Call us now:
Moving to Krabi: the legal framework for buying property
Every year, many foreigners are attracted by the opportunity to buy a house in Krabi due to its investment potential that this southern province of Thailand has to offer.
With its pristine beaches, spectacular cliffs, and developing infrastructure, Krabi has everything it takes to be a prime destination for residential or rental purchases. However, the downside is complicated and even hostile legislation for foreigners. Under Thai law, foreigners are not allowed to own land in their own name, with a few very limited exceptions. Thus, the decision to buy a house in Krabi raises the need to understand local land law, primarily Land Code B.E. 2497, foreign affairs legislation B.E. 2542, and practices relating to ownership through leasing or through a company.
In this article, we take an in-depth look at the legal options available to foreigners wishing to buy a house in Krabi.
Table of Contents
What is the legal framework for buying a house in Krabi?
The legal system governing land ownership in Thailand is characterized by a crucial distinction between ownership of the land and ownership of the buildings on it.
For this reason, if a buyer is considering purchasing a house in Krabi, they must take this distinction into account, especially when it comes to foreigners. These activities are governed by several fundamental laws such as the Land Code Act B.E. 2497 (1954), the Condominium Act B.E. 2522 (1979), and the Foreign Business Act B.E. 2542 (1999).
Section 86 of the Land Code expressly provides that foreigners are not entitled to hold a Chanote title (full title) to land, except in very specific cases covered by exceptional regimes, such as an investment approved by the BOI (Board of Investment) or a right granted by international treaty (which remains very rare).
Consequently, in most cases, when a foreigner buys a house in Krabi, they only acquire the building, while the land is either leased or owned by a Thai company. It should be noted that the regime is significantly more flexible for Thai nationals. They are allowed to own a plot of land and any buildings on it.
What are the legal options for a foreigner who wants to buy a house in Krabi?
Foreigners who wish to buy a house in Krabi must use indirect legal mechanisms to secure their purchase, which nevertheless remain in accordance with Thai law. In practice, the following three solutions are implemented:
First, a long-term lease is the most common solution. This land lease agreement is regulated by sections 537-571 of the Civil and Commercial Code and is signed for a single term of 30 years. This lease can be renewed contractually once or twice, without exceeding a total term of 90 years, although renewals are not guaranteed without an express clause. This lease must be registered with the Land Department to be enforceable against third parties and thus fully effective.
Secondly, foreigners can buy a house in Krabi through a Thai Limited Company. This structure must have at least 51% Thai shareholders to comply with the law. If the company’s actual purpose is to carry out an economic activity, it can own the land or building. However, the practice of creating a shell company to circumvent the land ownership ban is strictly prohibited. In the event of abuse, the authorities may confiscate the assets and punish the parties involved.
Thirdly, it is only possible to purchase a house as a detached structure, building it or purchasing it on land leased under a lease agreement. In doing so, the buyer owns the building (which is not real estate within the meaning of the Land Code, but a separate property) while being the tenant of the land. This option must be carefully regulated by contract, particularly with regard to the transfer of the structure or its disappearance.
What are the rules when Thai nationals buy a house in Krabi?
Thai citizens enjoy much greater property rights in the country. Buying a house in Krabi as a Thai citizen is based on the standard rules of the Land Code. Thai nationals can purchase both the land and the house, provided that the title deed is a Chanote or Nor Sor 3 Gor, which guarantees full ownership and the possibility of legally registering the sale with the Land Department.
The procedure includes verification of the land title, negotiation of the price, signing of a sales contract in Thai, and registration of the title for the transaction with the local authorities. The seller will be required to pay certain taxes and fees, including transfer tax (Transfer Fee), Specific Business Tax, and Stamp Duty.
In addition, Thai citizens may be able to obtain a mortgage from a local bank, which is extremely rare for foreign investors unless specific guarantees apply or, in the case of condominiums, the property is purchased as part of one of the specific authorized projects.
Finally, unlike foreigners, Thai nationals can transfer their property to their heirs in accordance with the rules of the Civil and Commercial Code of the Kingdom, without any restrictions based on nationality, which facilitates the management of assets across several generations.
Get expert legal guidance.
How does it work to buy a house in Krabi?
Buying a house in Krabi involves several steps. First, due diligence is carried out. It is essential to check the title deed (Chanote) of the land, the existence of any easements or mortgages, and the building’s compliance with local urban planning regulations.
Once these checks have been carried out, the buyer signs a reservation contract, followed by a purchase contract or a lease contract. All documents must be written in Thai and officially translated for foreign parties.
The certificate is officially registered at the Land Department. If you enter into a lease contract, it must also be registered in order to be enforceable.
What documents are required?
To buy a house in Krabi, foreigners must present a valid passport, a valid visa, proof of foreign currency transfer (Foreign Exchange Transaction Form) for any purchase over USD 50,000, and company articles of association if using a legal structure.
The seller must present the Chanote, a cadastral plan, proof of payment of property taxes, and sometimes a building permit if the house is newly built. These documents must be reviewed by a specialized lawyer.
What precautions should you take before buying a house?
Before you buy a house in Krabi, you should check that the property complies with the Building Control Act, that the land is easily accessible, that the utilities (water, electricity) are in order, and that there are no outstanding disputes.
As for the lease, it must include a clear renewal clause, a right of transfer, a registration fee, and provisions in the event of death or incapacity.
The role of a lawyer in buying a house in Krabi
To buy a house in Krabi necessarily involves a lawyer, whose role is to carry out due diligence, draft contracts in English and Thai, assist with negotiations, accompany the buyer when registering transactions with the Land Department, and verify the legality of the deeds.
In addition, the lawyer can structure the investment through a company or advise on the best tax option (particularly with regard to inheritance tax or resale of the property).
What are the risks of an unsupervised purchase?
Without proper legal support when buying a house in Krabi, the buyer is exposed to significant legal, tax, and property risks.
In Thailand, due to the complexity of land ownership laws, restrictions imposed on foreigners, and differences in contractual culture, it is essential to exercise caution at every stage of the transaction. Otherwise, the consequences of a poorly structured or poorly documented purchase can be disastrous in the long term and give rise to several risks.
Firstly, one of the most common risks is the invalidation of the lease agreement. Under the Civil and Commercial Code (sections 537 to 571), all lease agreements of more than three years must be registered with the Land Department in order to be enforceable against third parties. If not registered, it will only remain valid for three years, even if the lease term specified in the contract is 30 years. This means that after three years, the landowner can legally take back possession of the land without any obligation to renew, which constitutes a total loss for the foreign buyer.
Another risk is incomplete or ambiguous wording in a lease, which can lead to disputes.
There is also a high risk of reclassification by the tax authorities. If the authorities believe that the foreigner is gradually becoming the owner of the land by circumventing the law, they will interpret the transaction as an illegal acquisition. This situation arises as soon as the foreigner finances the purchase of land in the name of a Thai nominee or creates a company with fictitious Thai shareholders.
The creation of a real estate company is another major source of risk. If the Thai Limited Company is used solely to circumvent the law prohibiting foreigners from owning land, it is considered concealment. According to Article 36 of the Foreign Business Act, the use of nominees is prohibited and punishable by fines of up to one million baht, or even imprisonment in the event of a repeat offense. In the event of an inspection, the Department of Business Development may cancel the company’s registration and order the forced sale or return of the land to the state.
Finally, the absence of bilingual Thai-English documentation, legal signatures, and protective clauses makes it impossible for foreigners to effectively defend their interests in a Thai court in the event of a dispute. Only documents in Thai and registered with the authorities are recognized as evidence under local law.
Conclusion
To buy a house in Krabi is a significant investment. The beauty of the region and the attractiveness of its real estate market make it a dream destination for foreign investors. However, the law is so complex that it is impossible to proceed without advice. Whether you opt for a 30-year lease, purchase through a company, or acquire a separate building, each option has its advantages and disadvantages. Using a law firm remains the best guarantee for turning a purchase project into a smooth reality.