Holiday Home Times

Buying Land in Phuket as a Company – Recent changes in Law and What to Look Out For

Land for sale signIn June this year, changes have been made in the application process and consequently the approval of registration of companies to purchase land and long term land leases for foreigners in Thailand.

But before we go into the new changes let’s revisit the laws pertaining to a foreigner buying land in Thailand:

Under Thai law, foreigners are generally prohibited from owning land. However, they are allowed to own buildings built on a piece of land by getting a lease on the plot from a Thai landowner and purchase or construct the house. But there is a catch or more appropriately a risk involved. Law permits a maximum lease term of 30 years which thereafter may be renewed together by the lessor (the landowner) and lessee (the buyer). However this renewal agreement is by contract only, not a registered document at the land office.

Even if you look at the land lease agreements for the leasing of land in Phuket’s villa developments contain provisions stating that the lease will be renewed for two additional 30-year terms. As such, a common lease arrangement is 30 years + 30 years + 30 years, for a total of 90 years, thus providing a time period that can be considered near-freehold.

However foreign buyers must understand the risk because the lessor’s obligation to renew the lease is merely a contractual promise. Therefore, if the lessor chooses not to renew the lease, it is a breach of contract, and not a violation of the law per se.

Back to the recent changes in the land purchasing laws by foreigners:

Earlier foreigners could start a majority Thai-owned limited company to buy land in the island. However lawmakers see this as a major loophole in the land laws of the country, thus making the norms tighter for foreign companies to buy land.

As such, companies having foreign shareholder(s) and/or director(s) might be refused to take ownership of land. Long term land leases with automatic or optional extension rights mentioned in such cases may also be refused to be registered. Usufruct and/or superficies or lifetime usage rights agreements can also be refused to be recorded at many land offices.

In addition, now, any person who wishes to register such agreements or companies to purchase land will have to give evidence and proof that there is no foreigner behind the purchase of land and /or a hidden nominee situation from Thai Nationals (Natural or Juristic persons) holding land on a foreigner’s behalf.

Under these new changes what makes it a little difficult for foreign nationals to buy land in the province is that now it is solely the land officer’s decision to allow or turn down such registration if a nominee situation is alleged.

So foreigners who were thinking of taking this route (to buy land as a company) need to be aware that the ultimate decision to allow or register your request solely rests on land officer who is in charge of recording such agreements. As such, any agreement signed by you with third parties before the registration will be considered null and void.