Investing in property in Thailand is full of pit falls and potential scams. I know because I have firsthand experience of buying property in Thailand and I have seen several people lose their money because they did not performed due diligence.
It is essential with any type of property investment to keep a cool head and not to take anything for granted, and this is especially true of Thailand where property ownership laws are very different to in the USA or UK.
When you ask a developer what the property laws are in Thailand you will get a different answer to when you ask a lawyer. Both a lawyer and a developer have a vested interest – the developer wants to push you down the path of a long term lease and the lawyer sees the potential of bigger fees and pushes you down the path of incorporation of a Thai company.
Here is the official line in Thailand – foreigners cannot own land in Thailand. This is repeated so much on the internet, but what is not mentioned is that non-Thai nationals can own property in Thailand. This is paradoxical: you can own a building but not the land upon which the building stands. Developers get round this problem by offering the potential buyer a 30 year lease on the land. This lease is registered at the land office. It requires the owner of the land to appear at the land office. In the typical contract offered by developers 2 renewals of the lease are guaranteed making a total of 90 years leasehold.
Read this next part carefully: the contract obliges the owner of the land to renew the 30 year lease when it expires, but if the owner of the land doesn’t appear at the land office then ownership reverts back to the owner. The lease is immediately invalid. The Thai courts will not uphold the enforcement of a second or third lease because the law states that a lease to a foreigner only lasts 30 years! In other words, your investment is completely at the whim of the land owner.
The alternative route is to use a Thai lawyer firm to set up a Thai company. In the memorandum of incorporation preferential voting rights are given to the foreign share holders. The shares in a Thai company must be less than 50% owned by foreigners, but lawyers can set up a company to give only the foreign owners dividends and voting rights: thus, effectively giving control of the company and its assets to non-Thai nationals. These assets could include a house and land.
Although the Thai government has recently tried to close this loophole of preferential voting rights, it is still very easy for lawyers to give de facto (if not de jure) control of a Thai company to foreigners.
The downside of this approach is that it is in a legally grey area. Furthermore, you will be required to prepare tax returns twice a year and so you have to employ an accountant and your company has to be seen to move money around to appear like a legitimate company.
My advice is not to buy property in Thailand. I have seen too many people lose their money in Koh Phangan property. Developers have been known to sell land that they don’t actually own. Never buy on Koh Tao – there are no land titles for the island because it was a penal colony. If you just want a holiday home for retirement then a 30 year lease is fine. If you want a serious and safe investment then get a lawyer and get a Thai company. And most importantly, make your lawyer insist on seeing the original land certificates. If you go into a property investment in Thailand without a lawyer you are asking to be ripped off.