Thailand Property Online

Panic swept through sections of the foreign investment community in Thailand on Tuesday night following publication online of a story in the Bangkok Post entitled ‘New property law stuns foreigners’. The piece, which appeared in print yesterday, drew attention to a directive from the land office in Chonburi which said that one of the traditional routes to property ownership for foreigners in Thailand – 49% ownership of a Thai company – would be put under increased scrutiny, and that the Thai shareholders involved would have to disclose their assets. Quickly picked up by popular forum site, ThaiVisa.com, the story had generated over 200 posts by 6pm yesterday. These ranged from anti-Thai rants, to questions about the future validity of condominium ownership and debates over when it is appropriate to put property in a Thai spouse’s name.
Several agents around the country reported calls from Hong Kong and further afield, expressing concern about what had been written. They also expressed the opinion that the dramatic tone of the Post piece, with its quotes claiming ‘the property boom ended on 25 May’, amounted to unnecessary sensationalism.

The main effect of the directive has so far been confined to Chonburi’s Land Office, which deals with Pattaya and the Eastern Seaboard, where, as of yesterday, title transfers have been refused.  However, company representatives have merely been told to return the following week; no investigations into Thai shareholders have taken place.

“I think it will all blow over,” a well-known Pattaya agent, who wished to speak off the record, said, “probably within a week or ten days. Ninety nine per cent of developments here are Thai owned and run, but they are selling to the foreign market and do not want to see this kind of thing happening. Similar things have happened in Chonburi in the past, with no foreign bank accounts being allowed and no work permits being issued for periods of time, so I am not overly concerned about this. However, it will understandably make new investors wary for a period of time.”

Samui lawyer Manit Taejaw, a partner in Miklaw Associates, had already received over 100 emails from concerned clients by 10 o’clock yesterday morning. He also said that he had spoken to the Samui Land Office and that its officers had no knowledge of any new regulations coming into force. Transfers were continuing to take place as usual.

International law firm Belmont Limcharoen, which has offices in Bangkok, Samui and Phuket issued a press release on the news last night.

“Land ownership issues will always be a sensitive issue amongst Thai people,” it said. “There would be controversial political consequences if any government in power attempts to change the Land Code to accommodate foreign ownership of land. Whilst many foreigners elect to arrange, with majority shareholding Thai partners, to set up Thai companies and thereby operate in a ´grey area´ of the law, we believe the most practical and legal way to deal with the issue of foreign ownership would be resolved by legislative means, that is passing an act similar to Landlord and Tenant Acts in other jurisdictions which provide proper protection of lessees under a lease with changes to the maximum term of a lease for foreigners.”

“Whilst providing an opportunity to foreigners to have more secure investments in Thailand this would also solve the sensitivities attached to the concept or thought of foreigners “owning” or indirectly owning land in the Kingdom of Thailand. Whilst such improved leasehold legislation does not presently exist, there will continue to be, as there has been for many years, debate on what constitutes a company that is set up illegally, or what has been set up legally and which is a good structure for investment in real estate by foreigners. Unless there is a clear law that states foreigners cannot inject monies into a Thai company which has real estate assets there will be opportunities for investment and ways of protecting investors who inject more monies than others into an investment.”

In an interview with Thailand Property Report last year Gary Biesty, managing partner in international law firm Johnson Stokes and Master spoke at length about foreign ownership of property in Thailand. He was asked if he thought foreign investors had become fairly blasé about establishing companies to circumvent freehold laws, especially in resorts, and whether or not it concerned him.

“Any attempt to circumvent the laws concerns me,” he responded. “It is possible within corporate commercial law in Thailand for companies to be created to allow foreign investors to enjoy effective freehold ownership. If properly followed and conscientiously adopted, this is not circumventing the law, it is simply following the law. So provided that those corporations are created in accordance with the law, I have no concern. If, as you suggest, people are becoming blasé, then there is a danger, because that would suggest people are not correctly incorporating companies and with that, there is a much higher risk that they may ultimately find they don’t effectively own the freehold that they thought they did.”

Although the directive in Chonburi will clearly require further clarification in the coming days, for now at least with no Thai parliament in session and, therefore, no possibility of new legislation being implemented, the law regarding foreign investment in real estate has not actually changed at all.

Source : thailand-propery-report.com