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Important Issues for Investors in “Protected Leasehold” Developments
Legal Matters: December 2008 - February 2009I am considering the purchase of an apartment unit in Phuket which offers a Lease with a “share of the freehold”, what does this mean?
“As additional security to leasehold investors, some projects offer a share in an offshore company which indirectly owns shares in the Thai land owning company which granted the lease. This structure allows the leasehold investors, collectively, to exercise control over important decisions relating to the land. In certain circumstances, this “protected” leasehold structure allows the buyers to collectively direct the land owning company to grant subsequent lease terms at the expiry of the initial registered lease term. It is important for the leasehold investor’s lawyer to ensure that the protected leasehold structure works properly, is fair and is compliant with the laws of Thailand restricting the ownership and control of land by foreigners.”
(Desmond Hughes, Partner)
I accepted handover of my leasehold apartment unit last year. The project offered a “share of the freehold” option, however, I have not yet received any documentation from the developer relating to my “share of the freehold”, should I be concerned?
“It is common for the transfer of the shares in the offshore company which indirectly controls the land owning company to be transferred after the post completion formalities such as the registration of the leases, fulfillment of outstanding tax obligations and the registration of the condominium (if applicable) have been concluded. This may be more than one year from the date of handover and occupation of the apartment. Buyers should discuss any concerns with their lawyer who will in turn make formal enquiries of the developer to ensure that the developer is in full compliance with its contractual obligations and there are no anticipated problems or delays. Progress should be monitored to ensure that the relevant steps are being taken in the interim period.”
(Kris Limcharoen, Partner)
I am currently negotiating the purchase of a re-sale home in a project which offers a leasehold structure with a “share of the freehold”. The Seller has given me a photocopy of a share certificate relating to a share in a British Virgin Islands Company which owns a share of the freehold, what should I do?
“A number of important enquiries must be made into the British Virgin Islands Company prior to payment of the purchase price. Such enquiries should relate to the assets (or interests) of the company, its activities and its tax status and the tax status of any companies it may own an interest in. There are also a large number of other enquiries that should also be made in relation to this company. The Seller should lodge all signed documents necessary to transfer the share in the British Virgin Islands Company with your lawyer prior to the payment of the purchase price to ensure that the share will be registered to you after completion Even if the company is a special purpose company solely for one asset holding arrangement, protections in the documents for purchase should be utilized, as you will be re-selling this in the future.”
(Desmond Hughes, Partner)
I want to sell my leasehold apartment but I have lost the share certificate which relates to my “share of the freehold”, what should I do?
“A share certificate which has been lost, worn out or destroyed can usually be replaced by the directors of the British Virgin Islands Company once they are satisfied that the old share certificate has been lost, worn out or destroyed. There will usually be an administration fee payable to the company for the issuance of the replacement certificate. You should contact your lawyer who will make the necessary procedural arrangements for the issuance of the replacement share certificate. For good practice, a note of the loss and replacement should be signed, witnessed and placed with the company books.”
(Kris Limcharoen, Partner)
This article is one in a series of articles for Exclusive Homes and was co-written by Desmond Hughes (Partner) and Kris Limcharoen (Partner) based in the Phuket, and Bangkok offices of Belmont Limcharoen respectively and now with an office in Koh Samui.
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: +84 938 8469021 E: HoChiMinhCity@Limcharoen.com
www.limcharoen.com
