Real estate investors in Thailand are presented with many enticing opportunities – from beach front resorts to secluded mountain side villas. As with any real estate investment, choosing the right opportunity is about assessing the risks and weighing them against the potential benefits.
In making this determination with regard to real estate the investor should be aware of the land history, access rights, and zoning restrictions.
Knowing and mitigating the risks associated with a particular real estate investment can be achieved through detailed due diligence on the land.
Where did the land come from?
Research into the history of the land can reveal some of the potential risks and “red flags” that every investor should consider before signing a contract.
Through an investigation of the land titles, an investor will be able to make a more informed decision regarding the amount of risk associated with a particular investment.
Under Thai law, there are different forms of title that provide different levels of security for your investment. The three most common forms of title are the Sor Kor 1 or Notification of Land Possession, Nor Sor 3 Kor or Certificate of Land Utilisation, and Chanote or Land Title Deed.
The Notification of Land Possession is the least se cure form of title because it is simply an official notification that a particular individual possesses a portion of land and its estimated size. This type of title does not provide a right of ownership or utilization of the land unless and until the land is upgraded by court order.
The Certificate of Land Utilisation is a more secure form of title that provides the title holder to right to utilize land still technically owned by the State.
Finally, the most secure form of title is the Chanote which is the freehold ownership of land. However, having a superior form of title does not mean that the title is valid. Even if you are presented with a Chanote title for the land it does not, necessarily, indicate that the title was legally issued.
Thai law currently requires that any upgrade to title be supported by the original title document and a court order approving the title upgrade.
If a land title seems to have appeared with no land title history leading to the Chanote this could indicate that the older land titles have been lost or it could be a sign that the title was not legally issued.
Although in most cases the risk of a challenge to the title may be low, the possibility does exist and may be a factor in your decision to invest.
How do I get there?
On the ride up to see an amazing vista from the land, investors may take for granted that they have a legal right to use the roads leading there. Unless the roads are public roads belonging to the State, your right to travel to the land may be subject to the consent of the current adjacent land owners rather than a public or registered private right of access.
This is also true for other essential access rights such as electricity and water.
Conducting due diligence into the access rights to the land is necessary to avoid conflicts with neighbouring land owners and ensure that you have the legal right
to fully utilise your real estate investment.
A review of the land title records of the land and neighboring lands should be completed to ensure that the investment land is provided with legal rights of access.
Can I build that here?
Another reason every investor should consider conducting due diligence is to determine whether the proposed or existing use is, in fact, permitted on the land.
In Koh Samui and Koh Phangan, land is subject to zoning restrictions that can limit the type of use, size, and scope of any real estate development. In order to accurately determine the zoning restrictions an aerial survey of the land should be conducted to confirm the land’s zoning district.
The zoning district will determine what types of projects may be permitted on the land and whether the proposed investment is permitted as advertised or built.
A review of any construction permits and zoning restrictions can help investors assess the level of risk of the real estate investment.
It is strongly advised that every investor in Thai real estate consult with qualified legal counsel. Do not be fooled by what other investors have done (could be illegal) or go with a deal that’s too good to be true (probably is) make sure that you know your investment by having a clear understanding of the risks and challenges associated with the land.
This article was written by Paul Volodarsky, a Senior Associate in the Bangkok office of law firm Limcharoen, and is published with kind permission. www.limcharoen.com.
