taking steps to take advantage of the MR. That said, the MR is a very welcome step in the right direction for the tourism and real estate investment markets in Thailand.


DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in over 100 other jurisdictions worldwide. Visit them at: duensingkippen.com


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Our “Lease-Mortgage” article in AMCHAM-Thailand’s current issue

Our article on the most secure way to structure long term leaseholds in Thailand is featured in the current issue of the American Chamber of Commerce of Thailand’s magazine.


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Fact Checking Comments in the Media Regarding “Illegal Hotels”

Since we published our article, “Is your house or condo an illegal hotel” on 30 April 2016 there have been several media reports on the same subject. Unfortunately, not all of the comments quoted in the reports were legally accurate. And we have received several inquiries regarding the reports. Accordingly, we thought we would take the opportunity to provide a short legal “fact checking” of the following comments quoted in the reports that seemed to have peeked the greatest interest:

1.       “[Renting one’s condo] is a personal arrangement between the person renting out the condo and the person renting it – it does not concern the Employment Department.”


Section 5 of the Alien Workers Act defines “work” as follows:

“Work by using manpower or knowledge, whether those who perform the work want wage or any other benefits in return or not.”

Setting aside the circularity of the definition, any foreigner within Thailand engaging in any activity that meets that definition would need work permit. In our opinion, actively renting out your condo or villa on a daily or weekly basis could be considered a service. And using your knowledge or manpower to do so meets the Section 5 definition.

However, if you do so from outside of Thailand you do not need work permit.

2.       “In actual fact, according to Thai Law, foreigners allowed to purchase under foreign quota is [sic] only allowed for personal dwelling and not for business or income.”


It is true that the Condominium Act restricts the percentage of foreign ownership of a condominium,  but there is nothing in the Condominium Act that specifically restricts a foreigner’s use of their condominium unit.

However, if the registration of the condominium juristic person occurred after July of 2008 then commercial or business activities by anyone, foreign or Thai, are prohibited in any part of the condominium building that has not been officially reserved for such activities. In our opinion, short-term rentals constitute commercial/business activity. Any violation in this regard is subject to a fine of THB 50,000 plus an additional fine of THB 5,000 per day of the violation.

3.       “Rentals can be done from 30 days up and not less.”


The Hotel Act restricts rentals of less than 30 days without a license. But there is an exception to this for properties with four bedrooms or less and where the income earned from doing so is not the operator’s primary source of income, as we explain here.

4.        “If you are a Thai company you need not have a work permit as you have Thai directors.”


Neither the Civil and Commercial Code nor the Foreign Business Act require a Thai company to have a Thai director.

Furthermore, if you are a foreigner, and the Thai company in which you are a shareholder or director is doing any business activity, and you are acting on behalf of the company for its business – you need a work permit (full stop)

5.       “It is inacceptable [sic] to operate an illegal hotel. The penalty for this is up to one year in jail or a fine of up to THB 20,000, or both.”


Correct, but there is also an applicable fine of up to THB 10,000 per day of the illegal operation, as we explain here.

6.        “If a property is registered with the Land Department as a condo, then it cannot be registered as a hotel.”


The Condominium Act regulates a type of real estate ownership, but not activities or businesses.

The Hotel Act regulates what it defines as the type of activity that constitutes hotel business.

As long as:

  1. a registered condominium building complies with the requirements of the Hotel Act (which also requires compliance with the Building Control Act’s requirements regarding hotels);
  2. all or part of the condominium is officially designated to be used for commercial purposes; and
  3. all of the owners of the condominium consent obtaining the hotel license, then

a condominium can, indeed, obtain a hotel license. And in fact, there are many such cases of registered condominiums for which hotel licenses have been obtained, including in Phuket.

Generally this is planned and processed when the development is set up. But it is also possible to change an pre-existing apartment building into a legally registered condominium and, therefore, a legal hotel as well, as we explain here.

7.          “To make them all legal can take time and some of them simply cannot be registered as a hotel simply because structurally they are not hotels.”


As the Hotel Act stands at the moment, most illegal “hotels” cannot become legal, largely because they cannot comply with the requirements under the Building Control Act for legal hotels. And for those currently illegal hotels that could comply, it would require a significant amount to time for them to obtain legal status.

However, it should be noted that operators who are providing rentals of less than 5 bedrooms for less than 30 days AND only for “additional income”, could comply with the Hotel Act by simply reporting their activity to the relevant local authorities.

8.       “The Hotel Act needs to be updated to allow condominiums that do wish to obtain a hotel license and villa estates or properties a clearer pathway, as there are a many who are willing to obtain the necessary documentation.”


“A hotel business involves many laws, so solving this issue is not easy. The Ministry of Interior is working on this issue. I know the ministry is considering a proposal to allow other types of building to operate as hotel, which is now being considered by their policy committee.”


This could be done without the need to amend the Hotel Act itself. As we mention above, there is already an exception to the definition of a “hotel” under the Hotel Act pursuant to a Ministerial Regulation under the Hotel Act which excludes operators with less than 5 bedrooms (and less than 21 guests at time) who are only doing such for “additional income”, from the definition of “hotel” operators.

We suggest that similar could be done for the many currently illegal hotels in Thailand by carving out one or more categories of exceptions to accommodations that would require a hotel license. Such additional categories of operation could perhaps require a lower grade license with much less onerous requirements and, of course, a fee payable to the Thai government. We believe the majority of such operators would be pleased to comply with such reasonable requirements and Thailand would not only gain direct fee income but benefit its tourism industry as well.


DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in 45 other countries. Visit them at: duensingkippen.com


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9 essential do’s and don’t’s when investing in real estate in Thailand

As a general matter, real estate in Thailand can be an excellent investment. Unfortunately, however, horror stories are not rare enough. But if you adhere to our following nine points, such tragedy can be avoided.

  1. Beware of real estate agents

“Real estate agents”, “estate agents”, or (as they are more properly referred to under Thai law) “brokers” are middlemen who make their living by being paid a commission for putting a buyer and seller together. Only when the deal completes, the agent gets paid. Thus, agents have a financial interest in every deal completing.

That is the reason why agents are commonly regulated in developed countries such as those in the Europe, the US, and Singapore. Such regulation generally imposes a “fiduciary” duty on the agent to act in the best interests of their clients with significant penalties applicable if they do not. This makes sense since such agents (like lawyers and accountants) hold your finances in their hands during a deal and they should not be allowed to knowingly guide you into making an unwise investment for the sake of their commission.

In Thailand, however, agents are not regulated. We have first hand experience of far too many agents putting the interest in their commission above the interest of the buyer. We should emphasize that we are not saying not to use an agent but rather that you should be aware that it might be the case that your interests might not be the top priority of your agent. Therefore, if you intend to use and agent and you start to feel uncomfortable with too many statements like: “this is how its done in Thailand”, “it is standard that the agent holds the deposit on the sale”, that do not make sense, trust your instincts and walk away, or at the very least get other competent independent/non-interested advice.

We explain more about real estate agents in Thailand here:


and here:


Beware of estate agents.

  1. Get competent legal counsel

One of the best protections you can find when investing in real estate in Thailand is competent legal counsel. This should be obtained rather sooner than later (certainly before you sign any agreement with an agent or seller).

However, “competent” is the key. We are often amazed by what people say they were told by law firms in Thailand. Thailand actually does have a well-developed set of laws (most mirroring Western law). Thai law for the most part fits together logically, just like in most fully developed countries. Further, almost all the relevant Thai law is available in its English translation. Thus, if what you hear from a law firm in Thailand about Thai law sounds like it does not make any sense, if it sounds illogical, there is a good chance you are right. In such case, ask them to show you the law in question to read it yourself. If they are unable to explain their point then with the text in front of you both, or if they refuse to do so, you are well advised to find another law firm that will.

Furthermore, “competent” counsel doesn’t just know the law—competent counsel is also ethical. By ethical we mean compliance with internationally recognized standards for lawyers.

Thus, you should expect that your law firm has a fiduciary duty to you, in other words, that they will put your interests first, even above theirs, including their financial interests. In this regard, you should expect that your law firm does not and will never have any conflict of interest in representing you. They should not have any interest (including any of their own) the advancement of which would be detrimental to yours.

For example, your law firm should never accept commissions from others, like real estate agents or developers, to refer you to them.

Nor should you law firm represent both you and the other side in a transaction. There is no such a thing as a “non-conflicted transaction”. Every contract is a give and take and your lawyer should be looking out solely for your interest.

An initial evaluation is easy enough. Ask your prospective counsel to show you their formal legal credentials. Then ask them what code of professional legal ethics they are bound by and to show them to you. If they do, verify those credentials and review their professional code. If they cannot, or if you find their response unsatisfactory (for instance, “I have lived in Thailand a long time, I speak Thai, and I know many government workers”), you should find other counsel.

Finally, do not assume you are going to get the easy or correct legal advice from Thai government officials. They are very often wrong even about the law they are charged with administering. We explain more on that here: http://www.duensingkippen.com/thailandpropertylawblog/?p=75

Hire a good lawyer.

  1. Do your due diligence

Due diligence means checking for any negative legal issues with the property you are planning to buy. Due diligence is a must anywhere in the world, but especially here in Thailand. Once you’ve bought the property you’ve also bought any legal liabilities it might have.

More than once we have heard a remorseful purchaser tell us they did have a due diligence done: “my lawyer got a copy of the deed from the land office and translated it. The deed showed that the seller was the owner and there was no mortgage on the property.”

That, is not due diligence.

The minimum essential components of a real estate due diligence should include:

  • a full check of the entire history and validity of the title deed. Just because the deed is issued does not mean it was legally issued. A current title deed can later be found to be legally invalid. That can and does happen in a number of ways one of which we explain here: http://www.duensingkippen.com/thailandpropertylawblog/?p=68 ;
  • verification that the property has legal access rights;
  • if you are planning on building on the property, a full report on all land use laws and regulations governing construction on the land;
  • if you are planning on purchasing a property that requires special licensing like a condominium or a unit in a building that will also function as a hotel, then verify that the project is planned or built to properly qualify for such licensing. This does happen even in very high-end projects were you would not expect it. For example in Phuket a project was market and sold as a seaside condominium development that won awards for “best condominium project”, only later it was “discovered” that its access was not wide enough to qualify for a condominium license. It is now a hotel; and
  • if you are planning on “buying” a property by buying a company that owns such property (something that is generally not recommended) then a check of all corporate, accounting, and legal records of the company is required.

Do your due diligence.

  1. Be aware that a “lease” does not = “own”

Because foreigners are generally restricted from owning land in Thailand they commonly enter into a lease for such property instead. It is important to understand that leasing a property is not the same as owning it. Leasing is “renting” something pursuant to the terms and conditions of an agreement or contract with the person who really owns it. If you break any terms of your lease agreement the real owner can terminate the agreement and evict you from the premises.

Hence, a lease is just a contract to use something in exchange for payment—but for how long? A peculiarity of Thai law is that real estate can be leased for a term of no longer than 30 years. Such a term can be renewed by means of a “renewal clause” in the lease contract. However, and crucially, if the real owner (the lessor) changes (i.e. dies, goes out of business, sells the property, etc.) during the lease, then the new real owner will not bound by the renewal clause.

This means common real estate leases with renewal clauses in Thailand are not a long-term secure investment. As a result many developments marketing to foreigners what they call a “secured” or “collective” lease. It is neither of those as we detail here: http://www.duensingkippen.com/thailandpropertylawblog/?p=36

and here: http://www.duensingkippen.com/thailandpropertylawblog/?p=40

and here: http://www.duensingkippen.com/thailandpropertylawblog/?p=149

If you do wish to invest in a long-term lease, a better and completely legal and secure structure for your investment, renewal terms, and resale value is easy enough to arrange, as we detail here: http://www.duensingkippen.com/thailandpropertylawblog/?p=171

Beware if you lease you do not own.

  1. Be aware building permits do not = ownership

You may hear someone tell you that having their name in a building permit means they own that building…hopefully that (mistaken person) will not be you.

Although foreigners generally cannot own land in Thailand, they can own structures such as villas. In the past it was quite common for real estate developments marketing to foreigners to sell them “ownership” of a villa by promising a building permit in their name. Whether or not this was for “tax planning purposes” (selling a building permit incurs no real estate transfer taxes for the seller) or not we can only speculate. What is certain is that buying a building permit gets you nothing as we explain here: http://www.duensingkippen.com/thailandpropertylawblog/?p=49 .

Your name in building permit means nothing other than you have government approval to build an approved structure, at a given location, during a given period of time (full stop). And, although it is less common, we still find sellers, including developers, selling building permits.

Building permits—don’t be fooled.

  1. Do not use a company only to own real estate

Although common, using a company to own real estate in Thailand is generally unwise.

Legal Liabilities

It is true that a company registered in Thailand can own land, by having at least two Thai shareholders who own more than 50% of the company’s share capital. However, those Thais may not be mere “nominees”(i.e. in name only), they must be actual investors in the company having actually paid for the share capital that they hold and own.

If the authorities find that the Thai shareholders are not actual investors then both those Thai “nominees” (i.e. shareholders in name only, not real shareholders) and any foreigner who benefitted from a Thai acting as a nominee will be subject to imprisonment, fines, or both. In such case, the company can also be shutdown and the land office can force the company to divest itself of any land that it owns.

Furthermore, Thai law does not recognize “holding companies” (i.e. companies set up only to own assets but that not to do actual business). If a Thai company is not actually doing business (and as a practical matter, paying taxes) it will be subject to closure.

Commercial Liabilities

Using a Thai company to own property could also cost you a lot more than you expected, for example:

  • every year a Thai company must pay for: (1) an accounting to be prepared, independently audited and filed; (2) an annual tax return to be prepared and filed; and (after the first company’s first year) (3) a semi-annual tax return to be prepared and filed;
  • a Thai company must have a registered address. If the company does not have a qualifying property the company will have to pay for one;
  • the income tax applicable to the sale is generally much higher for a company than for a personal owner; and
  • under Thai tax law if you personally own a villa or condominium unit for five years or more, then on transfer a tax equal to 0.5% of the sale price is applicable. However, if a company owns the same property for five years or more, the applicable tax will be 3.3% of the sale price amount. We explain all the taxes applicable to the sale of real estate here: http://www.duensingkippen.com/thailandpropertylawblog/?p=12 .

Off-Shore Companies

Off-shore companies such as those registered in tax-havens like the British Virgin Islands are not a solution. While such a company does not entail the legal liabilities we mention it DOES implicate all of the commercial liabilities (except perhaps for the accounting and tax return but will certainly have annual running costs no matter where the company is registered).

And an off-shore company cannot own land.

With few exceptions there is simply no good legal or commercial reason to use an off-shore company to own real estate in Thailand.

Options Without Liabilities

Foreigners can own structures like villas and condominium units outright. And foreigners can lease land and that such leases can be structured in such a way as to legally secure the investment—without the liabilities above.

Don’t use a company to own real estate.

  1. Document the money you bring into Thailand correctly

When investing in real estate in Thailand it is very important that you document the transfers properly. This process begins when you are sending the money. So you should be sure to understand all the requirements before you send your first transfer. You will need to obtain the proper relevant documentation of the transfer from the receiving bank in Thailand. What that documentation is will depend on the amount transferred and its purpose.

Once obtained these documents should be saved in a secure location. If you are a foreigner buying ownership of condominium unit in your own name, you will need these correctly detailed documents (for every purchase price transfer) to complete the purchase. And if and when you sell your condominium unit or villa, you will need them in order to send the money back out of Thailand.

Document your money transfers.

  1. Pay your taxes

“If it goes without saying, don’t say it.” True, but in Thailand for some reason many people seem to think paying the correct taxes is not a serious issue. They are wrong. If you do not pay your taxes, for example income taxes from rental that was (or that should have been earned as detailed above) your property or your company’s property can be seized and sold.

We have mentioned most of the relevant taxes above with links to our other articles detailing them. However, one we have not and that is the all too common decision to under-declare the sale price of real estate to the authorities at the time of purchase. Besides the fact at this is criminal tax fraud, it is also commercially stupid because whether the property is owned by a company or a real person, you will almost certainly incur far greater tax liability on resale that what you “save” if you agree to illicitly under-declare your purchase price…not to mention the tax authorities could go after you for the under-declaration (and, if necessary, your property) while you own your property.

Pay your taxes.

  1. Use arbitration

Finally, no one entering any agreement or contract, including one to invest in real estate expects nor certainly wants the deal to go bad and end up in a dispute. The fact is that it does happen and probably more often than you think. If that happens to you, and particularly if you are a foreigner, you almost certainly will be far better of (EVEN IF YOU LOSE) settling your dispute by legally binding arbitration than doing so in a Thai court. By “better off” we mean the process will be quicker, less costly, documents and proceedings can be in, e.g., English, the decision will be enforceable worldwide, and more as we explain here: http://duensingkippen.com/thailandcontractdisputeblog/?p=55

and here: http://duensingkippen.com/thailandcontractdisputeblog/?p=59

and here: http://duensingkippen.com/thailandcontractdisputeblog/?p=62

and here: http://duensingkippen.com/thailandcontractdisputeblog/?p=65

and here: http://duensingkippen.com/thailandcontractdisputeblog/?p=72

However, because binding arbitration requires the agreement of the parties, and because agreement about anything is unlikely once parties start to fight, you should be sure to include a well-drafted arbitration clause in you real estate investment contract(s).

Stay out of Thai Courts, use arbitration.


DUENSING KIPPEN is an international law firm specializing in business transaction and dispute resolution matters, with offices in Bangkok and Phuket, Thailand and affiliated offices in 45 other countries. Visit them at: duensingkippen.com

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