Purchasing an apartment during the construction stage is common practice in Thailand. However, even when signing an official contract with a developer, it is important to remember that failure to follow the payment schedule may result in losing the apartment and suffering financial losses.
Let us review the buyer’s obligations and the circumstances in which a developer may unilaterally terminate the agreement.
What are the risks of late payments.
Under Thai law and standard contracts:
- the developer may charge a late payment penalty of no more than 15% per annum on the overdue amount.
- however, the total penalty may not exceed 10% of the apartment price.
- the contract may provide for a lower rate, but not a higher one.
When may the developer terminate the contract.
The developer’s right to terminate depends on the number of instalments provided in the payment schedule.
- If payment is due in one instalment, failure to make that payment on time may lead to termination.
- If the schedule provides for 24 or more instalments, the developer may terminate the contract after non-payment of three consecutive instalments.
- If the schedule provides for fewer than 24 instalments, the contract may be terminated when unpaid amounts reach 12.5% of the apartment price.
Calculation examples.
Example 1.
Apartment price: THB 5,000,000.
Payment schedule: 10 instalments of THB 500,000.
Failure to pay two consecutive instalments equals THB 1,000,000, or 20% of the price.
The developer may terminate the contract once the 12.5% threshold is reached.
Example 2.
Apartment price: THB 5,000,000.
Payment schedule: 50 instalments of THB 100,000.
Failure to pay three consecutive instalments equals THB 300,000.
This represents 6% of the price, but three consecutive missed payments are sufficient grounds for termination.
How to protect yourself.
- Carefully review the contract terms before signing.
- Pay close attention to the section covering liability of the parties, payment schedule, and penalties.
- Make payments on time and keep all supporting documents.
- If you face financial difficulties, contact the developer as early as possible to negotiate a deferral or amend the terms.
Alexandra Agapitova.
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