Distinguishing Between Leasehold and Freehold: A Guide to Purchasing a Condo or a villa in Phuket

 

Foreign Freehold and Thai Quota

The Thai Condominium Act of 1979 dictates that non-Thai citizens are restricted from owning more than 49% of the sellable square meter space in a condominium in Thailand.

Foreign Freehold Ownership

Foreign Freehold ownership refers to the 49 units in a condominium building that can be sold to non-Thai citizens. These units have the same land title category as the “Chanote” title that Thai individuals can possess.

Thai Quota and Leasehold

The remaining 51 units fall within the Thai ownership quota and can be held by Thai individuals or Thai companies. Non-Thai buyers can acquire a unit within the Thai quota through a lease arrangement. The Chanote for these leasehold units is still held by a Thai company or Thai individual.

 

Ensuring Leasehold Safety: Legal Protection and Ownership Security

 

Lease Terms and Renewal

In most condominium developments, the developer, usually a Thai company, holds the Chanote. The non-Thai purchaser of a unit is then issued a lease that spans a maximum of 30 years, with the option to renew for two subsequent terms of 30 years each.

Mitigating Risks and Ensuring Stability

To mitigate risks associated with leasehold properties, it is advisable to involve a Thai company as the lessor in any leasehold purchase. Additionally, executing the Sales and Purchase Agreement under the supervision of a lawyer with clear extension and termination clauses can provide further protection.

 

Protected Leasehold and Corporate Freehold: A Secure Form of Ownership

 

Protected Leasehold Ownership Structure

Protected leasehold refers to an ownership arrangement where leaseholders become shareholders of the Thai limited company that holds the freehold (Chanote) of the property. This structure provides owners with control over lease renewals and issuance, offering a high level of ownership security.

 

Why Is Leasehold Property Cheaper Than Freehold?

 

Pricing Factors and Taxes

Leasehold properties are generally cheaper than freehold properties due to various factors. These include the longer sales cycle for leasehold units, a premium on the resale price of freehold units, and significantly higher transfer fees and taxes for freehold ownership.

 

The Procedure for Buying and Selling Leasehold Property in Thailand

 

Buying and Selling Off-Plan Leasehold Property

The purchase of an off-plan leasehold property involves a straightforward transaction. The developer, a Thai company, issues the lease to the buyer. When selling a leasehold property, the transfer process requires the presence of the seller, buyer, and owner of the Chanote at the land office.

Taking Over an Existing Lease

In cases where a buyer takes over an existing lease, only the buyer and seller need to be present at the land office. The remaining lease duration directly affects the property’s price in such transactions.

 

Evaluating the Worth of Paying a Premium for Freehold Ownership

 

Factors to Consider

When deciding whether it’s worth paying a premium for a freehold unit, factors such as resale market appeal and property tax burdens should be taken into consideration.

 

Conclusion about leasehold property in Thailand

 

In conclusion, understanding leasehold property ownership in Thailand is crucial for individuals interested in purchasing a condo. By considering the distinctions between leasehold and freehold, ensuring legal protection, and evaluating the worth of paying a premium for freehold ownership, buyers can make informed decisions and secure their investment.

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