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Why is it essential to understand the risks of buying a property in Thailand before investing?
Thailand attracts many foreign buyers each year, whether they seek a holiday home, a rental investment or a long-term residence. However, before signing any reservation agreement, it is essential to understand the main risks of buying a property in Thailand. The Thai legal system is very protective of land ownership, imposes strict rules on foreign ownership and relies on specific land titles that many foreigners do not know. Under the Land Code Act B.E. 2497, foreigners cannot generally own land, and under the Condominium Act B.E. 2522, foreign ownership is limited to 49% of a condominium project.
In practice, many transactions are prepared by agents or developers without real legal advice. Contracts are one-sided, land titles are not properly verified, and structures such as leasehold, usufruct or superficies are poorly drafted or not registered at the Land Office. Buyers often believe they hold secure rights, while, in reality, they may have weak or unenforceable claims. These gaps are among the most common risks of buying a property in Thailand.
Because of this, any foreign buyer should treat a Thai real estate acquisition as a legal operation rather than a simple lifestyle purchase. Working with a specialized law firm such as Benoit & Partners helps identify and reduce the real risks of buying a property in Thailand before they escalate into disputes, loss of rights, or tax exposure.
Table of Contents
How do foreign ownership rules create the first risks of buying a property in Thailand?
What can foreigners legally own in Thailand under the Land Code and the Condominium Act?
The starting point for all risks of buying a property in Thailand is the foreign ownership regime. As a general rule, foreigners cannot own land in Thailand in their own name. The Land Code Act provides only narrow exceptions, for example, in the context of Board of Investment (BOI) approved projects or industrial estates. For most private buyers, these exceptions do not apply.
Because of this, many foreigners turn to condominiums. The Condominium Act allows foreign individuals to own a condo unit freehold, provided that the building respects the 49% foreign quota and that the purchase funds come from abroad in foreign currency, evidenced by a Foreign Exchange Transaction Form. If these conditions are not met, the Land Office may refuse to register the transfer. Therefore, even when buying a condo, there are hidden risks of buying a property in Thailand for those who do not follow the formalities.
In addition, foreign buyers sometimes use long leases, usufruct or superficies to secure rights over land or villas. These tools are recognized by the Thai Civil and Commercial Code. However, they only protect the buyer if they are drafted correctly and registered at the Land Office. Otherwise, the buyer may hold rights that are valid on paper but impossible to enforce in practice. This legal gap represents a central part of the risks of buying property in Thailand.
Why are nominee company structures a major legal risk when buying property in Thailand?
Another frequent source of risks of buying property in Thailand comes from so-called “Thai companies” used to hold land on behalf of foreigners. In many cases, these companies have Thai shareholders who act only as nominees, while the foreigner provides all the funds and exercises actual control. This structure breaches the Land Code and the Foreign Business Act, which both prohibit nominee arrangements.
Thai authorities have increased their scrutiny of such schemes. The Land Department, the Business Development Department and even the Anti-Money Laundering Office may investigate companies that appear to be foreign-controlled despite having Thai majority shareholders on paper. If a nominee structure is proven, authorities can cancel the transaction, order a forced sale or impose penalties. This makes nominee companies one of the most serious risks of buying a property in Thailand for foreign buyers who rely on informal advice.
How do title deeds and Land Office issues increase the risks of buying property in Thailand?
Why does the type of title deed matter so much for foreign buyers?
The Thai title system is another central element of the risks of buying a property in Thailand. Not all land titles are equal. The most secure title is the Chanote, which provides full ownership and has precise boundaries recorded by GPS. Other titles, such as Nor Sor 3 or Nor Sor 3 Gor, can be upgraded, but they may present uncertainties about boundaries or rights.
Foreign buyers sometimes receive copies of titles they do not understand and rely on translations provided by agents. However, only a lawyer accustomed to working with the Land Office can confirm the exact nature, history, and reliability of a title. If the title is incomplete, disputed, or based on older documents with weak evidence, the buyer faces significant risks when buying a property in Thailand, including boundary disputes, overlapping claims, or future challenges from neighbours or authorities.
A proper title search includes reviewing the history of transfers, checking whether the land has been subject to expropriation, zoning restrictions or public road projects, and confirming that it is not in a forest reserve or protected area. Without this verification, a buyer might acquire land that looks attractive but carries high legal risk.
How can hidden encumbrances and disputes affect foreign purchasers?
Even when the title itself is valid, the land may be subject to mortgages, usufructs, leases, rights-of-way, court orders, or tax liens. All of these can appear as encumbrances on the title. If they are not identified and dealt with, they become direct risks of buying a property in Thailand for the buyer.
For example, a previous owner may have granted a long-term lease to a third party, giving them the right to occupy the property for many years. A foreign buyer who ignores this lease will not be able to use the land as expected. Similarly, a mortgage in favour of a bank or a financing company may prevent registration of a new transfer until the debt is settled.
A thorough search at the Land Office and other authorities is therefore essential. At Benoit & Partners, we systematically check encumbrances, pending court cases, debt issues and any objection recorded on the title.
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Why are contracts and unregistered rights at the heart of the risks of buying a property in Thailand?
How can poorly drafted or unbalanced contracts expose buyers?
Many purchase agreements, reservation forms and lease contracts in Thailand are drafted by developers or agents who naturally protect their own interests. They often limit the seller’s obligations, grant broad powers to amend the project, and restrict the buyer’s rights in the event of delay or defect. They may also be written only in Thai, with an informal English translation that lacks legal force.
When a foreign buyer signs such a contract without independent legal review, they accept an unbalanced framework. If a dispute arises, the court will apply the Thai version and the Civil and Commercial Code, not the buyer’s expectations. This contractual imbalance is one of the most frequent risks of buying a property in Thailand.
A specialized lawyer will review or draft contracts to include clear payment schedules, conditions precedent, penalties for late completion, defect liability, termination rights and an obligation to register the transfer or the lease at the Land Office. This work turns a weak agreement into a legally robust instrument that truly protects the buyer.
Why is registration at the Land Office so critical for leases, usufruct and superficies?
Many foreigners reduce the risks of buying a property in Thailand by using leasehold, usufruct or superficies. These mechanisms are fully recognized by Thai law. However, they are only effective when registered at the Land Office. For example, a lease longer than three years must be registered; otherwise, it is enforceable only for three years, even if the contract states a term of thirty years. The same applies to usufruct and superficies, which must be recorded on the title to bind future owners.
Some sellers or agents claim that registration is unnecessary or costly. In reality, refusing registration is often a red flag. It may indicate existing encumbrances, tax avoidance or even an attempt to keep full control over the property. Accepting an unregistered right is therefore one of the clear risks of buying a property in Thailand.
A law firm will always insist on registration, ensure that the content of the right matches the parties’ intentions and that the Land Office records it properly on the title deed.
How do taxes, financing and compliance add to the risks of buying a property in Thailand?
What transaction taxes and costs should foreign buyers anticipate?
A real estate purchase in Thailand involves several taxes and fees. Transfer fee, specific business tax, withholding tax, and stamp duty may apply, depending on the seller’s nature and holding period. If the parties do not plan for these items, the buyer may incur unexpected costs at the Land Office. Misunderstandings over tax allocation are a classic source of last-minute disputes and, therefore, concrete risks of buying a property in Thailand.
A lawyer calculates these amounts in advance, clarifies the cost-sharing terms in the contract, and ensures that both parties bring the correct funds on the day of transfer. This avoids delays, rushed negotiations at the Land Office and potential cancellation of the transaction.
Why do banking rules and source-of-funds requirements matter?
For condominium purchases by foreigners, funds must be remitted from abroad in foreign currency and properly documented. The bank issues a Foreign Exchange Transaction form or a similar document that must state the purpose as the purchase of a condo. Without this evidence, the Land Office may refuse to register the condo in the foreigner’s name. This technical detail often surprises buyers and forms an additional set of risks of buying a property in Thailand.
Moreover, Thai banks and authorities apply anti-money laundering rules. Large transfers without a clear explanation may trigger questions or delays. Proper planning, correct wording of transfer references, and careful coordination with the bank help minimize these risks and allow a smooth registration.
In addition, after the purchase, foreign owners may become subject to annual property tax under the Land and Building Tax Act. Failure to pay can lead to penalties or enforcement measures. A law firm guides clients through these obligations so that tax compliance does not become another hidden part of the risks of buying a property in Thailand.
How can a property lawyer reduce the main risks?
Legal due diligence is the most effective way to reduce the risks of buying a property in Thailand. It offers a structured review of the property and its legal environment. It checks title deeds, encumbrances, historical transfers, zoning rules, building permits and developer licences. It also examines corporate documents, foreign ownership compliance, existing contracts, payment proof and tax records.
At Benoit & Partners, we prepare a clear written due diligence report. It explains the property’s status, identifies the risks, and proposes solutions. With this information, buyers can make informed decisions, renegotiate terms or walk away before committing funds.
A property lawyer then secures the entire transaction. They negotiate terms, draft or revise contracts, coordinate with banks and prepare all documents for the Land Office. They attend the registration and ensure the seller has full authority to transfer the property. They also verify that all taxes are handled correctly.
If issues arise, such as delays or defects, the lawyer advises on the available remedies. They manage disputes or settlements when necessary. For foreign buyers, working with a bilingual legal team familiar with Thai law and international practice is essential. It ensures that each step of the purchase is legally sound and that the risks of buying a property in Thailand remain fully under control.
Conclusion
The risks of buying a property in Thailand are real but manageable. Foreign ownership restrictions, complex title deeds, unbalanced contracts, registration requirements, tax obligations and banking rules all create a legal environment that is very different from that of most foreign buyers. Without proper guidance, these factors can lead to loss of rights, financial losses or long-term disputes.
However, when transactions are prepared with rigorous due diligence, carefully drafted contracts, and full compliance with the Land Office, Thailand remains an attractive and secure jurisdiction for property investment. The key is to treat the purchase as a legal transaction from the very beginning, not just a personal or lifestyle decision.
If you are considering purchasing property in Thailand, you can contact Benoit & Partners to schedule a first consultation. Our team will review your project, explain the risks of buying a property in Thailand in your specific case and design the safest structure to protect your investment over the long term.
FAQ
No. Foreigners cannot own land directly. This is one of the core risks of buying a property in Thailand.
Yes. A condo can be owned freehold if the 49% foreign quota is available. Ignoring this rule is a major risk of buying a property in Thailand.
Yes, but only when registered. An unregistered lease is one of the most common risks of buying a property in Thailand.
Yes. Due diligence is essential. It prevents hidden problems, which are frequent risks of buying a property in Thailand.
Yes. Early legal review protects buyers from contractual and ownership issues. It reduces all key risks of buying a property in Thailand.