How Foreigners Can Buy & Own Property in Phuket, Thailand: A Legal Guide

How Foreigners Can Own Villas, Houses and Land in Thailand

Foreigners can buy villas and houses in Thailand, but there are some restrictions regarding land ownership as Thai law prohibits foreigners from owning land directly. However, there are legal alternatives that allow foreigners to control landed property effectively.

Foreigners Can Own Villas/Houses/Land in Thailand via:

Leasehold Agreements: Foreigners can enter into long-term leasehold agreements, typically lasting up to 30 years with options for renewal. This arrangement grants exclusive rights to use the land, but ownership of the land itself remains with the Thai landowner. The leasehold can be registered with the Land Department, ensuring legal protection for the lessee.

Thai Limited Company: Another common method is establishing a Thai Limited Company, where Thai nationals hold the majority of shares (more than 51%). The company can then purchase the land, while set up to allow the foreigner to control the property through their shareholding. This option requires careful legal structuring and compliance with Thai business laws.

Ownership of Structures: While foreigners cannot own land, they can own structures built on leased land. If a foreigner leases land, they can fully own any house or villa constructed on that land. The ownership is enforceable if registered at the land department.

Alternative Options

While establishing a company is a viable route for freehold land ownership, foreigners can also consider other options such as leasehold agreements or acquiring property through a Thai spouse, each with its own legal implications and restrictions.

Lease and Tenancy Options for Foreigners

Leasing is a popular alternative for foreigners who wish to have control over a property without owning the land outright. Thailand offers several lease and tenancy options, each with its own legal considerations. You can also find more details on both in this article: Freehold and Leasehold Property Ownership in Thailand.

Understanding Leasehold Agreements and Considerations

Leasehold agreements allow foreigners to lease land or property for up to 30 years, with possible renewals. While leasehold does not provide full ownership, it offers a degree of security and is a legally recognized method of property tenure in Thailand.

Keep in mind that Thai laws limit the lease term to 30 years at a time. In some cases, sellers prepare pre-agreed extensions for the buyers, such as 30+30+30, which total 90 years. However, this pre-extension agreement is not recognized by Thai laws and does not have legal protection.

How Can I Ensure My Lease Agreement is Legally Enforceable?

A lease in Thailand is governed by the civil and commercial code and falls under the general Thailand contract laws. For it to be legally enforceable, a lease must be backed by written evidence. If the lease lasts over three years, it must be registered at the land office and noted on the land’s title deed, as outlined in Section 538.

Can Leasehold Agreements Be Transferred to Another Person?

Yes, it is possible to sell or transfer a lease agreement in Thailand, but there are some important considerations:

• The ability to transfer or sell a lease depends on the specific terms of the original lease agreement.
• If the lease allows for assignment or subleasing, the current lessee may be able to transfer the remaining lease term to another party. However, the property owner’s cooperation and approval is always required for a valid transfer.
• The transfer must be registered with the Land Department to be legally enforceable.

It’s advisable to consult with a Thai lawyer experienced in real estate to ensure the transfer is executed properly and to understand the rights and obligations of all parties involved.

What’s the Cost of Transferring a Lease in Thailand?

One benefit of a leasehold over a freehold is the lower registration fee when buying or selling a lease. Registering a lease costs 1.1% of the total lease value. In Phuket, this amount is typically shared equally by the buyer and the seller.

What is a Protected Leasehold Title in Thailand?

“Protected Leasehold” is another way foreigners can own property in Thailand.  Protected Leasehold is a term often used when a property is owned through an offshore company. Here’s how this structure typically works:

1. The development establishes an offshore company, usually in the British Virgin Islands (known as a BVI company).
2. Each unit owner in the development holds an equal share in this BVI company.
3. The BVI company, in turn, owns 49% of the shares in a Thai Land Holding Company.
4. The remaining 51% of the shares are held by a Management Company, which is formed and controlled by the collective owners of the BVI company.
5. The Thai Land Holding Company owns 100% of the land.

This way, every property owner in the development has an equal share in the BVI company, which grants them the full legal right to renew their leases whenever they expire, without relying on a third party for the extension. This arrangement is particularly common in older condominium projects in Phuket, where the Protected Leasehold system via BVI ownership is still in use.

The benefits of the Protected Leasehold System

Renewable Lease Rights: This setup allows every property owner to act as a shareholder of the BVI company and have the official ability to continuously lease their particular unit indefinitely in case the lease term ends by re leasing it to themselves.

Elimination of 3rd Party Dependence: Protected Leasehold eliminates the reliance on a party compared to conventional lease agreements, in Thailand by removing the requirement for an external Thai entity to possess property rights—a move that helps minimize conflicts of interest.

Enhanced Control: Foreign investors have authority when it comes to managing their property investments than, with regular lease agreements.

Historical Precedent: Past instances support the effectiveness of this approach, with condominium developments in popular tourist destinations such as Phuket having adopted and thrived using this system.

In summary, protected leasehold presents a strategy for investing in overseas real estate in Thailand, providing a level of authority and durability not usually found in conventional lease agreements. Other than freehold, protected leasehold is the second safest way foreigners can own real estate in Thailand.

All Thailand Land Titles and Title Deeds Explained

Title deeds are important documents to prove ownership rights to land and property in Thailand. They serve as official records of property boundaries, ownership history, and any encumbrances or restrictions on the land. Understanding the different types of title deeds is essential for making informed real estate decisions and ensuring the security of your investment.

Breakdown of Title Deeds in Thailand

Thailand’s land title system includes several categories, each with varying degrees of ownership rights and legal standing. Here are the main types of title deeds you’ll encounter:

1. Chanote (โฉนด) – The Chanote, also known as “Nor Sor 4 Jor,” is the most secure and desirable type of land title in Thailand.

Key features:

• Provides full private ownership rights
• Accurately surveyed and measured by the Land Department
• Registered with the local land office
• Can be used as collateral for loans
• Allows for subdivision

Chanote titles are typically found in urban areas and developed regions. They offer the highest level of security for property investments and are preferred by most buyers and financial institutions.

2. Nor Sor 3 Gor (นส 3 ก) – The Nor Sor 3 Gor is the second most preferred land title in Thailand.

Key features:

• Allows for private ownership
• Boundaries are defined by GPS coordinates
• Can be converted/upgraded to a Chanote title
• Transferable
• Can be used as collateral for loans

While not as secure as a Chanote, Nor Sor 3 Gor titles are still widely accepted and considered a good option for property investment.

3. Nor Sor 3 (นส 3) – The Nor Sor 3 is similar to the Nor Sor 3 Gor but with less precise land measurements.

Key features:

• Certifies the use of land
• Boundaries are defined by measurements or landmarks
• Can be used as collateral for loans
• Transferable, but requires a 30-day public notice period

This title is less secure than the previous two and is more commonly found in rural areas.

4. Possessory Right (Sor Kor 1) – The Sor Kor 1 is not an actual title deed but rather a notification of possession of land.

Key features:

• Does not grant ownership rights
• Can not be sold, only transferred through inheritance
• Can not be used as collateral for loans
• May be upgraded to a higher-level title deed

Sor Kor 1 documents are the least secure form of land rights and are generally not recommended for property investments.

Title Deed Upgrade Process

Upgrading a lower-level title deed to a higher one, such as from Nor Sor 3 to Chanote, can significantly increase the value and security of a property. The process typically involves:

1. Applying at the local land office
2. Paying required fees
3. Land survey conducted by officials
4. Public announcement period to allow for objections
5. Issuance of the new title deed

The upgrade process can be complex and time-consuming, often taking several months to complete. It’s advisable to seek assistance from legal professionals experienced in Thai property law.

Potential Issues with Thailand Title Deeds

When dealing with Thai title deeds, be aware of potential issues:

• Encroachments: Neighboring properties may encroach on the land boundaries.
• Easements: There may be rights of way or other easements affecting the property.
• Restrictions: Some areas have zoning laws or building restrictions.
• Multiple Claims: In rare cases, multiple parties may claim ownership of the same land.

To mitigate these risks, always conduct thorough due diligence and consider hiring a reputable law firm to perform a title search and verification.

Title Deed Verification Process

Before purchasing property in Thailand, it’s crucial to verify the authenticity and status of the title deed. Steps in the verification process include:

1. Obtaining a copy of the title deed from the seller
2. Checking the deed at the local land office
3. Verifying property boundaries and measurements
4. Investigating any registered encumbrances or liens
5. Confirming the current owner’s identity

Professional legal assistance is highly recommended for this process, especially for foreign buyers unfamiliar with Thai bureaucracy and language.

The Future of Land Titles in Thailand

The Thai government is continually working to improve the land titling system. Recent initiatives include:

• Digitalization of land records
• Implementation of blockchain technology for more secure and transparent land registration
• Efforts to resolve long-standing land disputes in rural areas

These developments aim to enhance the efficiency and reliability of the Thai land titling system, benefiting both local and foreign investors.

Understanding Thailand’s title deed system is crucial for anyone looking to invest in Thai real estate. While the Chanote title offers the highest level of security, other types of title deeds can also represent viable investment opportunities if properly verified and understood. Always exercise due diligence and seek professional legal advice when dealing with property transactions in Thailand.

For more information on Thai property law and regulations, visit the Department of Lands official website.

Do I need a Lawyer When Buying Property in Thailand?

At Storm Real Estate, we always encourage our clients to hire a lawyer to avoid any unpleasant surprises. While contracts and legal documents from reputable developers are usually secure, investing a bit more to ensure everything is in order can save you significant time, money, and sleep. Thailand’s legal system differs from what you might be used to in your home country, so it’s better to be safe than sorry.

Can Foreigners Get a Home Loan in Thailand?

Foreigners can obtain a mortgage in Thailand, but the process is challenging. Mortgages are primarily available for purchasing completed foreign freehold condominiums, with restrictions limiting these loans to specific areas like Bangkok and Phuket. Additionally, banks require applicants to have a valid work permit, a stable income, and sufficient documentation, which can complicate the process further.

To increase the chances of approval, having property in Thailand or in your home country as collateral can be beneficial. Alternatively, some developers offer in-house financing and extended payment terms, especially for off-plan properties.

You can read more in our article Can Foreigners Get a Home Loan in Thailand?

Visa Types in Thailand for Foreigners

Foreigners do not need a visa to buy property in Thailand. However, if you would like to stay in Thailand for an extended period of time, you will definitely need a visa. There are different types of visas Thailand offers for foreigners to stay longer terms:

• Retirement Visa
• Work Visa (Non-B)
• Thailand Elite Visa (Privilege Card)
• Thailand Long Term Resident’s Visa (LTR Visa)
• Destination Thailand Visa (DTV Visa)
• Investment Visa
• Tourist Visa
• Education Visa
• Marriage Visa

Transfer Fees and Taxes on Property Transactions in Thailand

Understanding the associated taxes and fees is crucial when purchasing a property in Thailand.

Freehold Transfer Fees & Taxes

• Transfer Fee: 2% – This fee is typically split equally between the buyer and seller, although alternative arrangements can be negotiated.
• Specific Business Tax (SBT): 3.3% – Applicable to properties held for less than 5 years. Includes a 0.3% municipal tax on top of the 3% base rate.
• Withholding Tax: 1% – Calculated on the assessed value or the sale price, whichever is higher.
• Stamp Duty: 0.5% –  The stamp duty applies when Specific Business Tax is not charged.

If the seller has owned the property for over five years, they’re exempt from the 3.3% Specific Business Tax. In this case, the 0.5% Stamp Duty applies instead.

Note that the transfer fee and stamp duty are calculated based on the property’s appraised value, which is updated by the Land Department and Treasury Department every four years. This is done to ensure that the buyer and seller cannot understate the sale price.

The payment of these taxes and fees is a critical step in the property transfer process:

• All taxes and fees are typically paid on the day of the transfer at the local land office
• The Land Department requires proof of payment before officially changing the property’s ownership
• It’s advisable to prepare bank drafts or cashier’s checks in advance to ensure smooth transactions

Leasehold Registration Fee

For leasehold properties registration fee is 1.1% of the Lease value and it’s paid in every 30 years for each extension. If the lease is transferred, the registration fee is 1.1% of the remaining value.

In Phuket, the transfer fees and taxes for both freehold and leasehold property are typically shared 50/50 between the buyer and the seller.

Thai House Book

The Thai House Book, known as Tabien Baan (ทะเบียนบ้าน) in Thai, is an official government document that records the details of the residents living in a particular property. It serves as proof of residence and is an essential document for various legal and administrative purposes in Thailand. Here’s a closer look at the Tabien Baan:

Types of Tabien Baan

There are two main types of Tabien Baan:

Blue Tabien Baan (ทะเบียนบ้านเล่มสีน้ำเงิน)

• Issued for Thai Nationals: The blue book is typically issued to Thai citizens. It records the names and details of the Thai individuals who reside at the property.
• Proof of Residence: This document is used as proof of permanent residence for the people listed in it. It is often required for tasks like registering a vehicle, applying for a passport, or voting.

Yellow Tabien Baan (ทะเบียนบ้านเล่มสีเหลือง)

• Issued for Foreign Nationals: The yellow book is specifically for foreign residents in Thailand. If a foreigner owns a house in Thailand, they can apply for a yellow Tabien Baan to have their name officially registered as a resident of that property.
• Proof of Residency: While not mandatory, having a yellow Tabien Baan can benefit foreign nationals. It provides proof of residency, which can be useful for various administrative processes, such as applying for a work permit, driver’s license, or other official documentation.

Importance of Tabien Baan

• Legal and Administrative Use: The Tabien Baan is used for various legal and administrative purposes, including utility registrations, property transfers, and inheritance matters.
  Proof of Address: For Thai nationals, the blue Tabien Baan is the primary proof of address. For foreigners, the yellow Tabien Baan serves a similar purpose.
• Property Sales and Ownership: While the Tabien Baan is not proof of property ownership (the title deed serves that purpose), it is still important for the registration of the property’s occupants. When selling a property, the Tabien Baan must be updated to reflect the new occupants.
• Inheritance: In cases of inheritance, the Tabien Baan can play a role in determining the legal heirs, as it records the residents of the property.

How to Obtain a Tabien Baan

• Blue Tabien Baan: This is automatically issued to Thai nationals when they register a new house with the local district office (Amphur).
• Yellow Tabien Baan: Foreigners must apply for the yellow Tabien Baan at the local district office where the property is located. Required documents typically include proof of ownership, passport, and a valid visa, among other documents. The process may require the assistance of a Thai national or legal expert.

The Tabien Baan is a crucial document in Thailand that records the residents of a property, whether they are Thai nationals (blue book) or foreigners (yellow book). While it doesn’t confer ownership rights, it plays an important role in various legal, administrative, and everyday matters. For foreigners residing in Thailand, obtaining a yellow Tabien Baan can simplify many processes and provide official recognition of their residence in the country.

The Future of Foreign Property Ownership in Thailand

Thailand’s property laws have historically been restrictive regarding foreign ownership, particularly concerning land. However, recent developments suggest that the Thai government is considering significant reforms to attract more foreign investment. These potential changes aim to make Thailand’s real estate market more competitive on the global stage while balancing the interests of local residents.

Upgrading the Foreign Freehold Quota in Condominiums to 75%

One of the most notable proposed changes is the adjustment of the foreign ownership quota for condominiums. Currently, foreign nationals are allowed to own up to 49% of the total sellable area in a condominium building. The Thai government is considering increasing this limit to a minimum of 75%, which would significantly expand the opportunities for foreign investors. This change aims to stimulate the real estate market by making it more accessible to international buyers, although there may be conditions to ensure that Thai interests are still protected, such as limiting voting rights in condominium management.

Increasing the Lease term to be 99 Years

Another significant proposal under consideration is extending the maximum lease term for foreigners from the current 30 years to 99 years. This change would provide greater security and long-term investment potential for foreign buyers who cannot own land outright. The extended lease term would also allow properties to be used more effectively as collateral for loans, potentially increasing credit availability and making the Thai property market more attractive to global investors.

Foreigners Might Be Allowed to Buy Landed Property

Perhaps the most groundbreaking potential change is the possibility that foreigners could be allowed to buy landed property directly. Currently, foreign ownership of land is generally prohibited, with few exceptions. However, there are discussions about permitting foreigners to purchase land under specific conditions, such as through high-value investments in designated areas or under certain economic initiatives. This change, if implemented, would mark a significant shift in Thailand’s property laws and could open up new opportunities for foreign investors.

These proposed changes are part of broader efforts by the Thai government to boost the economy, particularly in the wake of the COVID-19 pandemic. While these reforms are still under discussion and not yet finalized, they represent a potential new era for foreign investment in Thailand’s property market. Investors should stay informed and consider consulting legal experts to navigate these evolving regulations effectively.

Why Does Thailand Impose Strict Foreign Property Ownership Regulations?

1. Preserving National Sovereignty –  At the core of Thailand’s property ownership laws lies a deep-rooted desire to maintain national sovereignty. The Thai government seeks to prevent excessive foreign control over the country’s land resources, ensuring that Thai citizens remain the primary stakeholders in their nation’s territory.
2. Protecting Agricultural Land – Thailand’s economy has strong agricultural roots, and the government is keen on safeguarding farmland from foreign speculation. By restricting foreign ownership of land, Thailand aims to preserve its agricultural heritage and food security.
3. Preventing Land Speculation and Price Inflation – Unrestricted foreign investment in property could lead to rampant speculation and artificially inflated prices, potentially pricing out local buyers. The ownership regulations serve as a buffer against such market distortions.
4. Balancing Economic Growth and Local Interests – While Thailand welcomes foreign investment, it strives to strike a delicate balance between economic growth and protecting the interests of its citizens. The property ownership laws are designed to encourage foreign investment without compromising local opportunities.
5. Maintaining Cultural Identity – Land ownership is deeply intertwined with Thai cultural identity. The regulations help preserve the country’s unique character by ensuring that a significant portion of the land remains in Thai hands.
6. National Security Considerations – Like many countries, Thailand views unrestricted foreign land ownership as a potential national security risk. The regulations provide a layer of control over strategic areas and resources.
7. Managing Urban Development – By channeling foreign property investment primarily into condominiums, Thailand can better manage urban development and infrastructure planning, particularly in popular tourist destinations.

What Are The Advantages of Buying Property in Thailand?

Thailand offers a unique investment opportunity where your investment can also provide you with a suntan. Stunning locations like Phuket, Samui, Pattaya, and Hua Hin are some of the world’s best holiday resorts, ideal for retirement, living, or owning a property to generate substantial passive income.

Many foreigners own properties in Thailand that they use during visits and rent out when they’re away, earning residual income. As Thailand is a top holiday destination, consistent annual capital gains make this investment even more appealing.

Beyond being a fantastic place to live or invest, Thailand also allows foreigners to own property. The Condominium Act of 1976 permits foreigners to fully own condominium units in their name.

Compared to other countries, Thailand is quite affordable in terms of living costs, and property prices are also competitive. Easy and low tax laws, straightforward legal processes, numerous affordable property options, and an incredible lifestyle make buying property in Thailand a wise choice.