Pages Navigation Menu

A Law Firm in Thailand

Condominium Leasehold or Purchase

Aside from the benefit of the avoidance of the 49% ratio rule, there are no clear advantages to buying a leasehold condominium, assuming the purchase price is not significantly lower than its freehold equivalent. This is not generally the case with ‘off plan’ leasehold units (units under development that have been purchased before the completion of construction).
Virtually the only leasehold condominiums the foreign buyer is likely to encounter and which usually sell for an equal or comparable price to their freehold counterparts. If the ratio in an ‘off plan’ site has exceeded 49 percent, it is often the case that developers will offer a proportion of the remaining units for sale under leasehold terms.

 Thai law allows for the lease of property for a maximum of 30 years and, despite the potential for the inclusion of renewal terms in the lease, it is by no means certain such terms would ever be enforceable. Anyone considering purchasing a leasehold condominium should also be aware of the following issues:

Any leasehold contract should ideally include an option to convert the leasehold title to a freehold, should the opportunity become available i.e. the ratio of foreign ownership in the building drops below 50 percent. It should be stated in the contract that this should be done in an equitable way i.e. a first come, first served basis. Such an agreement would obviously need to be negotiated before , but note developers have no legal obligation to provide this and may be reluctant to do so for commercial reasons.

Condominium leaseholders are not listed as owners and this can cause problems with regard to voting rights over the administration and management of the building. It should be ensured that voting rights are assigned from the developer to the purchaser in the lease agreement
What important legal and other precautions should be taken before purchase?

Title Search: A simple, yet critical step, conducting a comprehensive investigation of the title deed will confirm clear and legal title is held by the seller, determine the land’s legal boundaries, whether the land has registered liens, mortgages, leases etc. and provide important information regarding the rights of vehicle and utility access, residential zoning and environmental and planning codes for the area.

Maintenance Fees and Sinking Funds: Details of these should already be provided in contracts for new condominiums. In the secondary market, care should be taken to ensure the seller provides them. Alternatively, they can be obtained directly from the management company (the Juristic Person). The maintenance fee should be in accordance with the ratio of space owned and, as such, should be expressed as an amount per square meter.  The amounts should also be specified under the Rules and By-laws of the condominium, a copy of which should be obtained from the management company or from the relevant local Land Office (where they will be registered), since they also contain other very useful and important information.

Accounts:  It is good practice to request a copy of the accounts of the Juristic Person to ensure they are fully in order and all payments can be accounted for.

Document Review:  Since it is the seller who writes the contracts, a thorough and comprehensive review of all the terms and conditions contained therein is absolutely critical immediately before completion of sale. Any concerns raised should be communicated to the seller, along with a request for appropriate amendment.