The Condominium Conundrum

Condo conundrum Bangkok

Given the restrictions on foreign ownership of land in Thailand, the most popular way for foreigners who want to own a property in the Kingdom has been to purchase a condominium.

Even this method of obtaining a property in Thailand has been subject to a series of restrictions, albeit relatively simple and straightforward as successive Thai governments have been prepared to encourage foreign private investment, viewing it as a long-term positive for the local economy.

This is very similar to the same conundrum that happened in Spain previously in places like Costa del Sol and Mexico’s Playa Del Carmen Real estate is changing here in Thailand too.

At the present time almost any foreign individual can purchase a condominium in Thailand. According to one of Thailand’s premier real estate companies, Jones Lang LaSalle, eligible foreigners include those with residence permits; those granted permission to enter Thailand under the Investment Promotion Act; limited companies with more than 49 percent of capital owned by foreigners, but who have been registered as a foreign ‘juristic person’ under Thai law; foreign juristic persons with investment promotion certificates, and, probably the most common of all, foreign individuals or juristic persons remitting foreign currency into the Kingdom for payment for the condominium units.

A foreigner not holding a permanent resident certificate, or a foreign company purchasing a condominium unit, is required to bring the full amount of the purchase price from an overseas source into Thailand.

The funds for the purchase of the condominium must be transferred into Thailand as foreign currency, with the handling bank in Thailand making the conversion of that money into baht.

For the foreign purchaser it is best to err on the side of caution when remitting funds and take the view that the exchange rate will be a little lower than might be expected. So, it is best to remit a little more than the purchase price in order to account for bank fees and a possibly poorer exchange rate.

It is also important that remittances be sent in precisely the same name as that which will appear on the purchase contract. As well, when asking your home bank to remit the funds it is a good idea to make it clear for what purpose the funds are being transferred. So, something like, ‘for the purchase of unit xyz in the abc condominium complex’ makes clear the intention and should make it easier to obtain the necessary paperwork from the bank. This paperwork is required by the Land Titles Office to officially register the purchase.

The only foreigners who are exempt from the need to remit the funds from overseas for the purchase price of a condominium are those in possession of resident status in the Kingdom. They only need to produce proof of their resident status, which is contained in a blue book, to negate the need to bring money in from overseas.

Choosing condos in Bangkok

In April 1999, almost two years after the start of the Asian Financial Crisis, the government introduced Condominium Act Number 3. This permitted certain apartment blocks (of more than 40 units located only in Bangkok or Pattaya and on not more than five rai of land) to exceed the previous limit of 49 percent foreign ownership levels. The provisions of the Act were put in place for a five-year period only, ending on 27 April 2004.

For that five-year period it was possible for an entire condominium complex to be owned by foreigners, or foreign companies. After 27 April 2004, the law reverted to the previous 49 percent maximum foreign ownership rule. This did not mean those foreigners who were in a condo complex with greater than a 49-percent ownership level had to divest themselves of their properties. All it meant was that if a foreigner sold a condo to a Thai national after this date, then that property could only then be on-sold to another Thai national or a properly constituted company.

A foreigner could certainly on-sell to another foreigner without the need for the property to revert to some kind of Thai ownership. There are probably dozens of condominium complexes in Bangkok (and Pattaya) which still have much greater than the 49 percent threshold, but remain quite legal under the provisions of the amended 1999 Act.

Over the last few decades successive Thai governments have tried to make it easier for foreigners to purchase certain kinds of property in the country. Naturally, the biggest concern for these governments has been the potential for any kind of open slather situation to inflate prices to such an extent that locals are priced out of the marketplace. Hence the restrictions which are in place today regarding the percentage of a condominium complex which can be in foreign ownership as well as the locations for such purchases.

In April 1979 the Condominium Act was promulgated into law and this piece of legislation basically established the paradigm for foreign ownership of condominium units.

As noted above, that Act was amended in 1999 and it was further modified in 2008. The modifications were intended to remove certain anomalies associated with the original 1979 Act, although the 49-percent to 51-percent foreigner to Thai ratio remained the same.

Despite the changes, the safeguards one might expect to be in place for those who are looking to buy are not necessarily as clear and defined as some people might hope. For example, real estate agents are not required to be licensed and so a fancy office and a couple of smiling and attractive receptionists do not necessarily make up a professionally-run organization.

There is plenty of information regarding the purchase of condominiums in Thailand on the Internet, as one would imagine. As with purchasing a property anywhere in the world, the buyer needs to always keep the Latin phrase ‘caveat emptor’ (let the buyer beware) firmly in mind. Sadly, there will always be those who will look to take financial advantage, and the best advice a potential purchaser can get is to employ the kind of rigour they would use if they were purchasing in their homeland.

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[1] Thailand Property Investment Guide 2013, Jones Lang LaSalle (Seri Manop & Doyle), page 6

[1]  http://www.doingbusinessthailand.com/blog-thailand/doing-business-in-thailand, accessed 16/5/15

[1]  https://www.youtube.com/watch?v=8gm0uI0hUrk, viewed 18/5/15