No matter where you decide to buy a property in the world, it should be both a satisfying and exciting experience. But that doesn’t mean that you should enter into any transaction without taking the correct steps to ensure your investment is a safe and stress free. This is not difficult in Pattaya if you stick to the correct procedures and become familiar with the basics of Thai law.
Always Use a Lawyer for Your Pattaya Real Estate Purchase
If you are considering buying a property in Pattaya it is important that seek the help of a good lawyer. Eager agents sometimes may pressurise you, not only into making the purchase, but also going through with the sale without the use of a competent lawyer.
There is no Thai law requiring you to engage a lawyer, but it is certainly highly recommended. If you fail to enlist the services of an experienced lawyer you can open yourself up to many potential difficulties later.
It go without saying that any lawyer you hire should have no ties to either the project developer or the agent. Only if your lawyer is unencumbered by “conflicts of interest” can you be sure that his/her explanations of the contract, and the subtle nuances of Thai law, are truly objective.
Further, a good lawyer will insist on carrying out due diligence on your property (and on the property developer) before any sales and purchase agreement is signed. This will give you peace of mind that all parties involved are reputable and that the project has the necessary permissions.
A title search is probably the most crucial aspect of due diligence. You will want to ensure that there is no third-party ownership associated with the land or the project, as this could jeopardize your ownership rights as the new buyer. Essentially, you are verifying that the seller or the developer is the legal freehold owner of the property, and thus has the legal right to sell it.
If you are looking to buy a condominium in Pattaya, it is imperative that your lawyer requests the Chanote title for the whole project (not just the condo unit in question). By doing so, you can be assured that no liens, loans, or mortgages exist against the development.
You may need to put down a deposit before the due diligence is conducted, so that your purchase is secured, but a capable lawyer will see to it that your deposit is 100% refundable. If due diligence turns up unpleasant information about your chosen property (or indeed about the developer), you will obviously want your deposit back if choose not to go ahead.
If the due diligence finds nothing amiss, the next step will be to draft the legal documents and sign your contract. Your taxes and fees must be paid when the full payment is made. This is done at the Chonburi Provincial Land Office, and Pattaya being serviced by the Banglamung Branch. It is at this time that your condo is registered – in your own name. (If you are buying your condo off-plan, you are possibly making payments at different stages of completion. Fees are only paid, and the title registered, when the final payment is submitted.)
The Cost of Buying a Property in Pattaya
Regardless where in Thailand you buy a property, the fees are lower than in most other countries.
For condominiums, you need to pay a transfer fee of 2% (based on the assessed value), although this is typically shared 50/50 with the seller. If it is a new development, there will be a “foreign freehold upgrade” fee (any advertised price is usually for a Thai freehold/foreign leasehold). This fee is not fixed, and will vary with each project. That said, expect to pay either a percentage of the purchase price, or a pre-determined fixed amount.
When budgeting your condominium ownership don’t forget that there will be running costs each year. The major expense is the sinking fund, while common area fees are an ongoing cost. In most cases, a sinking fund is a one-off fee, but if the fund at your resort becomes depleted, every owners will be asked eventually to help recapitalize the sinking fund.
When buying a villa, house or bungalow, the fees are not unlike those which condos buyers pay. Fees for a villa are never more than 6.3% of value of the property, and each developer chooses how to split the fees between them and the buyer. You may be asked to pay a percentage, a flat fee, or you may just find they are split 50/50 between you and the developer.
What Should You Know As a Foreigner?
Foreigners may own foreign freehold condominiums in their name with ownership registered at the local Land Department.
But with one exception (mentioned later), Thai law prohibits foreigners from owning freehold land. This entails all landed property such as villas, houses, or bungalows.
A leasehold is the easiest way for any foreigner to own landed property in Pattaya. Ownership is obviously not in perpetuity, but it is 100% above board and ensures that the property is yours for at least 30 years. Every lease is also registered in your own name with the Land Department. After 30 years is it is possible to renew a lease, and landlords and/or developers are generally more than happy to help you do this.
This brings us back to the importance of the right lawyer. A legal representative will ensure you are dealing with only the most reputable developers. A good lawyer and top-notch developer with also make sure the clauses are in place to allow your property to be sold on to a new owner before the lease expires. It may be a brand new 30-year lease for a foreign buyer, or the freehold market value of your villa to Thai entity.
Foreigners occasionally opt to set up a Thai Company when buying their property, making the legal owner of the house or villa the company itself, rather than the individual. This is sometimes done to get around the rules on Thai ownership, but it is important to understand that the Thai authorities frown on this practise.
A foreigner should never use a Thai company specifically to circumvent the law to buy landed property. If you are considering buying a property through a company, you must ensure the company actually trades as a business. It must generate revenue, pay taxes, file accounts, and its local shareholders must also receive dividends. Local Shareholders are essential, and they must be proper Thai shareholders, not just some nominees appointed by your lawyer.
If you establish a proper Thai company, including legitimate Thai partners and shareholders, then it is perfectly permissible to buy and own landed property/properties through your company. Being a tourist area, Pattaya has excellent potential for any foreign investor with a little entrepreneurial spirit. If you own a villa (or even multiple properties) your legitimate Thai company could operate as a rental business for Pattaya’s tourists.
It is important to note that, while you may not own the company outright in your own name as a foreigner, you may be listed as a company director, and even make use of the property.
The Exception to the Rule – Section 96 of The Land Code Act
If you want to own a villa as a foreigner in Pattaya, there is an exception which makes this possible: you can make a “Prescribed Investment” in Thailand.
A Prescribed Investment allocated directly into specific government bonds (or government-linked securities). These can be bonds issued directly from the Thai Government, or by the Bank of Thailand. They can also be bonds from any State Enterprise, including those whereby the Ministry of Finance secures the capital or interest.
Prescribed Investments are reserved for high net worth individuals, and must be a minimum of 40 million Thai Baht. If you are able to make such an investment you could qualify for an ownership grant for up to 1 Rai of land (1,600 m2), titled in your own name.
Buying real estate in Pattaya should be a relatively easy and worry free experience. If you follow the simple steps you can own your new dream home or investment without any hassle or problems.
The simple things to remember are:
- Do not be pressured into buying by eager agents
- Always use an experienced lawyer
- Make sure the lawyer is not tied to the developer
- Do Due Diligence when necessary
- Educate yourself on the Basics of Thai Law
- Try and Always Buy Freehold