Real Estate Transaction Registration in Thailand: Stricter Procedures

Thailand is placing increasing attention on real estate transactions that may involve the use of nominee arrangements.

Suspicions of nominee arrangements apply not only to companies with foreign participation, but also to certain real estate transactions involving individuals.

The Land Department’s main concerns relate primarily to land plots: there is a risk that the property is actually being purchased by a Thai citizen using funds provided by and for the benefit of a foreigner.

Source-of-Funds Checks When Purchasing Real Estate

For real estate transactions exceeding THB 5 million, and for cash transactions exceeding THB 2 million, a Thai buyer may be asked to provide information and documents confirming the source of the funds.

In particular, the following may be examined:

· the source of the funds used for the purchase;

· the buyer’s level of income;

· the buyer’s financial situation.

Therefore, a large real estate transaction may require documentary evidence that the buyer actually has sufficient funds to purchase the property.

If the Thai Buyer Has a Foreign Spouse

Particular attention is paid to situations where the buyer is a Thai citizen married to a foreigner.

In such cases, the buyer may be required to confirm that the money used to purchase the property constitutes their personal funds rather than jointly acquired marital property.

This is especially important for transactions involving land, as foreigners generally cannot own land in Thailand on the same basis as Thai citizens.

Checking a Leasehold Registered in the Name of a Foreign Company

When registering a leasehold where the tenant is a foreign company, the Land Department may examine the intended use of the land.

This is necessary to ensure that the transaction structure corresponds to its stated purpose and is not being used to circumvent restrictions on foreign ownership of land.

How Does This Affect Leasehold Registration in Phuket?

In practice, leasehold registration in Phuket has recently become more complicated even for foreign individual buyers.

This may apply, in particular, to transactions with developers where the house is purchased on a freehold basis while the land underneath it is held on a leasehold basis.

Depending on the terms of the agreement with the lessor, the payment structure, and the intended use of the land, the leasehold of the land underneath the house may be regarded not as an ordinary lease, but as a transaction that has characteristics of a real estate sale.

Could This Apply to an Apartment Leasehold?

Yes. Similar questions may arise not only when registering a leasehold of land, but also when registering a leasehold of an apartment.

One circumstance that may lead to additional questions is 100% advance payment for the entire 30-year lease term.

Another factor may be the content of the agreement and the parties’ actual intentions — for example, if the terms of the transaction indicate that the tenant does not intend to return the property to the lessor after the lease term expires.

30-Year Advance Payment and the Risk of the Transaction Being Regarded as a Hidden Purchase

A year ago, we already discussed the standard long-term lease agreement established by the Contract Committee of Thailand’s Office of the Consumer Protection Board.

One of the features of this agreement is the possibility of providing for rental payments covering a long period.

However, full advance payment for 30 years of rent may, under certain circumstances, become another factor that raises questions for the registration authorities, as such a structure may outwardly resemble a concealed purchase of real estate by a foreigner.

Therefore, when preparing a transaction, it is important to consider not only the formal name of the agreement, but also its content, payment structure, lease term, and the actual economic purpose of the transaction.

What Is Important to Consider When Registering a Transaction?

Stricter checks mean that the source of funds, transaction structure, contractual terms, and the parties’ actual intentions are becoming increasingly important when registering real estate transactions.

Particular care should be taken with transactions involving land and leasehold arrangements where foreigners are involved.

Before registering such a transaction, its structure should be assessed in advance to ensure that it complies with legal requirements and the practice of the Land Department.