Thailand plans to relax foreign ownership rules

[CraigDunn]

Even tho' I work in the property biz I have sought the answer to the following question for a looooooooooong time but never gotten a clear conclusion ...

What happens to one's ownership of a condo unit when the building itself is worn out and has to be evacuated/abandoned/reconstructed?

Has this actually happened yet, is there any case history? Are the owners invited to pay their share of reconstruction or are they left waving chantoes for X cubic meters of airspace 100 feet up? Anyone know?

cd.

[Super Joe]

Good question, was going to get one in Bangkok until I looked into it further, as I wanted it to be long term for my son say 30 years down the line.
Problem can be that initially a great management team is in place and the block is kept in a good state of repairs. Then the building starts to age, wealthy people move on to newer blocks, a cheaper less quality management company may come in. The building may then, partly through natural ageing process and partly through poor maintenance, deteriorate faster than any repairs being carried out.
More people move out, the empty units are harder to sell and value of units goes down.
At a certain point the residents committee can decide (vote) to accept an offer from a developer for the land and all owners get their share of that offer based on the % of the ground area they own. Simplyfying it 100 units all have a 1% share of the 10 Rai it sits on. The exact share is actually 'weighted' based on the sq.m of their particular unit.
The key to how long of an investment a condo is is down to the quality of management company and committment of residents to pay upkeep for top quality management company. Too many variables for me and no control, with a house you can keep it maintained yourself forever'ish.

All the stuff I read from supposed 'experts' say life expectancy of a non-well maintained block is 20-25 years and the problem is that your unit then will be worth a fraction of the unit in the brand new block next door.
Whereas a house that you can keep well maintained yourself in 25 years time will keep pace, albeit a bit less value, than that the brand new one thats just been built next door.

Ok to live in and make use of for 20-25 years (lifestyle property) but not good for a long term investment imo.

SJ

[Guess]

I agree lease terms should be greater than 30 years. I appreciate that not many Farang would see out the 30 years but as buksida says, it needs to be passed on to the kids. 99 years is common in many countries.

Now I have a question related to company ownership of land and property.

When the clampdown became enforced regarding farang owned shell companies I was told it only affected companies that were set up after a certain date.

Does that mean that a company registered before a certain date can buy land and property?

The particular company I am thinking of is one set up in 2002 and now not trading but still paying basic taxes. The owners are Farang 49% and seven Thais owning 51%. I don't know the exact split but it is structured so that it is highly unlikely the 51% could get together and take the company over. The second largest shareholder is the wife of the Farang.

[Super Joe]

When the clampdown became enforced regarding farang owned shell companies I was told it only affected companies that were set up after a certain date.

There was no clampdown on Limited Companies with a foreign 49% shareholder wishing to register a single piece of land under 1 Rai (unofficial measurement used by HH land office.) But while it was all being sorted out they stopped all transactions.

When the new directive from Central Government finally went out to land offices it was directing them to clampdown on Limited Companies with a foreign shareholder where they suspected of carry out Real Estate business, ie: registering large chunks of land. This directive is in this thread posted by Lev halfway down the page: http://www.huahinafterdark.com/forum/le ... t4126.html. It was back to normal for the average Joe Limited Company.

At the time there was another regulation in the actual forming of the Limited Companies with the Commerce department (nothing to do with Land Office) and all they wanted to see was 6 months banks statements from the Thai 'shareholder' to show they had the funds to purchase the shares.

So to answer your question any Limited Company holding small land and house before or after has not had their status changed at all. They do ofcourse still have nominee shareholders. And by the sounds of the company you mentioned they'd be wise to start doing a bit of trading!?

Cheers,

SJ

[johnnyk]

I think company trading is the main thing. File tax returns, show activity and pay a bit of tax, it's all legit and keeps the tax boys happy.
Hold land, do nothing and pay nothing sometimes gives off a scent that bloodhounds can happily follow.

[clive]

The problem with most condo buildings getting run down is because in the past they have been predominantly Thai owned, I know, my wife owns a condo in a 100% Thai building. The management is conducted by the original freeholders, the company that sold the apartments. Their problem is that most of the apartments are rented out and neither the owners nor the tenants wish to pay maintenance fees, hence no money for running repairs. A local golf course recently tried a good one to get over the problem; they simply took the gross figure they needed to maintain the buildings and common areas and divided it amongst the owners that were willing to pay! Logical!
During 2008 new condo laws were introduced in Thailand, most of us are still getting to grips with them, one very important rule is that the developer must have a substantial sum, I believe a minimum of 100 Million Baht in the bank before they are given permission to build. The others are things like installation of fire alarms etc. But a couple of changes cover things like common area use and juristic persons. It would appear that now the only way the juristic person or an owner can change the use of a common area is with the approval of the majority of the owners, ie; an area originally set aside in the promotional material for a lobby or reading area cannot be changed to a karaoke without the majority of the owners approval. The second is that the juristic person can be replaced if the majority of the owners wish to do so, so if the seller of the apartments appoints a juristic person and it appears that the juristic person is working for the benefit of the original seller of the apartments then the new owners of the units can vote to replace them.
Many of the larger developers use subsidiary companies as the juristic person and if you look at most of the Condo buildings that have been constructed during the last 10-15 years by people like Sansiri then you can see that they are maintaining them very well.
If I am right, I believe that there is now a law that allows a juristic person or a residents association to apply to the courts through a fast track system to seize and sell the assets of those owners who have refused or failed to pay maintenance fees, assets can include the condo or the house! That also includes houses on developments where a communal agreement has been made to contribute to the maintenance of the estate. Maybe SJ knows more about that one.

[crazy88]

Clive,SJ

Excellent ,accurate,balanced and informative posts IMO .Have you both been drinking those new peptide drinks ?

I would be interested to know if the laws apply to developments of houses as well as condos .I hear a number of complaints from Thai developers about people refusing to pay the fees .Almost all who refuse are Thais it would appear .

You have covered the pros and cons of condos but there are some simple reasons why I do not live in one .I do not want to live in flat,smaller than where I lived as a college student .I cannot afford a 200m baht penthouse on sukhumvit road,nice as it is .Lastly I can have a 3 bedroom villa with private pool on a decent plot of land with stunning surroundings for a third of the price of a 100 sqm ground floor unit with no view at a condo block in central HH .Oh,forgot .I can keep my cats as well .

Crazy 88

[norm]

Clive,SJ

Excellent ,accurate,balanced and informative posts IMO .Have you both been drinking those new peptide drinks ?

I would be interested to know if the laws apply to developments of houses as well as condos .I hear a number of complaints from Thai developers about people refusing to pay the fees .Almost all who refuse are Thais it would appear .

You have covered the pros and cons of condos but there are some simple reasons why I do not live in one .I do not want to live in flat,smaller than where I lived as a college student .I cannot afford a 200m baht penthouse on sukhumvit road,nice as it is .Lastly I can have a 3 bedroom villa with private pool on a decent plot of land with stunning surroundings for a third of the price of a 100 sqm ground floor unit with no view at a condo block in central HH .Oh,forgot .I can keep my cats as well .

Crazy 88

Crazy......Like you I didn't want to live in a condo, but after going through the hassels of land ownership and then HH builders I decided I would take the easy route and buy a condo, with some reluctance.

Now that we have been living in it for a year I love it. It is a 4BR 4Bath condo 255m2 and with 4 balconys. Two condos per floor, we are on the 14th floor.

Part of the beauty of it is it is on the beachfront and has views that go forever. Love to get up in the morning and see where the tide is and who is walking up and down the beach. You can walk for hours if you wish, long beach, nice sand.

The wife insisted on a pool if we built a house. We get a large one at the condo and don't have to worry about maintaining it. Also have a fitness room, Snooker room, Handball court and meeting room. Each unit has a drivers quarter, which most use as a storage room about 3mX3m. It has the normal 24 hour guards, cleaning ladies for the common area, maint. man for any problems you might have (fast response and friendly). A live in manager and undercover parking.

The building is now 11 years old. Which could be a downside but it is easy to tell that it is a very good structure, no cracks etc. When we bought a year ago we were told the building would be painted in a few months. I'm pleased to say they just finished a very through paint job and have done work on the pool and replaced some of the plants on the grounds.

It is only 38 units and before we bought there was only one farang owner in the complex. At the time we bought there were 12 units for sale. Now there are none and I think 8 units are now owned by farangs. Our maint fee is 21baht per m2 monthly and they have in excess of 12 million baht in the slush fund, after the recent paint job.

If you are late in your maint payment they charge 18% interest. Don't think they have a problem in that respect. They don't add anything to the actual electric bill or water bill. The manager and most of the workers have been here since it opened and are friendly and helpful.

There is only one other couple that live here full time. An American with a thai wife, who have become very good friends. It is rather nice having the whole place to ourself most of the time. Holidays and weekends attract some of the owners but typically not that many. By the way our condo is in Cha Am, which IMO has a better beach than HH and is about 30 min closer to BKK.

So where I was originally very reluctant to live in a condo it has turned out to be a really great place to live and we are both happy as Larry with it. Good luck in your choice.

Norm

[crazy88]

Norm

I have many friends with well run condos sporting great facilities and stunning grounds .It is convenience living and the whole process is very simple on the whole .Your unit is a very large one and I would imagine that it is furnished and decorated to the highest standard .My point was a personal choice one .Also the majority of people who buy here fall into the 3-6m baht range and you would not get a large quality unit in a well run complex for that money .Good luck to you and Lu and I am glad to hear you are happy with your decision

Crazy 88

[Guess]

There was no clampdown on Limited Companies with a foreign 49% shareholder wishing to register a single piece of land under 1 Rai (unofficial measurement used by HH land office.) But while it was all being sorted out they stopped all transactions.

OK thanks. That's the first time I have seen it clearly explained.

One more question I have is that, is a no-trading but tax up to date company have any value?

[Super Joe]

If non-trading company, ie: no real trading/business, then the company should at least be declaring an income and paying tax on the rent that the company director (49% farang shareholder) is liable to pay the company to use their asset, the land/house.
So any company is due to declare an amount of income and pay tax, unless you wanna make up loads of expenses and make yourself stand out even more. But that's a different ball game to an actual trading company, if they decided to look into you.

SJ

[CraigDunn]

Two issues come to mind:

1. The solution-of-old has been to personally lease, or at least rent, the property back from your company to create activity/income. I'm told now, though, that a company cannot lease out it's own registered address.

2. Leasing from your wife is in doubt too: I'm told the LO does not recognize leases between husband and wife.

I cannot confirm either, but will endevour to find out today.
cd.

[CraigDunn]

Land Office sources say:

1. Company cannot lease its address to the director. Correct, but the director can rent (unregistered) space at the address for living in. This also creates action in the Co. accounts. (However, BS is BS no matter which way you spin it. A work permit, staff, VAT registration, accounts with REAL action - that's not BS, but it's no guarantee that the company can register a particualr piece of land. LO decisions are at the Officer's discretion.)

2. Husband cannot lease from wife. Not correct. He can, but must document the reason why he wants the lease (as if that wasn't obvious).

Anyway, this thread was about relaxing the rules. Condos is one thing and longer leases is another; there will surely never be changes that allow foreign freehold of land. It's likely that the unwritten one-rai-one-house per nominee company rule will prevail forever.

cd.

[JimmyGreaves]

The particular company I am thinking of is one set up in 2002 and now not trading but still paying basic taxes. The owners are Farang 49% and seven Thais owning 51%. I don't know the exact split but it is structured so that it is highly unlikely the 51% could get together and take the company over. The second largest shareholder is the wife of the Farang.

Was told me that Husband & Wife cannot own shares in the same company. So is this true or not?

[Guess]

Was told me that Husband & Wife cannot own shares in the same company. So is this true or not?

No, not true but there are percentage restrictions. My understanding is that a farang cannot own 49% and his wife 51% there must be 5 other shareholders that own a minimum percentage each. I think it is 3% each but I am not sure.