Integrity Legal

23rd July 2009

The government of the Kingdom of Thailand has erected many protectionist economic measures. One of the most prevalent legal restrictions imposed upon foreigners in Thailand is the de facto prohibition on land ownership under Thailand Real Estate Law. There is a common misconception that foreigners are not allowed to own land. Technically, this is not the case. In reality, the law states that a foreigner may purchase Thai Real Estate if he or she obtains approval from the Minister of the Interior of Thailand. As a practical matter, obtaining this approval is extremely difficult, if not impossible. The upshot of these restrictions is a virtual bar on foreign ownership of Thai Real Estate.

In Thailand, a freehold Title deed is known as a “Chanote.” Due to the aforementioned legal restrictions it is a virtual impossibility for a foreign national to obtain a Chanote for Thai property. That being said, some years ago the Thai government carved out a legal niche whereby a foreigner could obtain a Freehold Title to a Condominium in Thailand. This exemption is subject to certain conditions. First, the Condo must meet the definition of “Condominium” under the act which means that the paperwork for the building must be completely in order. Another very important aspect of this legislation is the fact that a foreign quota is imposed upon a condominium complex. The law states that foreign ownership may only account for 49% of a condominium’s total number of units. The other 51% must be set aside for those of Thai nationality.

This foreign quota provision can lead to a problem because Condos that are highly desired or in desirable areas are not available for foreign purchase. Further, it can be a great disadvantage to Condominium developers in Thailand because there is generally an income discrepancy between foreign and Thai property buyers. As a result, legal devices are sometimes utilized to circumvent the foreign freehold quota on a Thai condo.

For many years, the classic method of providing foreign control of Thai real property was through the use of a Thai Company to own land. In the recent past, the Thai parliament passed legislation which outlawed the use of “nominee shareholders” in ostensibly Thai companies to own real estate. This mechanism has been employed by Condominium developers to get around the freehold quota. Basically, the developer sets up a Thai company, sell the condo to the company, and then sells the company, that now owns an otherwise quota restricted condo, to a foreigner. As a result, the foreigner owns a company which owns a condo in freehold that could not be legally purchased outright. As with any corporate structure involving “nominees,” the use of nominees is prohibited, but the definition of “nominee” is left somewhat vague under Thai law. Specialized legal advice should be sought where corporate structures are utilized for property ownership.

For more on Special Exemptions under Thai law for foreigners please see Amity Company Thailand

(This article is not legal advice. For such advice contact a licensed lawyer. No Lawyer-Client relationship is formed by reading this piece.)


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