Thailand is a popular tourist destination due to its magnificent beaches, rich culture, and pleasant weather with warm, sunny days all year. Additionally, the country has earned a reputation as a destination for foreigners wishing to invest in Property in Thailand. From sea-view condos in Patong and waterfront penthouses in Kamala to modern flats on Karon Hill and magnificent villas on Bangtao’s lovely beach, there’s something for everyone. When it comes to selecting a dream home in Thailand, there are plenty of options.
A foreigner has to take care of several factors while purchasing a property in Thailand. One of the most important aspects is ownership. Any foreigner looking to buy a home in Thailand faces one big stumbling block. It is Thailand’s Land Code prohibiting foreigners from owning land.
The Condominium Act, on the other hand, allows foreigners to own freehold apartments in condominium developments. Furthermore, there are no restrictions on foreigners leasing property in the country. Foreigners can successfully use land through a leasehold tenure. Additionally, they can possess buildings or constructions created on that land through this arrangement.
The most frequent and legal options for foreigners to own property in Thailand are foreign freehold and leasehold ownership. Each option has benefits and drawbacks that need careful evaluation before determining which option is best for your property. Therefore, we’ll look at the differences between the two.
Foreign Freehold of Property in Thailand
Foreigners may own a unit under the foreign freehold ownership quota, according to the Thai Condominium Act. It means that foreigners can only possess 49% of a condominium’s total unit floor area on a freehold basis. Thai nationals must own the remaining 51% of the condominium. Developers often offer foreigners the opportunity to buy a leasehold in the Thai ownership component of the building. It is possible once the quota for foreign freehold ownership fills up.
Pros of Foreign Freehold in Thailand
- In Thailand, foreigners can acquire condominium units in their own names.
- In the resale market, a foreign freehold unit is more desirable.
- The ownership does not have a time restriction.
- Foreigners can sell, mortgage, or pass down a condominium unit to their heirs.
- In comparison to many other nations, Thailand’s overall property tax burden is minimal throughout the course of a property’s lifetime.
- At general meetings, the owner has a vote.
Cons of Foreign Freehold in Thailand
- Purchasing a foreign freehold is usually more expensive. For freehold properties, some developers charge a higher price.
- At the Land Office, there are also greater transfer fees and taxes for freehold than for leasehold.
Leasehold of Property in Thailand
A leasehold is a type of property tenure in which a person can rightfully inhabit a specific building or piece of land for a set period of time. It seeks for the payment of a predetermined price or in instalments. Then, the landlord of the building or land transfers temporary possession and occupation of the premises to the leaseholder.
When buying leasehold property at the Land Department, foreign buyers get a 30-year lease with the option of a contractual arrangement for two future renewals. The lease will grant a foreigner access to the property for the duration of the lease and guarantees a right by the Land Department.
The two subsequent 30-year lease terms are contractual duties in a legal agreement in the consent of both parties. Foreign owners’ rights to the two additional lease terms will not cover the guarantee of the Thai government.
Pros of Leasehold in Thailand
- There are more types of property available to foreigners, including villas, standalone houses, and townhouses.
- The leaseholder is not solely responsible for the property’s upkeep or preservation because he or she is only a temporary occupant.
- On the expiry of the leasehold contract, the leaseholder may not renew the prior arrangement and explore alternative arrangements for the best advantage.
- Purchasing a leasehold condo is less expensive than purchasing a freehold unit. A leasehold property can be as much as 10% to 15% less expensive than a foreign freehold unit. In addition, registering the leasehold is less expensive than transferring freehold ownership at the Land Office.
Cons of Leasehold in Thailand
- A property lease is only for a certain amount of time.
- Every year, the leaseholder has to pay a rental tax of 12.5% of the condominium cost, as well as a 1% registration fee.
- At general meetings, the leaseholder has no voting rights.
Protected Leasehold for Property in Thailand
Many developers give a foreign buyer the option of purchasing shares in the Thai limited company that owns the property in addition to a lease. Additionally, a foreign buyer in the development will have ownership over the Thai firm that owns and leases land. This strategy would ensure that the Thai firm would renew the entire lease for the two additional 30-year lease terms for the international buyer.
The tenant gets covered by the protected leasehold in the following situations:
- The landlord’s ability to terminate the lease agreement for a significant reason, valid in Thai law but commonly exploited by the landlord.
- After 30 years, the property is back to the lawful owner.
- The landlord’s agreement and active participation require the transfer of the property investment to the tenant’s heirs or successors.
- In order to restructure the investment, some requirements must be updated or modified.
The transfer of ownership is not always straightforward. Any foreign national willing to purchase a property in Thailand must consult a local real estate agent. Additionally, they also need a reliable Thai lawyer to negotiate the best deal possible. As a full-service law firm in Thailand, Konrad Legal has been helping foreigners purchase property in Thailand since 2013. Mail us at [email protected] to book your free session of consultation.
