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Saturday, 08 May 2010 14:50

Buying land in company name

All over the world investment into real estate is considered the most stable and most profitable, especially over long  period of time.  It is also true in  Thailand, named a piece of a paradise on Earth by everybody who ever visited this beautiful country.  That said,  we can also say that of all Asian countries Thailand’s economy  is amongst the most stable ones.  Many people just dream to buy a piece of this paradise and settle in Thailand, but to do this is not that easy.  First problem that arises is that foreigners are not allowed to directly purchase and own land in Thailand. Are there ways, apart from long term lease, to control a plot of land and build house of your dream on it? Yes.  Let’s see how it can be done and what you have to look for to avoid mistakes.

Land in Thailand / Земля в Таиланде

There are lots of various estate “titles” such as Sor Kor 1 or Tor Bor Tor 6, but most of these are merely a form of settler's claim or squatter, which has been filed with the district office and upon which a small fee has been paid.  You should always pay attention to land title deeds . If land plot seller has «Chanote» title  for the land then you can proceed with negotiations.  All land plots with  Chanote  titles  have accurate boundaries registered in Land Office, marked by unique marker posts set in the ground  and are plotted in relation to a national survey grid. Only Chanote provides complete ownership rights of the land.

There are plenty of land plots which are determined by other form, “Nor Sor 3” or, lately "Nor Sor 3 Gor". These  give you ownership rights of the land with practically determined boundaries but without full ownership rights in comparation with Chanote. The Land Department has not marked  the boundaries of the plot yet, they are determined by  neighboring plots’ boundaries and may be not entirely accurate. This  may cause  problems in future.  «Nor Sor 3 Gor» gives a right to use this land and even sell it, but it owner is obliged to make a 30 days public notice prior to sale. If there are no objections, the deal may be concluded.

Anyway, as we already know, in accordance with Thai Legislation a foreigner may not be the  owner of the land plot. What could we do? One of the methods to purchase the real estate in Thailand is to do so through your own company registered in Thailand. There are several forms of registration for companies with  foreign capital, the most widespread one is Limited Liability Company (Ltd).  It is not a very complicated procedure to set up a company with foreign investments in Thailand. The cost of it varies from 1.800 to 3.000 US dollars and annual running costs will be approximately 1.000 - 1.500 per year. But there is one more issue, as a foreign investor you are not allowed to hold more than 49% of the shares in the company. The rest  of it, 51%, must belong to Thai citizens. According to the Law there must be at least 3 shareholders and  minimum one of them must be Thai national.

Without doubt such setup may make you feel not quite assured but in reality you will hold actual control over company's assets and activities. This is achieved through your 49% of the shares being privileged thus giving you 1 vote for each share and your Thai partners holding ordinary shares, giving them one vote for each 10 shares. Therefore, you are not confined by any means to control all assets and financial activities of the company, including land plot registered into you company name.

For reinforcing your position it is possible to hand over this plot  to yourself in a lease. In addition, your plot may become a mortgage to  yourself on behalf of the company. In this case a plot of land is  mortgaged  to a foreigner and  serves as payment  assurance for loan provided to a Thai juristic or private person.  This transaction requires a registration fee of 1% of the amount indicated in the agreement of mortgage bond. You are obliged to make this payment at the time of  registering this mortgage.  Both of above mentioned ways give you more legal protection of your investment.

As a rule, two documents are being produced during land sale process. The first one is land plot purchase contract worked out directly in the process of transaction, signed by owner , buyer and witnesses.  It states price, payment terms and schedule of payment, as well as all necessary additional terms and conditions. This contract is usually  made by a qualified lawyer or an experienced agent of the real estate agency.
The second document is the official title deed issued by the Land Department office, it is issued after all payments have been settled and registration of the deal has been done.

These are the methods to register your land ownership rights  to a company in Thailand. Even though this process is a bit complicated, from the legal point of view you may feel confident and well protected.

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