Phuket Realty

State of Play of 37 Phuket Development Projects

Original article : Phuket Wan Sept 9, 2009 

TWO OF 39 projects for Phuket have ceased development plans. They were Karon Heights Residence (15 plots) and a five-storey building intended to contain 79 rooms on Chaofa East Road. 

Another 37 projects are seeking approval. Here is what the governor's review panel decided: 

Agreement for Two Projects 

Surin Estate Condominiums (157 rooms) at Surin beach. 

The owner: RMTC Thailand 

The Lofts Resort at Laguna Phuket (95 rooms) 
The owner: Laguna Grand 
--- 

Agreement to Supply More Documentation 

Miracle Lake View (39 plots) at Chaofa Road West 
The owner: Chalong Miracle Lake View 

Supalai View (184 plots) Pa Klok, Thalang 
The owner: Supalai Ltd 
--- 
No Agreement on Developers' Report 

Dala Resort (202 rooms) Bang Tao beach 
The owner: Phudalew 

waste waster runoff remains an issue 
--- 

Agreement to Go Ahead 

Spectrum (44 rooms) at Cherng Thalay 
The owner: Spectrum Asia 

Mai Khao Dream Resort and Spa (22 villas) at Mai Khao 
The owner: Mai Khao Dream 

Chalong Interview Condominium (72 rooms) at Rawai 
The owner: Phuket Intervilla 

Baan Prapatsorn (76 plots) at Thalad Yai, Phuket City 
The owner: Layan Burin 

Four-storey building (27 rooms) at Kathu 
The owner Wiroj Phutong 

Litte Mermaid (40 rooms) at Karon 
The owner: Sudhujai 

Jhomtong (22 rooms) at Wichit, Phuket City 
The owner: Boonma Huber 

Rompattana (21 rooms) at Wichit, Phuket City 
The owner: Wantana Prachumpan 

Three-storey building (38 rooms) at Rassada 
The owner: Yuparat Ritmethree 

Juntamas Hotel (56 rooms) in Phuket City 
The owner: Juntamas 

The Cape Estates (17 houses) at Patong 
The owner: Kedsavilla Development 

Sun Peung Condo (64 rooms) at Patong 
The owner: Sun Peung 

Romsowan Apartments (26 rooms) at Patong 
The owner: Chakorn Sermtokul 

Vises Hotel (79 rooms) at Patong 
The owner: Pothiphumi 

Neptuna Hotel (79 rooms) at Patong 
The owner: Udomeak 

Four-storey building (16 rooms) at Phuket City 
The owner; Chulee Thanakit 

Thawasin Place (79 rooms) at Rassada 
The owner: Thawasin Place Committee 

Prompan Condotel (78 rooms) at Rassada 
The owner: Baan Prompan 

Prateep Project (69 rooms) at Kathu 
The owner: Prateep Reaksomroj 

Three-storey building (19 rooms) at Kathu 
The owner: Jaroon Prateep Na Thalang and Jaroi Prateep Na Thalang 

Sai Tong-Na Yai (30 plots) at Chalong 
The owner: Gold Future Development 

Poonsab project (78 rooms) at Chalong 
The owner: Phuket Shinawat Property 

Silver Palm Rawai project (51 rooms) at Rawai 
The owner: Phuket Boutique Development 

Two-storey building (18 rooms) at Rawai 
The owner: Surasak Subjui 

Kata Rocks (30 rooms) at Karon 
The owner: Kata Rocks 

Excavation project Kata Rocks 
The owner: Kata Rocks 

Pornsawat Project (36 rooms) at Karon 
The owner: Tantipornsawat Kata 

Natalee Place (19 rooms) at Karon 
The owner: Nattakah Chukhoawong 

Six-storey building (45 rooms) in Wichit, Phuket City 
The owner: Sanfanpoo 
--- 

Agreement With More Details Required 

IEE to be supplied 

Patcha Resort and Hotel ( 61 rooms) at Kamala 
The owner: Patong View Thalay Studio 

Four-storey building (20 rooms) at Cherng Thalay 
The owner: Puttirat Rattanakong 
--- 

Agreeement Not Reached 

EIA still required 

Marina, Taj Exotica Resort and Spa, Koh Lon, Rawai 
The owner: Taj Asia Thailand 

What happens to your long lease when you die?

Bangkok Post/By James Finch and Nilobon Tangprasit Aug 9, 2009

Part I: How to prepare for the problem 

Many foreigners in Thailand have built houses on leased land, because under Thai law only Thai citizens and Thai companies can own land. Also, some foreigners live in condominiums on a long-lease basis because only 49% of the usable space in a condo building can be owned by foreigners, and this may already have been taken at the time a foreign buyer acquires his or her interest. In other cases the developer may have wanted to save the 49% for later buyers, because freehold condos are easier to sell than leased ones. And foreign customers are not always aware that they can own condominiums rather than just lease. 

What happens to one of these leases if the tenant dies, however, and what's the best way to make sure the tenant is protected? 

Under Section 1600 of the Civil and Commercial Code of Thailand, certain rights are not automatically contained in the estate of someone who has died; they are purely personal to him or her. The rights of a tenant are an example of such a purely personal asset. Thus the Thai Supreme Court has ruled that if a tenant dies during the term of his or her lease, and the lease does not provide otherwise, the tenants rights are extinguished. If there's only one tenant, these rights revert to the landlord (Supreme Court decision No 100/2531).

Here's an example of how this would work. Let's say you are the sole lessee of land from a developer for 30 years, and the developer built a house on it for you. Most leases with foreigners in Thailand make no provision for the tenant's death, so let's say your lease doesn't. You die after two years of the lease of elapsed. What happens?

The lease goes back to the landlord. 

Unfair? Maybe, but that's the law. 

How do you prevent this from happening? There are two answers.

First, Section 544 of the Civil and Commercial Code provides that a lease may be assigned to another person if the lease itself contains a provision that it may be assigned. Of course, agreeing to assignment between living people is not exactly the same as agreeing that an interest may go to an estate. And this issue has not been decided by the Supreme Court. Most legal commentators believe, however, that if the lease contains a provision giving the rights under the lease to the tenant's heirs, if the tenant dies during the term of the lease, that this would be upheld in court.

And that's step one - make sure your lease contains language to the effect that your heirs succeed to the lease if you die during its term. 

Second, have more than one person sign as tenant. The Supreme Court has ruled that if there is more than one tenant, the death of one of them doesn't terminate the lease. What is terminated is that mentioned above - the rights of the tenant who has died. This is because these rights are purely personal and don't automatically become part of the deceased's estate. The other tenant still has their own personal rights in the lease and can continue on with it.

So step two is that you should have more than one tenant.

People always ask us which of the above options is better. In fact, you should have both, to make sure the lease is not lost.

The above is the short version of answers to some common questions on the issue of long leases and estates. In the near future we will ho into more depth on these questions and long-term solutions. 

James Finch of Chavalit Finch and Partners (finch@chavalitfinchlaw.com) and Nilobon Tangprasit of Siam City Law Offices Ltd (nilobon@siamcitylaw.com).
For more information visit http://www.chavalitfinchlaw.com.

Land purchase through Thai spouse forbidden: Land Dept

Phuket Gazette May 27, 2009 

PHUKET CITY: The director general of the Land Department has reiterated that foreigners using Thai nominees to buy land anywhere in the country will have their land title deeds revoked if caught – even if the nominee in question is a lawfully wedded spouse. 

Land Department Director Anuwat Meteewiboonwut made the comments during a recent stop in Phuket as part of a nationwide inspection tour of 30 provinces. 

The tour is aimed at improving public services by land officials in three areas: dress, conduct when dealing with the public and working harder to eliminate a backlog of work. 

Many members of the public have complained that it takes up to a year to complete a transaction that should only take one day, he said. 

Mr Anuwat, a former governor of both Phang Nga and Samut Prakan provinces, said he was satisfied on the first two points, but rated the general level of success among land officials nationwide at speeding up their work rate at “only 30%”. 

The next round of inspection tours will come in July, after which time personnel changes will be considered if service does not improve, he said. 

“We have to keep pressure on them, otherwise the work will not get done,” he said. 

As for foreigners seeking to buy homes in Phuket, they can do so through the Condominium Act, which allows foreign ownership of up to 49% of any project, he said. 

Foreigners cannot use a Thai spouse as a nominee to buy property in Thailand, however. 

“If the Thai spouse has enough money to buy the house that is fine, but if the Thai has no money and uses money given to him or her by a foreigner to acquire property, that is against the law. If we check and find out later that a Thai person has been using money from a foreigner to buy land anywhere in Thailand, we will revoke title deeds,” he said. 

Mr Anuwat said the provisions of [Ministry of Interior] ministerial order 43 makes it difficult to issue land documents quickly, as it requires action from a number of different agencies. Desire for land on the island has also led to encroachment problems here, he said. 

As a key market for property companies, Phuket is a constant source of problems and complaints to the director general’s office, he admitted. 

“We will try to resolve these problems and develop our personnel continuously in order to provide high quality services. Fortunately the governor of Phuket used to work in the Land Department, so he understands the procedures and can help co-ordinate all the agencies involved,” he said. 

Mr Anuwat was speaking of Phuket Governor Wichai Phraisa-ngop, who served as Land Office director in Nakhon Pathom in 1997 and as deputy director of the Land Department nationwide in 2003.

Immigration to issue "frequent traveller" card

A new immigration card will be introduced for use by those going in and out of Thailand by the end of this year, said Immigration Police chief, Pol Lt-Gen Chatchawan Suksomchit.

Holders of the Immigration Card will include those who travel in and out of the country three to five times in a year, regardless of their nationality.

The Immigration Card holders, Thai and foreign alike, will bypass normal procedures of the Immigration Police which include scanning for criminal suspects or those on the police and immigration Watch List.

Instead, the Immigration Card holders will have the privileges to go through fast passage at airports, the Immigration Police chief said.

The Immigration Card, which will be issued to travellers by the end of this year, at the height of the tourist season, was part of the efforts to promote tourism and investment in the country.

Unfortunately, as usual the initial information offered is extremely vague.
For a start I find it unfortunate to name "immigration Card" a card intended for tourist and not immigrants.
There is no explanation as to who can get this card and how to apply.

Besides, everyone remembers the advantages offered to those who subscribed a few years ago to the Elite Card -which cost at the time one million Baht or USD 30,000- and that were similar to those introduced here : 5 year visas, "V.I.P. passage" at airports, etc.).
All of theses services where canceled when the Elite Card (which was promoted by the government though) went bankrupt.

What Taxes and Costs are Applicable to Purchasing a Property in Thailand?

On all purchase/sale of property in Thailand there is a stamp Duty of 0.5%of the assessed value of the property, a transfer fee of 0.01%, a business tax of 0.11% levied against an owner who has been in registered possession of the property less than 5 years, and Income Tax.
There is no Capital Gains Tax in Thailand, unlike many countries, and Income Tax (usually between 1.0 - 3.0%) on property is the comparable replacement.
There are no set rules on who pays the income tax, and it is just another part of the bargaining process, as with all the other costs of the transfer of ownership.

Are There Property Taxes in Thailand?

This question was asked to us on our agency web site: www.phuketimmo.com

There are no property taxes as such in Thailand that are exactly equivalent to the property taxes in the west, however, the most comparable taxes on properties in Thailand are the Land Tax and the Structures Usage Tax.

1. The Land Tax levied on land is so minuscule, that in practice the body charged to collect it, rarely bothers to do so, and if they do, they usually wait several years until the amount accumulates.
2. The second tax, the Structures Usage Tax, relates to buildings, is collected by the municipal office or district office, and is only applied to properties used for commercial purpose.

Thai Government to ease creation of companies

The Thai government, prodded by the Commerce Ministry, is adopting major amendments to several partnership and corporate law provisions with the aim to simplify or do away with unnecessary statutory procedures under the Civil and Commercial Code. The amendment was published in the Government Gazette on March 3, 2008 and will be effective on July 1, 2008.

Among other things, the mandatory seven minimum shareholders in a limited company shall be reduced to three. The new rule will benefit both new and old companies.

Having only three persons instead of seven sign the Memorandum of Association (MoA) will make the incorporation process easier and faster. A senior Commerce Ministry official claims that a fringe benefit to existing companies will be that nominee shareholders holding minority shares (typically one share each) will have a chance to make an exit. Many companies are getting ready to reduce the number of their shareholders.

Unlike the number seven, which has never been clarified, there is an explanation as to why at least three shareholders must be maintained, i.e. the requirement of majority number of shareholders still exists in certain statutes.

Another welcome change is that the process of incorporation which takes at least nine days under the present law can be done in one day under the new law. The new law provides for one-day registration of both the MoA and the company together if all requirements are met at the statutory meeting and all the papers are in order. This is a step forward that will put Thailand more in line with international practice.

The rules about shareholders' resolutions are simplified. Currently, a special resolution is required for important matters such as change of company name, address from one province to another, capital, objectives, or Articles of Association, which must be adopted and then confirmed by two successive shareholders' meetings. Said double approval takes at least 21 days and is the key reason why in practice it has been ignored and circumvented by backdating meetings.

The new amendment will allow the passing of a special resolution by only one shareholders' meeting by at least three-quarters of the votes of the shareholders in attendance and entitled to vote. It is interesting to note that calling a shareholders' meeting has always required prior notice either by publication twice in a local newspaper or delivery to all shareholders via registered post.

Finally, the new law makes it possible for an existing partnership to be converted to a limited company, subject to certain formalities. A partnership is nowadays not a popular form of business organization, as liability has increasingly become a concern to business owners, both Thais and foreigners. A great number of medium-to-large partnerships are opting to become a limited company with the aim of going public in the future. Without a legal channel for such transformation, partners would have to transfer the business and assets of a partnership to a new company, hindered by many issues, especially tax implications on the transferring partnership and/or the recipient company.

Although these amendments represent an advantage for Thai businesspeople, it will probably not influence on foreign investment. Indeed, if one take the example of foreigners who form Thai companies in order to acquire real estate in Thailand, these investors will probably prefer to keep dividing company shares among several Thai nominees in order to dilute the power of each of them.

Source: Baht & Sold

Property Titles in Thailand

Here is a little explanation on the different land titles in Thailand that was provided to us by Mr. Lucien Rodriguez (scphuket@yahoo.com) of Vovan & Associes (http://www.vovan-associes.com).

Normally the legitimate land titles in Thailand include:

1. Sor Kor 1
   This land tile was normally issued before 1955 when the government notified to all landlords in Thailand who obtained this SK1 land title to make an official request to the Land Office for further upgrade either to NS3 or Ns3K.
   The meaning of SK1 indicates that the landlord has the possession right on the land. However, there are still many landlords who own this kind of land title and did not proceed to upgrade their SK1 to NS3 or NSK during the Year 1955.
2. Nor Sor 3
   This is the second level of land title normally upgraded from SK1 land and usually specifies the detail information of neighbor on each of the borderlines of the land plot. Still, the surface area of the land plot is not accurately measured.
3. Nor Sor 3 Kor
   This is the third level of land title showing even more accurately the surface area and contour of the land plot. Before the issuance of the land title NS3K, the Land Office normally sends a measurement team for the survey and measurement. This team uses a measurement engineering camera to measure on each side of the land title.
   In effect, this kind of land is more “official” than the NS3.
4. Chanot Title
   This is the best defined and most valuable land title in Thailand.
   The contour line and surface area is determined by GPS (satellite system) along the engineer camera in order to find the exact point of each borderline and the exact length and width on each side of the entire property.
   This land title is the one with the most acceptances because most of the banks will accept it as collateral.
   All Chanot titles are upgraded from NS3 or NS3K.

Besides, there are some kind of rights - like the Phor Bor Thor 5 - that are related to the acquisitive prescription right.

Phor Bor Thor 5.
The definition of the PBT is Local Maintenance Tax’.
A PBT 5 land is basically a land plot granted by the Thai Government to someone possessing the land (i.e. exerting direct occupancy, use, or control on the real property) who has applied for it to the appropriate local authority (Tessaban Office or Or Bor Tor Office) to use for agricultural purpose (farming or plantation – often rubber tree plantation).
The true meaning of the PBT5 is that any person who has received this kind of documentation will have the right to do, for instance, rubber tree plantation or any other kind of plantation or farming or agricultural purpose provided that the person who has its name registered on PBT5 pays the local maintenance tax to either the Tessabaan or the Aor Bor Tor office every year (approx.8-15 baht per rai/year).

To sum up:

Any person who possessed this kind of PBT5 is allowed the following:

• Rubber tree plantation ,
• Any other kind of plantation,
• Farming,
• Agricultural purpose,
• Temporary Structure/construction that can be easily removed out,
• Temporary shelter/small cottage without concrete foundation.

Any person who possessed this kind of PBT5 is not allowed the following:

• Fixed /Permanent Structure/Construction/Building,
• House, villa, swimming pool, etc. that shall definitely require to obtain a construction permit from either Tessabaan or Aor Bor Tor office,
• Any kind of construction with concrete foundations since it may be deemed permanent.

Conclusion:
Therefore, with this kind of document (PBT5) one cannot legally obtain a construction permit and is not allowed to build any construction that would require obtaining a proper and official construction permit/building license.

PS: You will also find explanation about Thai Property Law on the web site of Phuket Immobiliere Agency.

Case law decided in favour of lease renewal

Mr. Grégory Placé (gregory@legalthai.com), associate advocate at the law offices of McEvily & Collins, has found a judgment from the Supreme Court of Thailand in favour of the lessee in a case of long-term lease renewal.
In this case of 1990, called “Deeka” (No. 748/2533), the Supreme Court was giving a ruling about a landowner (lessor) who did not agree to renew a 10-year lease at the end of the term even though a clause of the contract provided a renewal for another 10 years. The Court forced the lessor to renew the lease.

So far properties which are sold to foreigners are sold either through a Thai registered company or as a long-term lease, typically 30 years renewable twice.
According to the Thai law, a lease longer than 3 years must be registered at the Land Department and its term cannot exceed 30 years. This is why most developers resort to the “renewable lease” system.

Thai Laws make no provision for renewal of a lease. It does not forbid but it does not expressly authorize it.
Now, as long as their no conflicting law or decision, this judgment sets a legal precedent that would guarantee ownership though long-term lease.

In the current political context, politicians may consider this solution.
Thailand needs to allow foreigners to own properties. But voting a law in this direction is unpopular to the Thai population. The government might not make a new law soon, but instead let the judge strengthen foreigners right in a way that would go unnoticed.

What is the best legal guarantee when buying a property in Thailand?

Following the recent political upheaval and the legal uncertainties that it caused, the question is: “how can I best protect myself when buying a home in Thailand?”

There is a wide divide among professionals about the solution to this problem.
Most British agents and developers believe exclusively in the twice-renewed 30-year lease. Others, mainly based in Bangkok where this type of property is widely available, want to disregard anything that is not a “condominium”.
Being not only an intermediary but also a player in the industry, my point of view is somewhat different.

Let’s study first the three solutions available to a prospective buyer:

I. Long term lease

Being a lawyer by training, I would like to start with definitions.
We must distinguish here two kinds of rights: ownership and right of use or usufruct ([Latin ususfructus from usus et fructus, literally, use and enjoyment] : the right to the use and enjoyment of another's property and its profits as in the crops of the estate).
(Click here for a definition of usufruct: http://research.lawyers.com/glossary/usufruct.html)

Now are these assets or liabilities?

Ownership is clearly considered as an asset.
Although the usufruct generally means an advantage for its holder, expenses involved in order to keep the property in good condition may offset the advantage.
An added consideration in owning a villa is for example the benefit of securing your title against a loan, should you need to release equity in the future. This is not possible with an usufruct.
Thirty-year leases are not as attractive as freehold titles or longer term leases. They are relatively illiquid because of their short length, so there is a limited secondary market in resale.
This being said, in the current situation, the lease has the advantage of being relatively simple and cheap for those who tolerate its limitations. For example, if you are preparing to retire in Phuket, the lease can suit you perfectly.

II. Purchase of a “freehold condominium”

The “Condominium Act” (http://www.dol.go.th/low_ministry/commandment/condo_no3_2542.htm) gives developers the opportunity to sell 49% of the surface area of their project directly to foreigners in their own name under certain conditions.
But it is not that easy.
A team from the Bangkok administration must come to approve the construction after completion, which makes this kind of property rarer outside of Bangkok. The administration can always refuse to validate the qualification of a condominium although the developer has already promised to transfer the property into the purchaser’s name.
Then, there is, as you noticed, a contradiction in the definition of this faculty.
If sales are allowed to foreigners, the developer will design apartments intended for the foreign market that do not suit the needs of the local market, ie not only because of their price (foreign oriented condos sell for THB 5 to 50 million when Thaïs are looking for THB 1 million) but also because of their features (a 60 m² beach front apartment is perfect for a couple spending 2 weeks holiday but not for a family leaving there all year long).
The problem is then the following: After he has sold 49% of the area of the project of a « freehold » condominium to foreigners, what can the developer do with the remaining 51% if the local market does not absorb it?
Either he sells these units to foreigners through a legal set-up that will probably constitute a transgression of the law, which can cause cancellation of the sales by the authorities.
Or the developer does not sell the remaining half of the units. Then how will the money needed to maintain common areas be collected? One can then fear for the permanence of the building.

These are of course extreme scenarios, which so far have never happened.

III. Company registered in Thailand

The buyers’ favorite mode of ownership is purchase through a juristic person registered in Thailand, generally a “limited company” (Co., Ltd.).
You already know how it works:
(For more details, please see www.phuketimmo.com in its FAQ / property law section: http://www.phuketimmo.com/modules.php?name=faq&myfaq=yes&id_cat=3&categories=Property+Law+in+Thailand)

1. A company registered in Thailand
2. A minimum of 7 partners.
3. There must be more Thai partners than foreign partners.
4. The foreign partners together should not own more than 49% of the company shares (39% when transferring the property at the Land Department).

There is now a controversy about company nominees in Thailand and the preference shares system which allows a minority shareholder to control a company.
It seems that the military junta temporarily in power seems to want to abolish this system.
It should be noted that the representatives of the junta have had to reverse themselves on each one of their proposals and declarations concerning the foreign investment.

In addition, theoretically, if the Thai government decided one day to sink itself by expelling the foreigners which system would it attack first?
With the lease and the condominium, there is no risk, one knows whom one attacks since the property is in the name of the purchaser.
With a limited company, one never knows who is behind a figurehead or a chain of companies. Consider also that the number of companies being used for acquisition of properties by foreigners should not account for more than 10% of the total number of companies recorded in Thailand. While seeking to flush out foreigners the inspector to charge of the investigation is likely to uncover some secrets of certain Thai businessmen. it might not prove to be worth the risk for them.

To conclude, I think that each one of his 3 solutions is completely accurate, the catastrophes which I described being purely academic. However certain solutions are adapted better to certain situations. In my case, I chose the solution of a Thai company in order to purchase the house where I now live.