It is a rather unknown fact among foreign property purchasers, in particular in tourist resort destinations in southern Thailand, that Thai property law sets forth a strict regime for development of real estate projects. One significant piece of legislation in this context is the Land Development Act, B.E. 2543 (2000) (hereinafter referred to as “LDA”).
The LDA requires any real estate development in Thailand comprising ten or more units to obtain a development license. This license will be granted if certain required standards are met by the project and it may contain detailed and specific conditions for the development of the project.
The LDA provides purchasers of property in Thailand with a certain minimum level of legal protection. In order to take the full advantage of this protection, prior to a property purchase from a licensed development, the development license should be compared with following important documents:
In our experience, legal disputes frequently occur when a land developer breaches the contract and/or does not follow his own development plan. For this case the LDA provides protection for purchasers, if the correct legal procedure is considered. The LDA applies for both individuals and juristic persons. If there are any problems with a land developer, purchasers may file a complaint with the Land Development Commission in accordance with LDA Section 52.
This legal procedure is a very efficient means of dispute resolution.
From the beginning to the completion of a real estate development project, the LDA sets forth procedures related to the development of the land. For instance, the land developer has the responsibility to maintain public facilities and public services until the so-called “Developed Estate Juristic Person” has been established to take over the responsibility for the maintenance. We note that
According to LDA Section 44 (1), it is not allowed that the purchasers of developed land of not less than half of the sub-lots in the map under the project establish the developed estate juristic person while the land developer still has the responsibility of maintenance of public facilities. In case that the purchasers of developed land represent less than half of the sub-lots, they do not have the right to establish the developed juristic person in any event.
The purchasers should be aware that their right to establish the developed juristic person will permanently expire if they do not establish the developed juristic person on time. But it is highly recommended that the purchasers establish the developed juristic person to maintain the public facilities by themselves as it is very helpful and beneficial for their community.
The establishment of the developed juristic person by the purchasers has following legal effect:
The LDA interestingly stipulates very strict requirements for land and house purchase agreements between the land developer and purchasers. A house purchase agreement must be in accordance with the standard contract prescribed by the LDA in order to protect purchasers. There are two versions of this standard contract:
Any terms and conditions of the contract that has actually been entered into between land developer and purchaser are deemed invalid if they are in contravention to the standard contract.
As part of the standard due diligence prior to the property acquisition, we further recommend a thorough review of the land title deed (and the title history according to the registry at the land office), building permit, construction agreement and invoices / receipts for payments to the land developer or contractor. In a professionally managed development all such documents should be in line with pertinent laws and available for review to the purchaser.
It is important to note that the aforementioned protection by the LDA applies fully only in the case of outright purchases of property, not in the cases of long term leases, such as 30 year leases, which are frequently used to legally structure property acquisitions by foreigners.
However, further to the LDA there are various laws and procedures in place in Thailand that aim to protect the rights of real estate purchasers. For instance, according to the Consumer Protection Law B.E. 2541 (1998), a land developer may be held accountable for the information provided in marketing material. Furthermore, the Condominium Act, 1979, B.E. 2522 provides a standard condominium unit sale and purchase agreement which is comparable to the aforementioned standard contracts under the Land Development Act. And an Announcement of the Consumer Protection Board regarding Section 35 (2) Consumer Protection Act, dated as of 15 September 2000, stipulates detailed contract terms for condominium unit purchases.
This article is intended for general guidance only. It should not be relied upon as legal advice.