Advice please, villa purchase - freehold or 30 year lease?

Ask here about the pleasures and pitfalls of buying, selling or renting property and real estate in Hua Hin. Building, design and construction topics welcome. Commercial or promotional posts for real estate companies or private properties are forbidden.
SPONSORS: Hua Hin Property
404cameljockey
Amateur
Amateur
Posts: 37
Joined: Sat Apr 30, 2016 5:14 am

Advice please, villa purchase - freehold or 30 year lease?

Post by 404cameljockey » Tue May 10, 2016 10:56 am

Hi everyone, my British wife and I will take 'O' visas and will be your neighbours later this year!

I'm about to put down the deposit on the villa we have agreed a price on (with an expat not living in Thailand) but can't decide how to buy, any advise you can give based on current law and situation would be a great help.

I favour freehold, I know that would be the eventual sole director of the Thai company, with two other Thais as major shareholders (I would not know them) but I heard that the government may decide to 'looking more closely' at companies which seem to have been set up just to allow aliens to buy property in Thailand. Is it true? I get a feeling that the government are not hugely pro-alien when it comes to ownership of Thai land. Also do I need to find initial share capital for the company or do the Thai shareholders take care of that? How much do they get for their input, initially and every year? A Thai lawyer would make all the agreements.

Leasehold looks simpler, but when I or maybe my children eventually want to sell, then surely remaining length of lease can be a problem. The developer has a good track record building residential compounds over the years but I or any future prospective purchaser would still always be beholden to them for lease renewal/transfers and to make alteration to the property. Also who's to say they may not cease trading one day, and that would leave me in a tricky situation. Or am I being paranoid?

You can see that I'm still scratching my head, a Thai lawyer has explained all the pros and cons but I still have the above questions most of which don't really have solid answers.

If people could share their feelings on the matter it may help me decide.

Cheers all!

jingjoe
Professional
Professional
Posts: 499
Joined: Tue Jul 03, 2012 9:02 am
Location: hua hin hill top

Re: Advice please, villa purchase - freehold or 30 year lease?

Post by jingjoe » Tue May 10, 2016 12:58 pm

Try and have a chat to jane from chavilit and partners, she might be able to make it a little clearer,she is an English lady.They are a sponsor on this forum.
Also be aware that there is such a gluttony of over supply of houses here in hua hin, it will be very very hard to re sell the property quickly if ever needed, I know of may people with houses still on the markets for more than 2 years.

404cameljockey
Amateur
Amateur
Posts: 37
Joined: Sat Apr 30, 2016 5:14 am

Re: Advice please, villa purchase - freehold or 30 year lease?

Post by 404cameljockey » Tue May 10, 2016 3:26 pm

Thanks jingjoe, as we're looking for a retirement home I'm not worried about the housing market over the next few years. I think we are pretty decided on Hua Hin, having lived in a hot sometimes humid country for 12 years already, so there should be no need to consider any near future sale. We anyway have definitely not overpaid, judging by the properties we looked at.

PJG
Professional
Professional
Posts: 311
Joined: Fri Jan 06, 2006 9:48 am

Re: Advice please, villa purchase - freehold or 30 year lease?

Post by PJG » Tue May 10, 2016 3:53 pm

My advise would be rent a place do not buy.

A foreigner can not own land in Thailand so a company that does not trade but is solely set up to facilitate land purchase is not really legal. Going the company route involves set up costs and filing annual tax returns and of course is subject to the whim of the Thai government.

30 year lease also has its problems as the lease is dependant on honest land ownwers not on scammers such as those invoved in Phuket lease scandals. Look on Andrew Drummonds web site.

Whatever you decide good luck with it.

User avatar
StevePIraq
Ace
Ace
Posts: 1917
Joined: Sat Jun 28, 2008 1:21 pm
Location: Ting Tong Land

Re: Advice please, villa purchase - freehold or 30 year lease?

Post by StevePIraq » Tue May 10, 2016 10:22 pm

I would not rush to Chavilet, they charge a fortune, go see David at Hua HIn Lawyers in Macro car park.

Also be cautious about setting up a company with Thai directors as is required, the government has recently stated they are going to crack down on this
"Live everyday as if it were your last because someday you're going to be right." Muhammad Ali

JW
Rock Star
Rock Star
Posts: 3445
Joined: Sun Sep 11, 2005 8:53 pm
Location: hua hin

Re: Advice please, villa purchase - freehold or 30 year lease?

Post by JW » Wed May 11, 2016 12:23 pm

Either ownership way works fine, just down to which you feel comfortable with. There is a huge choice of lawyers here - Jane at Chavalit, Ex Pat Pro good bloke called Neal and Hua Hin Legal at Macro - all good people who do the job correctly.
You should have dilligence done on house and land to make sure that both are correctly registered.
Good luck with it and enjoy your new home here... great place to live, dont be put off by those who put it down :).

petercr
Member
Member
Posts: 89
Joined: Wed Mar 05, 2008 4:59 pm
Location: Hua Hin

Re: Advice please, villa purchase - freehold or 30 year lease?

Post by petercr » Wed May 11, 2016 5:40 pm

StevePIraq wrote:I would not rush to Chavilet, they charge a fortune, go see David at Hua HIn Lawyers in Macro car park.

Also be cautious about setting up a company with Thai directors as is required, the government has recently stated they are going to crack down on this
I have to agree with the comment about Chavilet, why pay through the nose for simple advice that is available more reasonably elsewhere

User avatar
StevePIraq
Ace
Ace
Posts: 1917
Joined: Sat Jun 28, 2008 1:21 pm
Location: Ting Tong Land

Re: Advice please, villa purchase - freehold or 30 year lease?

Post by StevePIraq » Wed May 11, 2016 5:59 pm

First 30 minutes free but it is full of how are, where you from, you enjoying it here blah blah blah, oh 30 minutes up please make an appointment at reception. Been there done that, never again.

Dave at Macro anytime
"Live everyday as if it were your last because someday you're going to be right." Muhammad Ali

AJBangkok
Amateur
Amateur
Posts: 40
Joined: Mon Apr 11, 2016 9:26 am

Re: Advice please, villa purchase - freehold or 30 year lease?

Post by AJBangkok » Fri May 13, 2016 9:34 am

I am going the purchase process at the moment and I am using Jane at Chavalit. She is more expensive than others (around $1000 more) but when I was doing my DD on legal firms her name was by far the most recommended. If I was a seller then I'd just use a local lawyer but as a buyer I want to know I am getting ownership of what I'm paying for and that ownership will be clean and undisputed as much as it possibly can be. So as I'm not a local and have no personal experience with local lawyers I don't mind paying a bit more for my piece of mind.

I have several properties in Thailand but they are all condos for which the transfer process is simple, pretty much just turning up at the land office with a cheque for the property and cash for the fees and taxes. Due Diligence is minimum as the land office won't transfer the condo if the chanote isn't clean, unencumbered and the condo itself provides a letter that all fees are up to date and the foreign Quota is available.

I've found buying a house can be a real snake pit. There are so many things that you need to account for a lot of which is determined by the existing structure of ownership especially if it's owned by a foreigner in a company name. Here are a few that I've had to deal with.

First and foremost when you buy a house you have to understand the land and the structure are treated differently.

1. Is the land in a company name or a Thai individual name.
If the land is in an individual's name then transferring out of the individuals name is quite easy. You need a title search and a check to see the annual land fees have been paid at the tessabaan and that's pretty much it. There will be around 6% transfer fees on the land based on the land office appraised value.

2. If you buy land registered in a company name the process is the same but you will need additional paperwork from the company so that the land office will transfer the land. The company will also be subject to 30% corporate tax on the difference between the purchase price and the appraised price .

3. If the land is registered in a company name and the seller just wants you to buy the company which will avoid paying any taxes all together then you will perform due diligence on the company and be aware that you will be liable for any off balance sheet liabilities as well as future corporate taxes on the sale of the land.

The real tricky part is the house or structure in the land. I don't know the process if a thai individual is the seller as I am dealing with a company selling and that's where I have I encountered problems.

What I understand, and I may be wrong as the rules are all over the shop, Houses/structures on the land don't have titles. Instead they have what I would call a chain of proof of ownership. Starting from the initial building permits through to the issue of the blue or yellow books that only prove who can live there but are not actual proof of ownership. Hardly anybody does this as they dint want to pay tax, but if there was an official transfer of the structure through the land office then there will be a receipt and that's probably the best claim to ownership you can have if you didn't build the house yourself.

Generally it's accepted that if you own the land then you own what's on it. Where problems occur is when the original builder of the house doesn't follow the process or didn't think it through before getting building permits etc.

This gets more convoluted when a company is involved. If the company applies for the initial building permit and then the shareholder builds the house and doesn't run the costs through the company then the question is does the company own the house or does the shareholder own the house. If it's the company then the house is an asset of the company and needs to be treated as such in the books and records and will be subject to corporate taxes when you sell it with the land. If it's not on the books then you the company can't sell it until it is and how do you get it onto the books?

If the building permit was issued in the shareholders name then does the shareholder own the house and if you buy the land from the company do you need a separate contract with the shareholder to buy the house and if you want to register that at the ,and office then 6% tax will be due.

What happens if there was never a building permit issued?
What happens if the contractor applied for the building permit and never transferred it on completion?

I looked at a lot of houses in HH before I found what I wanted, I would say that quite a few ( not all) of the houses I saw for sale by foreigners had one or more of the problems above.

A lot of sellers and agents had the attitude of don't worry they'll never check but they would because they just want to sell or collect a commission. To me that's not acceptable, I don't mind taking risks but I want to fully understand the risks so it's my decision if I decide to take them or not.

I'm not trying to scare you into not buying. I am buying now myself and all the issues I list above can all be fixed or dealt with ( as I am finding myself having to do) just make sure you get a good lawyer who understands the issues and will help you work with the seller to resolve them. Any lawyer in Hua Hin can write up a contract and deal with a transfer at the land office but just make sure what you think your buying is actually what you are buying and you won't be hit with surprises later down the road,

User avatar
Nereus
Addict
Addict
Posts: 5712
Joined: Tue Jan 02, 2007 3:01 pm
Location: Hua Hin and Bangkok

Re: Advice please, villa purchase - freehold or 30 year lease?

Post by Nereus » Fri May 13, 2016 9:54 am

Yes, some good advice there. But maybe you should have added your previous posts where you have written that your Thai wife is buying the house. The OP has stated that both of them are Brits, which makes it a whole different ball game.

viewtopic.php?f=20&t=32127&p=410929#p410929
May you be in heaven half an hour before the devil know`s you`re dead!

AJBangkok
Amateur
Amateur
Posts: 40
Joined: Mon Apr 11, 2016 9:26 am

Re: Advice please, villa purchase - freehold or 30 year lease?

Post by AJBangkok » Fri May 13, 2016 1:46 pm

Just FYI I have gone through several iterations of how to structure the purchase since I last posted. Company, wife's name, lease and each have there pros and cons and all are to some extent dependent on the current ownership structure and what the seller is prepared to do. I think all the points remain valid no matter if you are buying as a Thai or a foreigner in a company name.

Where it differs greatly is if you buy a lease as ultimately that would be far simpler as the lease will be registered in your name at the land office and getting the house/land's paperwork in order is down to the seller as the land office won't approve a lease unless the paperwork is in order.

That brings up another point is that if you are buying an existing lease or making a new lease then you must ensure that the lease is registered with the land office. If you are offered a lease that isn't then insist that it be registered at the land office or walk away.

User avatar
J.J.B.
Guru
Guru
Posts: 707
Joined: Sun Jul 22, 2012 10:03 pm

Re: Advice please, villa purchase - freehold or 30 year lease?

Post by J.J.B. » Fri May 13, 2016 2:10 pm

My wife and I are both British and bought a house with a 30 year lease in Hua Hin. As with many things, you get what you pay for when you employ a lawyer. Often the benefit of paying for the services of a professional is your ability to sue them, and their ability to pay, should things go wrong as a result of their professional negligence. The more established and invested the lawyer, the more likely they are to be around should you need them.

But let me give you some advice based on my own experience: never give advice based on your own experience.

My belief is that in a country where you really have no legal standing (we're grateful guests, blah...blah...blah [insert personal mantra here] etc.) and have virtually no chance of meaningful redress, I would not want to invest any more money than I could afford to completely lose.
"A man who does not think for himself, does not think at all."
Wilde

404cameljockey
Amateur
Amateur
Posts: 37
Joined: Sat Apr 30, 2016 5:14 am

Re: Advice please, villa purchase - freehold or 30 year lease?

Post by 404cameljockey » Wed May 18, 2016 4:52 pm

Thank you for a lot of things to think about. You guys are heroes.

The freehold is with the developer (who have a British director), the current owner bought leasehold, and I believe most/all houses on the development are leasehold. I think now that I will follow the same path, and get a fresh 30 year lease. I don't fancy the idea of a potential big fine and custodial sentence (unlikely I guess) if the government do crack down on small shell companies. I think they are only interested in the big ones at the moment but who knows. Also I read above that the land department will check the validity of the developers' title to the land before accepting any fresh lease (in theory...), which gives comfort, although I will of course get a lawyer to do a land search anyway. Belt and braces.

I already have been talking with Legal Services Hua Hin (the Makro guys) and they already urged me to instruct them to do a land search. I also understand that there is a particular type of land registration/title deed document that should be available, as there are various levels of documentation, from ultimate proof of land survey/title down to a mere historical record of purchases. Even if I only will take leasehold I think I need to be sure that the developer has full title to the land.

Thanks again, crossing fingers. :)

AJBangkok
Amateur
Amateur
Posts: 40
Joined: Mon Apr 11, 2016 9:26 am

Re: Advice please, villa purchase - freehold or 30 year lease?

Post by AJBangkok » Thu May 19, 2016 7:08 pm

Good luck 404cameljockey please ensure that the lease is registered at the land office at the same time you pay the money.

User avatar
Bristolian
Rock Star
Rock Star
Posts: 3118
Joined: Fri Nov 09, 2012 1:38 pm
Location: Hua Hin & Bangkok

Re: Advice please, villa purchase - freehold or 30 year lease?

Post by Bristolian » Thu May 19, 2016 7:28 pm

From what I read you are now tacking the issues in the right way. Employ good legal advice and make sure that the due diligence is done.

Having a foreign developer is no guarantee and I would probably say the reverse. There is at least one Brit who shall not be named on this forum who has made a very good living from scamming foreigners in deals around the country but specifically here in HH.

With due diligence done you should I hope encounter minimal issues. Having had a home in HH for more than 6 years I can thoroughly recommend it.

Good luck and welcome
"'The two most important days in your life are the day you are born and the day you find out why." - Mark Twain

Post Reply

Who is online

Users browsing this forum: Bing [Bot] and 7 guests