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Important Issues for Property Investors
Legal Matters: June 2010 - August 2010The payment terms of an off - plan apartment that I’m thinking of buying say that the money I pay will be paid into escrow. Can you explain this to me?
The contracts for this apartment may state that you have to pay the full purchase price on signing contracts. However, because it is off -plan and not yet built the developer is off ering an escrow service to give you comfort that it will be built or you will receive your money back. An escrow agent is a neutral third party who holds the funds and will only release them to the developer once building reaches certain level. If the seller cannot complete the apartment the funds held by the escrow service provider can be returned to you.
You will need an escrow agreement which the escrow agent signs which stipulates exactly when the monies can be released to the developer. You should review this agreement carefully and also check who the escrow agent is and whether they are licensed. It is possible for the escrow agent to be in Thailand or in a diff erent jurisdiction. Please note that there is now an Escrow Act in Thailand, but that is limited to escrow licence holders, generally not available and currently cost prohibitive to organise for small transactions.
(Desmond Hughes – Deputy CEO)
I understand that the renewals for my 30 year lease are not automatic. Is there any mechanism that can be put in place to guarantee or give me increased confi dence that the 30-year lease will be renewed? Could an international law fi rm guarantee it as the middle-man or is there another legal means to ensure the renewal will be fine?
It will not be possible to have an international law fi rm or professional company guarantee the renewal as the renewal is a contractual obligation between lessor and customer and is not something that an independent third party could give a cast iron guarantee for.
A collective leasehold structure is a solid structure that would give you a certain amount of security in the renewal. Under a collective leasehold structure you are given a shareholding in the lessor company so you will have a stake in the corporate decision making process within the lessor company and in the renewal of the leases. In addition, buildings can be owned directly by foreigners so ownership should be directly registered to you.
(Kris Limcharoen – CEO)
I know that in Phuket no building is permitted above 80 metres. How is this measured? Is it the foundation that must be below the 80 metre mark or the roofline?
The 80 metre mark relates to the gradient of land and the rule is that no building may be built on land 80 metres or more above sea level. The relevant measurement is height above sea level and so development can take place legally in Phuket on land that is less than 80 metres above sea level.
However, height restriction may also be imposed on the building itself. In such a case to determine the height of the building it is the height of the building above ground level. This means the building would be measured from the ground to the top of the structure. The extent of the height restriction will depend on the zone the land falls in and, as a very rough guide, the closer the land is to the sea the lower the permitted height of buildings.
The gradient and height restrictions are ministerial regulations issued from Bangkok and will be enforced by the local government authorities in Phuket.
(Kris Limcharoen – CEO)
I understand that the reduction in land registration taxes and fees has recently been extended. However, I’ve also been told that they have not. Please could you clarify.
The reduced registration fees and taxes introduced in 2008 were initially for a period of one year. In 2009 they were extended until the end of March 2010. However, the reduction for the registration fees (not the taxes) was then extended for a limited period of 60 days until 31 May 2010. However, as of 14 May 2010, all registration fees and taxes will be restored to their original higher levels from 1 June 2010. This may of course change if the government issues a further extension and you should check with your advisers.
(Desmond Hughes – Deputy CEO)
Information supplied by:
Limcharoen Hughes Glanville (Phuket)
T: +66 (0) 7634 2882-4 F: +66 (0) 7634 2885
E: Phuket@Limcharoen.com
Limcharoen Hughes Glanville (Bangkok)
Tel: +66 (0) 2635 5071-3 Fax: +66 (0) 2635 5074
E: Bangkok@Limcharoen.com
Limcharoen Hughes Glanville (Samui) Co., Ltd
T: +66 (0) 7724 6185 - 7 F: +66 (0) 7724 6188
E: Samui@Limcharoen.com
Limcharoen Hughes Glanville (Ho Chi Minh City)
T: +84 862 917 000 F: +84 862 916 999
E: HoChiMinhCity@Limcharoen.com
Limcharoen Hughes & Glanville (Bali)
T: +62 361 727 114 F: +62 361 727 486
E: Bali@Limcharoen.com
www.limcharoen.com
