Thai property law can seem fairly restrictive as applied to foreigners, but it is really no different from other countries where special treaties are not in place. Thai law stipulates that foreigners may not own land in their own names; one has the right of ownership of buildings only. There are, however, ways in which foreigners can legally own or acquire land in the Kingdom of Thailand.
Option No. 1 - Forming a Limited Company
Foreigners can form a Limited Company and register the land as owned by the company. The foreigner can personally own maximum 49% of the company shares, and the remaining 51% must be in the names of Thai nationals (39% - 61% at the time of registration of the property; can be changed after). (A Thai Limited Company must have minimum 7 shareholders - for example, one foreigner and six Thais).
The foreigner is named sole executive director in the company's Articles of Association and given preferential shares with, for example, 10 votes per share. The Thai shareholder nominees all sign undated Share Transfer Contracts at the time the company is being registered, and have only 1 vote per share. This effectively puts 100% control of the company and its assets in the hands of the foreign director. The Thai shareholders do not have absolutely no executive power within the company, nor need they be consulted over any issues at any time. They can also be replaced anytime at the director's wishes. The Land Office will call a transfer into question if there is anything wrong or missing from the documentation presented, but will not refuse a transfer if everything is in order.
A popular misconception which causes foreigners unnecessary concern is that such companies are owned by foreigners and could be exposed to imagined special (future) legislation by an imagined (future) extreme nationalist government with the intention of robbing foreigners of their real estate investments in Thailand. The fact is, however, that Limited Companies are owned by the shareholders, not their directors, the foreigners. As such, Limited Companies are Thai juristic entities subject to Thai commercial law, and any changes to legislation must apply to all Limited Companies, not only those whose directors happen to be foreigners. Thai law, both commercial and personal, is not so very different from legislation in most other countries, and it applies to all juristic entities in Thailand, foreign or Thai. It is also inconceivable that forces in Thailand would attempt to rob foreigners of their investments. In a global context, Thailand's feet are firmly planted in the First World. While much of Thailand has yet to emerge from former times, a national globalization process is ongoing and foreign investment provided by the real estate market is not only required, it is indeed welcome. It would not be logical to alienate Thailand from the international community, which would be one result if any such fears should become reality.
Option No. 2 - Lease of Land
Foreigners can lease land on a 30 year contract which can contain a clause giving the lessee first option on a further 30 years. The same contract, registered at the Land Office (Department of Lands), can be renewed every 30 years. The lessor's heirs are bound by law to honor the agreement, and the lessee can bequeath the lease to his/her heirs in a Last Will and Testament. Such contracts should be backed up by a private contract between lessor and lessee obliging the lessor to re-execute the same 30-year contract or to sign over freehold ownership to any name at any time of the lessee's choosing.
Option No. 3 - Contract of Credit
Instead of purchase or lease, the payment for land can be registered as a loan to the seller, documented in a Contract of Credit, registered at the Land Office. The value of the loan is set at the registered value of the land plus the actual building cost of any structures on the land. The buyer's name appears on the Title Deed as creditor, which effectively prevents the registered owner (debtor) from selling the land before repaying the loan. The weakness with this solution is that as property values rise, the value of the property will in the future be greater than the value of the loan, and the debtor could conceivably buy the land back at bargain price simply by repaying the loan.
Mike Orchid Villas provides 2 avenues for purchase of property as a special offer:
- Purchase an existing 100% owned Thai Company Limited which already owns the land and house from Mike Orchid Villas. This means that after signing the sales contract you take over the Director shares of that company and effective control of that company.
- Lease the land on a 30 years basis with a guaranteed option for a further 30 year lease. If you register the house in your own name your property rights are perfectly safe without the necessity of setting up a company or looking for a Thai nominee to serve as the lessor. Additionally, less equity capital is needed because the lease is paid monthly.