Property Freehold in Thailand
Property ownership in Thailand, especially for foreigners, often raises questions about the best and most secure ways to invest. One of the most attractive options for property ownership is freehold. Freehold ownership provides multiple advantages, making it a popular choice among both Thai nationals and foreigners. This article explores the concept of property freehold in Thailand, its benefits, legal considerations, and the steps involved in acquiring freehold property.
What is Freehold Ownership?
Freehold ownership refers to the complete and indefinite ownership of both the property and the land on which it stands. This means that the owner has full control over the property, including the rights to sell, lease, modify, or transfer it to heirs without any time limitations.
The concept of freehold ownership versus leasehold ownership originates from common law systems, where long-term leases, such as 99-year leases, are prevalent. In contrast, in civil law systems, ownership is simply ownership, and the term "freehold" does not carry any special significance.
- Benefits of Freehold Ownership
Freehold ownership offers full autonomy over the property, allowing owners to make any modifications, rent it out, or sell it without needing external permissions. The permanence of freehold ownership provides long-term security and stability for the owner and their heirs. Additionally, freehold properties typically have higher resale values due to the nature of ownership. Another significant advantage is that the property can be easily passed on to heirs, ensuring generational wealth.
- Freehold Ownership for Thai Nationals
Thai nationals face no restrictions in purchasing freehold property, whether it be land, houses, or condominium units. They enjoy full property rights and can engage in transactions seamlessly, benefiting from the complete control and security that freehold ownership provides.
Freehold Ownership for Foreigners
Foreigners face certain legal restrictions on owning land in Thailand but can still acquire freehold ownership under specific conditions. Generally speaking, it is not possible for foreigners to own the land in Thailand by themselves. An often observed structure, by setting up a company just for the sake of owning property, is illegal and is currently facing a crackdown with high fines and even prison sentences. It is therefore strongly advised against the used of such shareholder nominee structures.
One of the most straightforward ways for foreigners to obtain freehold property is through the purchase of condominium units, as they can own up to 49% of the total area of all units in a condominium project. Foreigners can also invest in Thai companies that hold land, provided they do not exceed 49% ownership of the company. This of course is only advised if the Thai partner is actually working or contributing to the scope of the company and the company was not only set up to own the land. This often involves complex legal arrangements. In some cases, foreign investors who contribute significantly to the Thai economy can obtain permission from the Board of Investment (BOI) to own land freehold.
Legal Considerations
Before purchasing freehold property, it is crucial to conduct thorough due diligence. This includes verifying the titles, such as land title deeds (Chanote) or Condominium Unit title deeds, to ensure it is legitimate and confirms clear ownership. Assessing the property’s market value is also essential to avoid overpaying. Hiring a lawyer to navigate the legal complexities and ensure compliance with Thai property laws is recommended, especially for foreigners. All property transactions must be registered with the Land Department, which involves drafting and signing a sale and purchase agreement, paying applicable fees and taxes, and officially transferring the title deed at the Land Department. At FRANK Legal and Tax, we specialise in all kinds of property transactions and due diligence reports.
Financing Freehold Property
Foreigners may face challenges in securing local financing for property purchases. However, options include obtaining a loan from a bank in the buyer’s home country, seeking developer financing, or making direct purchases without financing, which is often preferred by sellers.
Conclusion
Freehold ownership in Thailand offers security and control over property, making it an attractive option for both Thai nationals and foreigners within legal limits. While foreigners face restrictions on land ownership, opportunities exist through condominium unit purchases and certain investment schemes. Prospective buyers should conduct meticulous due diligence, engage legal expertise, and understand the financial implications to ensure a smooth and secure property acquisition process. By navigating the legal landscape carefully, investors can enjoy the benefits of freehold property ownership in Thailand’s vibrant real estate market. Another option is leasehold, which will be discussed in a different article.
This article was written by Andreas Seela , lawyer at FRANK Legal and Tax. If you have any questions, please feel free to contact us at info@franklegaltax.com or via +66 02 026 3284.
