Tag Archive: property

  1. Short-term rental businesses via online platforms in Thailand

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    As the economy recovers from the COVID-19 crisis, Thailand is again attracting more and more tourists to the country. Visitor numbers are increasing, and short-term rental businesses through platforms such as Airbnb, including daily rentals via other online platforms, are gradually becoming more popular, encouraging villa and apartment owners to set up short-term rentals to allow tourists to stay in their properties.

    Problematically, however, properties in Thailand are generally not allowed to be rented out for less than 30 days unless you have a hotel license, while condominium units are restricted to being used for short-term rentals under Thai Condominium laws.

    Acting contrary to these requirements may constitute a criminal offense under Thai law.


    Online rental platform – what is it?

    An online rental platform is an online marketplace for travelers looking for accommodation, for example, Airbnb, Agoda, or Booking.com. The groundbreaking model allowing private landlords to host vacationers and business travelers has effectively transformed the digital platform into the “world’s largest hotel”.

    Online rental platform’s legal status is still uncertain

    Online rental platforms continue to face massive criticism for being major competitors to regular hotel and accommodation businesses. Hotel owners are not pleased about declining revenues while continuing to pay the overhead costs for their properties. As a result, they view online rental platforms such as the Airbnb model as an unacceptable hardship. As a result, like other countries, Thailand has imposed restrictions against Airbnb and its operations.

    For condominiums

    We have to be focused on two Acts, the Condominium Act B.E. 2522 (1979) (the “Condominium Act”) and the Hotel Act B.E. 2547 (2004) (the “Hotel Act”).

    The Condominium Act, section 17/1 paragraph 2 states that no person shall be permitted to operate their business in the condominium except for the provided specific area of the condominium building. This regulation applies to short-term rentals via an online platform.

    Another concern is the Hotel Act. Under the Hotel Act, the definition of “hotel” is a lodging premise established for commercial purposes to provide temporary accommodation to a traveler or any person for consideration. Therefore, a monthly rental or more is exempt from the definition of temporary accommodation of the Hotel Act.

    Section 1336 of the Thai Civil and Commercial Code (“CCC”) states that the unit owner can enjoy his rights over his property if it does not disturb others. However, the Condominium Act, which governs the usage of the condominium unit, prohibits the condominium owner from using his condominium unit for short-term rental.

    For house

    Regarding landed property, the related piece of legislation is the Hotel Act which is, in principle, the same as for the condominium unit, which restricts the usage to short-term rental, except if such house owners have a hotel license. If the house owner has more than 4 rooms and is entitled to hold more than 20 occupants at a time, the property owner is entitled to apply for a hotel license to operate a short-term rental legally.

    On the other hand, the house owner is entitled to apply for the non-hotel license if the property has fewer than 4 rooms and cannot hold more than 20 tourists at a time but still wants to operate a short-term rental. The owner has to apply for a non-hotel license. This will allow a short-term rental of a house to be valid and legal.

    There are some specific requirements for each type of license. For example, for a non-hotel license, the owner must be a Thai national. Foreigners or juristic persons may not apply for this type of license. The reasoning behind this rule is to increase local people’s income, who could use their houses as accommodation for tourists as their additional main income source. The hotel license has stricter requirements than non-hotel licenses, such as hotels may not be located near historical sites, and entrance to the hotel must not cause traffic problems. Moreover, before applying for a hotel license, the building must also comply with the Building Control Act B.E. 2522. The regulation stipulates many more obligations for the applicant to comply with.

    Conclusion

    The legality of online short-term rental platforms in Thailand is still up in the air. The condominium is not allowed to rent on a daily or weekly basis. However, this is not a general rule, and it depends on whether each condominium regulation allows it.

    In order to legally operate a short-term rental business, the house owner requires a hotel or a non-hotel license, as the case may be, subject to the Hotel Act. A house with fewer than 4 rooms and 20 occupants maximum shall obtain a non-hotel license; however, a house with more than 4 rooms and more than 20 occupants in the building must obtain a hotel license.

    Thus, the legal status of online short-term rental platforms is still unknown as there is no clear answer by government authorities whether it is possible to do or not. 

    If you have any questions related to property in Thailand, please do not hesitate to contact us at [email protected]

  2. Buying a House in Thailand – Handover Checklist

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    When the owner of residential property changes, the last step after the visit to the land office and the receipt of the money is crucial: the handover of the keys; after this, the previous owner moves out, and the buyer moves in. At this point, all documents are handed over, a joint tour of the house is made, and meter readings and defects are noted. It makes sense to draw up a protocol for the handover of possession so that the sale of the house does not have any repercussions. We have summarized what you should pay attention to in the house handover protocol.

    Summary of the most important things to remember in a handover:

    As with a condominium, a house is handed over at an agreed time after the purchase contract has been signed, usually only after the money has been received.

    The handover occurs under the agreed conditions, typically in a “bought as seen” condition.

    Before the keys are handed over, the buyer and seller tour the property together.

    Defects are noted in the handover protocol, including the “to do” list, who will take care of these, and by what date.

    It also lists all the previous owner’s documents to be handed over to the new owner.

    The handover protocol may also be referred to as the takeover protocol, as meter readings are recorded, and it is noted which inventory/furniture is being taken over.

    The buyer and seller sign the handover protocol, and witnesses present also sign if necessary.

    The goal of a handover protocol for a house or condominium is a smooth transition without legal disputes. It protects both sides: for example, the buyer can claim unlisted, missing, or required documents from the seller. If defects occur after the handover, which the seller neither concealed nor is responsible for, he does not have to pay for these to be resolved.

    What should be included in a house handover protocol?

    A good handover protocol checklist includes:

    1. Names and contact details of the parties
    2. Time of the inspection
    3. Property data (address, last renovation, service charges paid until)
    4. Meter readings (heating, electricity, water meters)
    5. Furniture/inventory per room
    6. Defects – including the basement, attic, garage, outdoor areas such as the garden, etc. Examples include a crack on a wall, a leaking roof, and faucets not working. A record is taken of who will remove the defects, by when, and at whose expense.
    1. Repairs that have already been ordered or are still being paid for by the previous owner.
    2. The number of keys from the mailbox to the tool shed.
    3. A list of the documents handed over. Of particular importance are:
    • Building description
    • Building plans, floor plans, sketches, and static calculations
    • Building insurance
    • Property tax assessment
    • Craftsmen’s invoices (especially relatively recent, larger ones)
    • Inspection records (especially fireplace inspections by the chimney sweep)
    • Operating manuals for building services/heating etc.
    • In the case of condominiums, the minutes of the last three owners’ meetings and the declaration of division should also be included.
    • Place, date, and signature of all who are present*.
      *Optional: If witnesses accompany you during the handover, name them in the handover protocol and have them sign.

    For more information about our real estate services please visit www.franklegaltax.com/services/real-estate/
    If you have any questions related to property transfers or real estate in Thailand, please contact [email protected]

  3. The Sap-Ing-Sith – Is Thailand’s New Property Right a Game Changer?

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    The Thai Land Code stipulates that – apart from a few exemptions – foreigners are not permitted to own land in Thailand. Many foreigners seeking to buy immovable property in Thailand, therefore, chose legal structures like leasehold, usufruct, or ownership of the property by a Thai company, to mitigate the restrictions. However, these legal structures have weaknesses and, if not set up properly, may even involve legal risks. To encourage foreigners to invest in property in Thailand, the Thai National Legislative Assembly on February 8th, 2019, passed the Sap-Ing-Sith Act. The Sap-Ing-Sith Act was published in the Royal Gazette on April 26th, 2019 and will come into effect on October 27th, 2019. The new law is aiming to encourage foreigners to invest in immovable property to boost the economy in Thailand. Requirements, as well as the rights and obligations of the Sap-Ing-Sith, are as follows:

    Definition of Sap-Ing-Sith

    The Sap-Ing-Sith grants its holder the right to use an immovable property and can be established on land with a valid Chanote (Land title deed), buildings placed on land plots held under a valid Chanote and condominium units as defined in the Condominium Act. It is possible to register a Sap-Ing-Sith for a period of up to 30 years. The Sap-Ing-Sith has to be made in writing and registered at the competent land office.

    Registration of a Sap-Ing-Sith

    After the parties reached an agreement, the registration of the Sap-Ing-Sith at the Land Department takes place in two stages; first, the Property-Owner has to register a Sap-Ing-Sith for the property. After registration of the Sap-Ing-Sith, the transfer to the other party has to be registered. The registration fee is 20,000 THB. If the land plot where Sap-Ing-Sith should be registered is subject to a mortgage, consent from the mortgage holder is required. After registration, the Sap-Ing-Sith holder will receive a certificate of the Sap-Ing-Sith from the Land Office, which he can use to prove his right. The Land Office will also keep a copy of this certificate.

    Rights and duties in relation to the Sap-Ing-Sith

    There are several rights and obligations in relation to the Sap-Ing-Sith, which are surpassing the rights of a standard leasehold. The most significant rights and duties are shown as follows:

    Rights of the Sap-Ing-Sith holder:

    • Use the property as shown on the details of the certificate issued by the land office;
    • Transfer the Sap-Ing-Sith to a third party without the owner’s consent;
    • Use the Sap-Ing-Sith as security for a mortgage (not registered);
    • The Sap-Ing-Sith is inheritable under statutory inheritance law; and
    • Make alterations/additions to the property without the owner’s consent.

    Duties of the Sap-Ing-Sith holder:

    • Has to return the property in an “as is” condition at the end of the period unless otherwise agreed; and
    • Liable for the property like an owner. Exception: the right to follow and recover the property from a third party that is not entitled to possess the land, and the right to prevent unlawful interferences from the property.

    Rights of the Property-owner:

    • To transfer the ownership;
    • Use the property as security for a mortgage; and
    • Use the property security according to the Business Collateral Act B.E. 2558.

    The execution of all rights mentioned above requires written consent by the Sap-Ing-Sith holder.

    Obligations of the Property-owner:

    • Can’t create other rights on a property with a Sap-Ing-Sith without consent from the Sap-Ing-Sith Holder;
    • Can’t terminate the Sap-Ing-Sith before the expiration period if a right of a third party is affected. 

    Summary:

    As foreigners will be permitted to hold a Sap-Ing-Sith, it might become an interesting alternative to other legal structures that allow foreigners to possess land in Thailand. Also, when keeping in mind the advantages of the Sap-Ing-Sith, like the possibility to mortgage it, and the right to sell the Sap-Ing-Sith without consent of the owner, there are many scenarios where a Sap-Ing-Sith can be very useful. The Sap-Ing-Sith is not a game-changer, as the maximum period is still 30 years and thus the same duration as a normal leasehold. And most other rights that the Sap-Ing-Sith grants could also be granted with a standard leasehold agreement. But still, the Sap-Ing-Sith Act shows the ongoing liberalization of the Thai property market, which will certainly be welcomed by foreign investors. We expect that most foreign property buyers will likely prefer the new Sap-Ing-Sith over the traditional registered lease.

    We will monitor the impact of the Sap-Ing-Sith on the Thai property market when it comes into effect and will keep you updated. If you have any questions regarding this matter, feel free to contact us at [email protected].

  4. Residential Property Leasing as a Contract-Controlled Business

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    Overcharging tenants for electricity and water was a common practice among landlords in Thailand. Weak regulations laid the foundation for the collection of exaggerated deposits and punitive methods of landlords if tenants did not pay their rent.

    The Contract Committee of the Consumer Protection Board aims to end such practices with “the Regulation of Residential Property Leasing as a Contract-Controlled Business B.E. 2561” (the “Regulation”). Since May 2018 residential property leasing is considered a contract-controlled business.

    According to the Regulation the residential property leasing business is considered as a business which involves the lease or sublease of five or more units to individuals. The term ‘property’ has a broad meaning; it includes all kinds of residential accommodations, such as apartments, condos, flats, and houses.

    Such lease agreements must comply with the following requirements:

    • The agreement must be composed in Thai language (in addition to other languages, as the case may be) and include information on the business operator, the lessee and the property itself, the property’s condition and equipment. The lease agreement must contain the start and end date of the lease, rental and utility fees, due dates and other reasonable costs such as service fees and security deposit.
    • All invoices must be sent seven days before the due date. The business operator is obligated to provide a duplicate of the lease agreement and attach the tenant’s acknowledgement of the property’s condition and equipment.
    • The business operator has to repay the security deposit within seven days after the termination of the lease agreement and the inspection of the property’s condition.
    • The tenant has the right to terminate the lease agreement any time by giving written notice to the business operator 30 days in advance.

    • Clauses which give the business operator the right to terminate the lease agreement prior to the originally agreed period of time must be written in bold, italic, or red letters.
    • If the tenant is in breach of the contract, then the business operator is required to give the tenant 30 days to eliminate the breach before termination.
    • It is forbidden to incorporate clauses which waive or limit the liability of the business operator who is in breach with the lease agreement or acts wrongfully, allow the business operator to request an advance rental fee of more than one month’s rent, or to alter the rental rates or any fees during the duration of the lease agreement. The security deposit must not exceed the amount of more than one month’s rent, and terms which allow the business operator to seize the security deposit or advance rent are void.
    • Before inspecting the property, the business operator has to notify the tenant within a reasonable time.
    • Terms which allow a higher billing for electricity and water than the rates prescribed by the authorities are prohibited as well as stipulations which enable the business operator to bar the tenant from entering the accommodation or confiscating the tenant’s possessions.
    • Fees for prolongation of the rental agreement and terms which allow the business operator to terminate the lease agreement earlier without cause, such as material breach of the contract, are forbidden.
    • Normal wear and tear of the property or its interior and defects that result out of wear and tear shall be borne by the business operator only.
    • The tenant is not liable for property damages caused without the tenant’s contribution.

    If a lease agreement includes the above-mentioned clauses, such clauses will from now on be deemed invalid. A business operator who fails to follow the Regulations could face criminal prosecution.

  5. How to Secure the Purchase of Property?

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    The purchase or sale of a property is a legal transaction with a far-reaching legal and financial impact.

    To secure a prospective purchase or sale of property legally, both the buyer and the seller may enter into a so-called Memorandum of Understanding (MoU) on the intention to conclude a main contract later. The parties of such an MoU can sanction a breach of the intention to conclude the contract later, with legal consequences such as compensation of damages. If the MoU is worded correctly, it should not be possible to enforce the transfer of ownership of the property, or payment of the purchase price, on the basis of the MoU. However, it should strongly incentivize the parties to enter into the main contract, since a breach of the MoU would carry a contractual penalty, and compensation if the parties agreed on such legal consequences in the MoU. 

    Without such a specific MoU, a planned purchase or sale could otherwise be canceled without consequences, as there is no – at least no provable – agreement on the transfer of ownership until then.

    The Sap-Ing-Sith

    Therefore, a properly drafted MoU is the ideal basis for such a legal transaction. It should be made in written and cover the following issues:

    • Contracting Parties
    • Relevant Regulations by the Land Registry
    • Object of Purchase
    • Purchase Price
    • Payment Arrangements
    • Transfer Conditions
    • Costs and Taxes
    • Conveyance
    • Compensation of Damages
    • Final Provisions

    In addition, essential agreed terms should be included, particularly with respect to the registration by the competent official and the requirements of the individual case.

    The MoU is a good foundation and should be considered an essential element of the purchase and sale process of a property.

  6. Bangkok Property Market Performs Strongly in 2017

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    In Q4 2017, the Bangkok condominium market grew steadily, particularly in the downtown area of the city. The number of new properties launched in 2017 overall also grew year on year by, with a 51% increase compared to 2016. Bangkok’s condominium market is likely to continue to grow in the future, given the many new mass transit lines and pipelines under construction (for example the MRT Pink Line, MRT Yellow Line and MRT Orange Line).

    Land prices and the lack of remaining downtown new development space has opened the way for new locations to become up and coming property hotspots. Projects that are in prime or new locations with appropriate pricing to compliment market demand continued to performed well.

    Due to the high proportion of units from projects that have been sold and that have been completed since 2014 in the downtown area, there does not currently appear to be a risk of oversupply in the area. Increasing land costs are a central factor that has resulted in price increases. More projects are opening up in new areas due to the construction of the approaching transport connections.

    During the past one to two years, the average selling price of new condominium units has continued to rise at approximately 15–20% annually. Condominium prices are expected to increase similarly next year, particularly in in the downtown area.

    Expatriates work permits in Bangkok increased 1.3% Quarter on Quarter and 3.1% Year on Year. Typically, expatriates have favoured certain areas and this continues to be the case, particularly the Sukhumvit, Silom/Sathorn and Central Lumpini areas, due to their easy access to the BTS Skytrain, along with convenient shopping and dining options.

  7. Phuket Residential Property Market – Updates

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    Looking at the period January to June 2017, Ninety percent of Phuket resort property purchases were in the range of THB 5-35 M per unit for villas and THB 8 M or under for condominiums. Investors are looking for rental yields of between 5-7% over the course of two to five years.

    Expatriates from across the region and Thai nationals typically based in Bangkok are the main purchasers of Phuket’s resort properties. The Rouble has appreciated against the Thai Baht, which has also attracted interest in Phuket property from the Russian property investor’s market. There were also Chinese investors in certain entry-level projects. sales came from buyers who bought multiple units, buying at bulk prices and hoping to resell.

    Phuket Residential Property Market

    The priority for property buyers continues to be on rental income as typically investment properties in Phuket are stayed in for 60 days or less per annum. Potential property purchasers should examine the practicality of rental guarantees and other rental packages before making a decision.

    If you would like further information on the process of buying a property in Phuket or elsewhere in Thailand, please contact [email protected]

     

  8. Good news for property buyers

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    The cabinet has on October 13, 2015, approved significant tax incentives related to the property sector. The property transfer fees were reduced from 2% to 0.01% and the mortgage fee from 1% to 0.01%. The purpose is to support low-income earners who would like to buy homes priced below 3 million baht. The reductions will take effect this month for both new and second-hand homes. However, the effective date of this property measure is only on October 29, 2015 to April 28, 2016.

    Meanwhile, Government Housing Bank (GHB) will provide 10 billion baht in mortgage loans for low-income borrowers until the end of next year.

     

    Please find more information about this news from the following link: http://www.bangkokpost.com/news/general/728176/cabinet-approves-tax-fee-cuts-for-home-buyers

  9. New Inheritance Tax and Property Tax in Thailand?

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    Plans to reform Thailand’s tax system, including the introduction of inheritance and property taxes, have been approved by the Chief of the military-led National Council for Peace and Order (NCPO), Gen.Prayuth Chan-ocha.

    The proposed reforms would raise revenue by increasing taxes primarily on the wealthy. Thailand’s Ministry of Finance (MOF) has said Chan-ocha wants the new tax system “to be a mechanism for fairness and income generation for local communities.” Estimates project the new taxes could generate as much as US$3.1 billion.

    The approved tax reforms are not completely new to the Thai government. Proposals for inheritance and property taxes have been around during Thailand’s numerous administrations in the last decade, but never gained the necessary support for implementation.

    The inheritance tax will reportedly levy taxes of five to 30 percent of all domestic assets passed down to heirs, such as real estate, automobiles, stocks and bonds. Certain assets can be moved or already exist overseas, however, raising concerns over potential loopholes. Some believe an inheritance tax will also discourage Thais from saving income within the country.

    Thailand is not the first ASEAN nation to implement an inheritance tax. Singapore and the Philippines have implemented inheritance taxes, and other Asian adopters include China, Taiwan, South Korea, Japan and India.

    There are few details, as yet, on the land and buildings tax. An old tax bill proposal from a prior administration suggests a maximum tax of 0.5 percent of the value of properties that exist for commercial use, as much as 0.1 percent for private residences and no more than 0.05 percent on land used for agriculture. Temples, palaces and public areas would be exempt. Other sources say the new land and building tax rates will range from 0.05-2 percent and take into account land purposes and improvements made to it. Exemptions, such as for residences of lower appraised property values, are still being determined.

    It is also expected that the reforms will include specific tax cuts for those with the lowest incomes, detailed of which are yet to be specified.

    The Revenue Department is drafting the tax reform bill for submission to the new interim civilian Government, before it is then to be reviewed by the National Legislative Assembly.

  10. How to will your Thai Property

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    For many people, estate planning and the preparation of the last will and testament is a dreaded thought and something that is rather avoided. However, it is certainly advisable to settle such affairs, and this holds true in particular if you have property in Thailand.
    Phuket News - The Importance of Preparing a Thai Will_Page_1
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