Real Estate Law in Thailand

What law applies to real estate in Thailand?

Several essential laws and regulations govern real estate in Thailand. The following are the primary laws that apply to real estate in Thailand:

• Civil and Commercial Code: Thailand’s Civil and Commercial Code contains general provisions relating to property rights, contracts and obligations. It provides the legal framework for property ownership, leases and property transactions.

• Land Code: The Land Code is a crucial piece of legislation that governs land ownership, land use and land rights. It provides for the classification of land, restrictions on ownership, rights of possession and registration of land titles.

• Condominium Act: The Condominium Act regulates the ownership and management of condominiums in Thailand. It defines the requirements and restrictions for foreign individuals and entities to own condominium units, including provisions on the percentage of foreign ownership allowed in a condominium project.

• Land and Building Tax Act: Enacted in 2019, this law regulates the taxation of land and buildings in Thailand. It sets out the rules and rates for calculating and collecting land and building taxes, which are based on the property’s assessed value.

• Town Planning Act: The Town Planning Act deals with town planning, zoning and development control in Thailand. It sets out the procedures and requirements for obtaining development permits and the guidelines for land use and building regulations.

• Land Registration Act: The Land Registration Act regulates the registration of land ownership and related transactions. It sets out the procedures for registering land titles, mortgages, leases, and other encumbrances and ensures property rights’ legal protection and validity.

These are some of the central Thai laws that apply to real estate. It’s important to note that additional regulations, notifications and ministerial orders may also affect property transactions and ownership in certain circumstances. It is advisable to consult a real estate lawyer or a real estate law firm for accurate and up-to-date information regarding specific situations.

What are the regulations in Thailand?

Real estate in Thailand is subject to various regulations that govern property ownership, transactions and development. The most important rules for real estate in Thailand include the following

• Land ownership restrictions: The Land Law restricts foreign land ownership in Thailand. Generally, foreigners are not allowed to own freehold land directly. However, they may own buildings or structures on land, such as condominium units, subject to certain conditions. Foreigners can also lease land for a maximum period of 30 years with renewal options.

• Condominium ownership: The Condominium Act allows foreigners to own condominium units in Thailand, subject to certain restrictions. Foreign ownership in a condominium project is generally limited to 49% of the total unit area. Thai individuals or entities must own the remaining 51%. However, foreign ownership restrictions may be relaxed in certain designated areas, such as special economic zones.

• Environmental regulations: Thailand has ecological rules that apply to property development projects. Environmental impact assessments may be required for large-scale projects that could significantly impact the environment. Compliance with these regulations ensures sustainable development and minimizes ecological risks.

• Building regulations: Building regulations in Thailand ensure the safety, structural integrity and quality of construction. These regulations set standards for design, construction materials, electrical and plumbing systems, fire safety and accessibility. Compliance with these regulations is required for new construction and renovation projects.

• Town planning and zoning regulations: The Town Planning Act regulates town planning and zoning in Thailand. It sets guidelines for land use, building heights, density, setbacks and other aspects of urban planning. Development projects must comply with the zoning regulations set by the local authorities and obtain the necessary permits and approvals.

• Tax regulations: Various taxes and fees apply to property transactions in Thailand. These include transfer fees, specific business taxes, stamp duty and annual property taxes. The rates and calculation methods for these taxes vary depending on the transaction type and the property’s value.

It’s important to note that regulations are subject to change and the relevant authorities may issue additional rules or notifications. It is advisable to consult a real estate legal service with knowledge of current regulations to ensure compliance and mitigate potential risks when dealing with real estate law in Thailand.

What are the requirements in Thailand? 

The requirements for real estate in Thailand can vary depending on the specific circumstances and types of transactions involved. However, certain general conditions apply to Thailand’s real estate ownership and transactions. Here are some essential requirements:

Land Ownership:

• Thai Individuals: Thai citizens can own land in Thailand without restrictions, subject to compliance with relevant laws and regulations.
• Foreign Ownership: Foreign individuals are generally prohibited from owning freehold land directly. However, they can explore alternative options, such as leasing land or owning buildings or structures on the land.
• Condominium Ownership: Foreign individuals and entities can own condominium units in Thailand, subject to the restrictions outlined in the Condominium Act, including limitations on the percentage of foreign-owned branches within a condominium project.

Leasehold Ownership:

• Lease Agreement: Foreigners can lease land in Thailand for a maximum of 30 years, with options for renewal. A well-drafted lease agreement, prepared in compliance with Thai law, is required to protect the interests of both the lessee and the lessor.

Due Diligence:

• Title Search: Conducting a thorough title search is essential to verify land ownership, encumbrances, and any legal issues associated with the property. Engaging a real estate lawyer’s services experienced in Thai real estate law is advisable to perform due diligence effectively.

Documentation and Registration:

• Contracts and Agreements: Properly drafted contracts and agreements, such as sale and purchase agreements or lease agreements, are crucial to ensure clear terms and conditions between parties and protect their rights and obligations.
• Land Registration: Registering land ownership or leasehold rights at the appropriate Land Office is necessary to establish legal ownership and provide protection against third-party claims.

Taxes and Fees:

• Transfer Taxes: Real estate transactions in Thailand are subject to various taxes and fees, such as transfer fees, specific business tax, stamp duty, and annual property taxes. Compliance with tax regulations and payment of the applicable fees are essential requirements in real estate transactions.

Compliance with Laws and Regulations:

• Compliance with relevant laws, regulations, and local planning guidelines is crucial for real estate development projects, including obtaining the necessary permits and approvals from the local authorities.

You must note that specific requirements may vary based on factors such as property type, location, and the involvement of foreign ownership. Consulting a property lawyer Bangkok is recommended to ensure compliance and navigate the process smoothly.

What are the restrictions for real estate in Thailand? 

Real estate in Thailand has several restrictions that govern property ownership, transactions, and development. The main restrictions for real estate in Thailand include the following:

Land Ownership:

• Freehold Land: Foreign individuals are generally prohibited from directly owning freehold land in Thailand. However, there are exceptions for specific types of investments, such as Board of Investment (BOI)-promoted projects, where land ownership may be permitted with certain conditions.
• Leasehold Land: Foreigners can lease land in Thailand for a maximum of 30 years, with options for renewal. Leasehold land provides an alternative for long-term investment, but ownership rights are limited to the duration of the lease agreement.

Condominium Ownership:

• Foreign Ownership Quota: The Condominium Act restricts the percentage of foreign ownership within a condominium project. Foreign individuals and entities can collectively own up to 49% of the total unit space, while Thai individuals or entities must own the remaining 51%.
• Notification of Foreign Ownership: Foreign owners of condominium units must comply with the requirement to notify the Condominium Juristic Person or the management of the condominium project regarding their ownership, as outlined in the Condominium Act.

Environmental Regulations:

• Environmental Impact Assessments (EIA): Large-scale real estate development projects that could significantly impact the environment may be subject to EIA requirements. An EIA report must be prepared and submitted for approval before commencing such projects to assess potential environmental consequences and propose mitigation measures.

Town Planning and Zoning Regulations:

• Zoning Restrictions: Local authorities enforce town planning and zoning regulations, which define land use categories, building heights, density, setbacks, and other aspects of urban planning. Compliance with these regulations is necessary when undertaking development projects to ensure alignment with the designated land use and zoning requirements.

Foreign Business Act:

• Certain real estate-related activities, such as brokerage services, are regulated under the Foreign Business Act. Foreign individuals or entities engaging in such activities must comply with this act’s provisions, which include obtaining the necessary licenses or permissions.

It’s essential to note that the regulations and restrictions may evolve, and additional rules or notifications may be issued by relevant authorities. It is appropriate to consult a real estate lawyer or real estate law firm with knowledge of the current restrictions and regulations to ensure compliance and mitigate any potential risks when dealing with real estate in Thailand.

What are the property taxes and fees?

Property taxes and fees in Thailand apply to various property transactions and ownership. The central property taxes and fees in Thailand include the following

• Transfer fee: A transfer fee is a tax levied on a property transfer by a property owner. The cost is based on the appraised value of the property. The transfer fee rate is usually 2% of the appraised value, although some exceptions and variations depend on the property type and location.

• Specific Business Tax (SBT): Specific Business Tax applies to the sale of property within five years of the date of acquisition. The rate is generally 3.3% of the rateable value or actual transaction price, whichever is higher.

• Stamp duty: Stamp duty is a tax levied on certain documents, including sale and purchase agreements, leases and mortgage deeds. The stamp duty rate depends on the document type and the transaction’s value.

• Annual property tax: Annual property tax is levied on land and buildings owned by individuals or companies in Thailand. Tax rates are based on the property’s assessed value as determined by the Land Department. The rates range from 0.02% to 0.1% of the assessed value, depending on various factors such as the type and use of the property.

• Common Area Fee (for condominiums): The Common Area Fee is a recurring fee paid by condominium owners to cover the maintenance and management of the common areas and facilities in the condominium project. The fee amount is determined based on each unit’s proportionate share of ownership and is usually collected monthly or annually.

It is important to note that the specific rates and calculations for property taxes and fees may vary depending on the location and type of property. It is advisable to consult a property lawyer in Bangkok to ensure accurate information and compliance with applicable taxes and fees in property transactions.

Is contacting a real estate law firm mandatory when investing in real estate in Thailand?

While it is not mandatory to use a real estate law firm when investing in real estate in Thailand, it is highly recommended to seek the assistance of legal professionals with expertise in Thai real estate law. Here are some reasons why using a real estate law firm can be beneficial:

• Expertise in Thai property law: Property law in Thailand can be complex, especially for foreign investors who may not be familiar with the legal framework and regulations. Bangkok property lawyers specialize in this area and have in-depth knowledge of the laws, rules, and processes involved in real estate transactions in Thailand. They can provide guidance and ensure compliance with legal requirements.

• Due diligence and title searches: Real estate legal services can conduct thorough due diligence on properties, including title searches, to verify ownership, identify any encumbrances or legal issues associated with the property, and assess the risks involved. This helps protect the investor’s interests and ensures that the transaction is conducted on a sound legal basis.

• Drafting contracts and agreements: Real estate legal services can assist in the drafting and reviewing of contracts and agreements relating to real estate transactions. They can ensure that terms and conditions are clearly defined, protect the investor’s rights, and minimize potential disputes or legal issues in the future.

• Legal protection and risk mitigation: Engaging a Bangkok property lawyer provides an extra layer of legal protection and helps to mitigate the risks associated with property investment. They can help identify potential legal pitfalls, negotiate favorable terms and ensure that all necessary legal documentation is in place, reducing the risk of future disputes or complications.

• Compliance with laws and regulations: Real estate legal services can ensure compliance with relevant laws, rules and tax requirements. They can advise on foreign ownership restrictions, tax obligations and other legal obligations associated with property transactions in Thailand.

While it is possible to navigate real estate transactions without the assistance of a law firm, the complexities and potential risks make it highly advisable to seek out a real estate lawyer. A real estate law firm can provide valuable expertise, protect your interests and help facilitate a smooth and legally sound investment process in Thailand.

How does the legal framework in Thailand accommodate foreign investors in real estate?

Thailand’s legal framework has provisions that allow foreign investors to engage in real estate activities, but foreigners need to navigate these regulations carefully. Here are the key aspects of how the legal framework in Thailand accommodates foreign investors in real estate:

• Ownership of Land : Generally, Thai law restricts foreign individuals from owning land in their name. However, there are legal structures that allow foreign investors to acquire land, such as setting up a Thai company. This approach involves the majority of shares being held by Thai nationals. The company can then own the land, and the foreign investor effectively controls the company.

• Condominium Ownership : Foreign individuals are allowed to own condominiums in Thailand under certain conditions. The Condominium Act allows non-Thais to own up to 49% of the total sellable area in a condominium project. This provides a straightforward avenue for foreign investors seeking to own residential property.

• Leasehold Agreements:  Foreign investors can enter into long-term leasehold agreements for both land and buildings. While the maximum lease duration is typically 30 years, with an option to renew for an additional 30 years, it provides a viable option for those unable to utilize other structures.

• Board of Investment (BOI) Promotion : The BOI offers investment promotion incentives for specific real estate projects, particularly those that align with the government’s economic development goals. By obtaining BOI approval, foreign investors may enjoy privileges such as tax incentives and exemptions.

• Condo-Hotel Investments : Some foreign investors choose to participate in condo-hotel projects, where they own a unit in a hotel-like development. This structure often provides a rental income arrangement and may have fewer restrictions compared to owning traditional property.

• Real Estate Investment Trusts (REITs) : Thailand introduced Real Estate Investment Trusts as a way for investors, including foreigners, to invest in real estate indirectly. REITs offer the opportunity to investors to buy shares in a trust responsible for owning and overseeing real estate properties that generate income.

• Legal Assistance and Due Diligence : Engaging legal assistance is crucial for foreign investors to ensure compliance with Thai regulations. Thorough due diligence is necessary to understand any real estate transaction’s legal implications and mitigate potential risks.

• Foreign Exchange Controls : Foreign exchange controls may impact the repatriation of funds from real estate transactions. Understanding these controls and complying with reporting requirements is essential for foreign investors.

• Changes in Ownership Laws : The legal framework may change, and foreign investors should stay informed about any amendments or updates that might affect property ownership regulations.

Navigating the legal landscape for real estate investment in Thailand requires a clear understanding of these regulations. Seeking professional legal advice is highly recommended to ensure compliance and the successful execution of real estate transactions by foreign investors.