Buying a Condominium: The 49% foreign ownership quota issue
June 9th, 2010
One of the legal headaches limiting access of foreign buyers to the Thai real estate market is that Thai laws currently limit foreign buyer freehold purchases of condominium units to percent of the total area (reserved for private ownership) of a condominium building at any one time.
While this limitation is rarely a problem in Bangkok, it has become a serious handicap for condominium developers in resort areas, such as Koh Samui, Pattaya or Phuket, where foreign buyers often outnumber Thai buyers. As a result of this restriction , developers in resort areas are building up a stock of unsold units that Thai buyers are not interested in purchasing and that foreign buyers cannot purchase because of the current legal restrictions.
Why the 49% quota?
The logic behind these restrictions on foreign ownership is that any buyer (Thai or foreigners) who purchase a condominium will receive (1) the freehold ownership of their unit, and (2) a “ratio of ownership in the common property ______% in 10,000” .
Now the Common Property of a Condominium which is owned by the Co-Owners (all the condominium unit owners) includes:
(1) The land on which the building is situated,
(2) The land for mutual benefit,
(3) The structures of the building,
(4) Part of the building for mutual benefit,
(5) Tools and utilities for mutual benefit,
(6) Places for common services, and
(7) Other properties for mutual benefit. Act No. 4 adds the following properties as common property of a condominium including
(8) The office of the condominium juristic person,
(9) Immovable properties with obligations,
(10) Structures or systems for security or environmental purposes in the condominium (i.e. electricity, ventilation, air-conditioning, drainage and disposal and fire prevention systems etc.), and
(11) Other assets maintained by the common expenses collected from the Co-owners the condominium building itself, all the facilities and also the land on which the condominium is built on.
If the Government was to authorize a quota of more than 49% of foreign ownership in condominium buildings (said for example 70%) then this measure would have for immediate consequence to give to foreign buyers a majority interest ownership (in this example 70%) in the Common Property which also includes the land on which the condominium is built on.
In other words foreign buyers would own a majority interest in residential land which would conflict with Thai laws on land ownership.
Finally, the ownership of a condominium unit also includes the rights to become a member of the Juristic Person (or the co-owner(s) association) that manages the common property on behalf of the Co-Owners and as such to exercise the rights of vote attached to the ratio of ownership of the Common Property and to be elected as a member of the committee of the juristic person which may create more problems under Thai laws.
Of course the easy way out would be to suppress the quota. But things are not always so easy in Thailand especially in a political context where Thai press make its delights of the “foreign menace” on Thai land.
About the Author:
The author Rene-Philippe DUBOUT is a lawyer since 1990 when he was admitted to Geneva bar (Switzerland). He practiced as a litigator there for 10 years until he moved to Thailand in 1999. In 2002 he founded with a group of Thai lawyers Rene Philippe & Partners Ltd a local law firm that specialized in Cross Borders Investments and Real Estate. He has been lecturing in several Thai Universities and a speaker to numerous conferences and seminars. He is the author of a must read book:”How to Purchase Real Estate Offshore Safely: The Case of Thailand”.