Other issues of Legal Matters:
Mar-May 08 |
Dec 07-Feb 08 |
Sep-Nov 07 |
June-Aug 07 |
Mar-May 07 |
Dec 06-Feb 07 |
Sept-Nov 06 |
Mar-May 06 |
Dec 05-Feb 06 |
Sep-Nov 05 |
June-Aug 05 |
Mar-May 05 |
Dec 04-Feb 05
Legal Matters: Article #7 (June - August 2006)
Issues for the Buyer – Commercial Choices and Legal Issues
“Will the legal structure of the development be clear and
understandable?”
Developers should have thought through at an early stage the method of sales to a purchaser. Developers will have invested themselves in the real estate on which the project is based so will also understand the due diligence process. Provided the sales team is properly briefed, the legal structure should be explained prior to a purchaser signing a
reservation form. This means that the legal structure should be set
out, frequently as a section on a website and in the marketing
materials packed with the opportunity for legal questions to be
answered by the developer’s legal team. There is an extra
layer of understanding required for investment in property in Thailand,
but the market is developed enough for transactions to be run smoothly.
(Desmond Hughes, Partner)
“When I see a property I like, how will I know if the legal sales structure suits my purchase?”
A purchaser must be clear on the principal reason for the investment and so must its legal advisers before the contracts and legal structure is reviewed. For example: If a purchaser particularly likes the style and architecture of a unit and wants to enjoy it personally, and this unit is placed in a hotel resort rental pool with a minimum usage requirement, the restrictions on usage and ownership rights in the contract may or may not be appropriate to the purchaser’s principal purpose of enjoying the property for itself. However, if an investor wishes to invest in a unit in a resort, has analysed the return on investment and assessed the standing and marketability of the resort in relation to ‘comparables’ then a resort sales structure with restrictive rights and rules of use designed to protect the class of the resort would be entirely appropriate. Ultimately the appropriateness of the legal package will relate to the concept of the development.
(Kris Limcharoen, Partner)
“How do I know if the contracts are fair?”
Contracts may over the course of a development’s sales process, be reviewed by several sets of lawyers all of who may provide slightly different but similar sets of comments. This means that contracts can evolve to a stage where they ought to be balanced and fair, provided that the appropriate comments have been made and accepted into the final documents. If a ‘boilerplate’ and ‘precedent’ agreement is issued then inevitably a buyer’s lawyer will request changes as a precedent is normally drafted in favour of the buyer or the seller according to whom the draftsman is acting for. It is the lawyer’s task to understand the project in which the client is purchasing a property and if a physical inspection is possible then the overall negotiation process can be improved. Marketing materials which assisted with securing the purchaser should be checked to ensure the legal contracts have taken into account representations made. If the project has been sold with a gym, sauna and spa, then the contracts ought to include reference to the same, fitted or unfitted at the buyer or the seller’s cost. The list of questions should be pertinent to the deal and also particular to the purchaser’s special requirements, if any.
(Desmond Hughes, Partner)
“What else should I check when I am considering my options?”
The categories of purchase now fall into a wider range of options: ‘straight leasehold’; leasehold in a hotel resort with ‘guaranteed’ % rental return; apartment or villa leasehold with shared ownership in the foreign shareholding of a Thai company; Thai company investment with protected shareholding in freehold; and condominium direct freehold or condominium indirect freehold with a Thai company. These ownership methods should be explained in full so the purchaser is aware of the category of risk its investment is placed in. Leases can be terminated or made difficult to terminate; rental income guarantees can be subject to variable deductions or fixed deductions; shared ownership in Thai companies requires the Thai company to be properly set up and maintained.
(Kris Limcharoen, Partner)
This article is the seventh 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 a new office in Koh Samui.
Information supplied by:
Belmont Limcharoen (Phuket)
4/1 Prabaramee Rd., Patong, Kathu, Phuket 83150
Tel: +66 (0) 7634 2882-4 Fax: +66 (0) 7634 2885
Email: desmond@belmontlimcharoen.com
Belmont Limcharoen Company Limited
39 th Fl., 3904 A United Center Building.
323 Silom Rd., Bangrak, Bangkok 10500
Tel: +66 (0) 2635 5071-3 Fax: +66 (0) 2635 5074
Email: kris@belmontlimcharoen.com
Belmont Limcharoen (Samui) Co., Ltd
23/30 Moo4 Bophut, Koh Samui, Suratthani 84320
Tel: +66 (0) 7724 6185-7 Fax: +66 (0) 7724 6188
Email: samui@belmontlimcharoen.com
www.belmontlimcharoen.com
