Beware Real Estate scam..

[Masterwoodsman]

I've been made aware of this latest scam involving the purchase of Freehold Condominiums...

As many of you are aware the real estate market in Thailand has gone very quiet this last 2 years especially those properties which involve buying the land title on which your property is built.

Hence... the sale of Freehold condo's and apt's have gone through the roof as have the prices !!

This week i purchased 2 freehold condo's off plan from a developer whom i know and have done business with before. Apparently because the demand for Condo's/apts, having a Freehold title, are so high new developments are charging a fee of 1 million baht in order to obtain the title.

Basically when a new developement is built 49% of the Condo's total construction area is honoured a Freehold title. So basically these are issued on a first come first served basis. Once the 49% has been sold the other 51% would be purchased usually on a 90+90+90 lease hold basis.

New developers are using the "supply and demand" to their advantage and saying because there is so much interest in the obtaining of a Freehold title they are only offering the lease hold. Then when the client enquires about the Freehold they are told they are available but at a cost of 1 million Baht. Apparently developers are also conning clients into thinking this is a new law in Thailand because there are not many freehold titles left for foreigners to obtain with condo/apt purchases....

Buyers beware its not Thai Law its a complete con !!!

[LivinLOS]

Why is that new.. The 'farang' quota condos always have a price premium over the non farang ones..

Usually its discussed as a 'discount' on the sale price for those than a surcharge but the result is the same.. How else would they ever sell the Thai allocation if the prices were equal ? Even a Thai would take the farang quota due to resale potential.

[Masterwoodsman]

I get your point LiL... but as with purchasing any off plan condo, its usually offering incentives to get people to invest early which creates capital for the project.

Incentives being first 30 units at so much p/Sqm, fitted kitchen and bathroom, freeholde title etc

The project i have invested in being all the above inc payment incentive plans. However i totally agree if after 30 units sold they put up the cost p/Sqm, no fitted appliances and no freehold title...who would consider buying.

What i'm saying is i've done my homework and looked at the plans of many condo projects on Phuket and for the one i've invested in there's been no mention of "extra" payment for Freehold titles and the cost p/Sqm is about the same...taking into account sea views, locations, floor levels etc

Read into it what you will but to be physically asked for 1 million baht for a freehold title that doesn't even belong to the person trying to sell it, to me is outright fraud not only a con...

[bangladiver]

seen it but don't think it is a con - the freehold does belong to the developr as upon completion it will obtain the same for the buyer

its not the supply and demand that makes the freehold more valuable - its that the freehold IS more valuable (thus driving the demand) - its just marketing smoke and mirrors at the end of the day rather than a con/fraud - unless i am missing something

if a buyer cannot calculate the price per square meter to include 'freehold fee' thats their own stupidity IMHO

of course relying on 'advice' from the agent is to rely on sales patter and nothing else - 'buyer beware' - i wouldn't rely on the agent's advice in farangland and even less so here

[LivinLOS]

If you dont like it, surely you can buy a Thai only condo allocation that you cannot legally claim ownership to, and then have a company ownership dodge or lease dodge or nominee owner dodge or.. If that doesnt appeal then obviously there in itself is the value added.

I guess what I am saying is this is, in my eyes, not a dual pricing scam where its the same plate of rice at two prices, or the same national park at 40 v 400 baht. Its 2 different products, one product is a condo and legal farang ownership which equals value x and product 2 is the same condo but with a legal title that cannot be owned without dodges or selling to a Thai, hence value equals x- etc.

Also if no other places have mentioned a premium... Have a Thai contact them for the non freehold thai allocation price, I am 99% sure that unless its in one of the most highly desirable developments there will be a substantial discount offered. The other way this is hidden is that the farang buyers who come in and buy off plan not only pay a price, but also pay a risk premium in buying off plan, often the Thai allocation is the last sold (or kept by the developer and rented, leased) and hence even if the price remains equal one has more risk than another.

[DrDave]

Not really a scam - just a way to squeeze significant extra profit due to the value-add of the freehold title. This is similar to charging a premium for identical units on higher floors, or with seaviews. Same floorplan, fittings and finish, but additional real (or perceived) value due to position in a building or other intangibles. In fact, the freehold title can provide more real value than a seaview unit (for the premium price paid), because a unit that's seaview today may not have a seaview a year from today. Just look around Patong and it's easy to see how new construction projects are eliminating the sea views that existing units formerly had.

I think that charging a premium for the freehold units is relatively new (within the past couple of years). I know of several projects for which there was initially no difference in price for freehold versus leasehold. The trend started when a small number of developers began to charge premiums for their freehold units, and soon after, others followed suit.

For the 51% of the units in foreigner-oriented projects that cannot be sold freehold to foreigners, most of these are held by the developer's company and sold as leaseholds. I believe that in some cases, the remaining units are sold freehold to Thais or legitimate Thai companies, who in turn may sell leaseholds to foreigners.

One thing to consider is that while most developers talk about a 30+30+30 (total 90 year) lease for a leasehold, there's been a lot of discussion as to whether Thai law will recognize the commitment for the additional two 30 year extensions. Only a single 30 year (maximum) lease period can be registered with the land department. In my mind - assuming that the extensions will actually be granted is somewhat of a gamble. The developer's company could go bankrupt, or be sold to someone with a different business agenda. It seems foolish to assume that the same developer, company and attitude toward extending leases will be in place after the initial 30 year lease period ends, knowing that the courts may not uphold your right to extensions if later, the owner of the freehold title refuses to honor the extensions. Developers and their legal assistants tend to write a lot of things into contracts that probably cannot be upheld under Thai law.

One final thing to consider is re-sale. I don't have any personal experience with this, but I would imagine that it would be fairly difficult to sell a leasehold unit for which the clock has been ticking for more than a few years in the initial 30 year lease.

For these reasons, a freehold unit is simply more valuable than an identical leasehold unit. Unfortunately, the developers have discovered this, and adjusted their pricing accordingly. For them, its like "found money" - more profit at zero cost.

[Masterwoodsman]

Developer to inexperienced client -

Sorry Thai law has changed and because there are not many Freehold titles left for foreigners anymore so we are charging a premiuim of 1 million baht should you prefer this option to a lease hold.

Inexperienced Client to Developer -

but we are not Thai and dont have a Thai company so how can we have a lease hold ? I think a Free hold title is all we are entitled to

Developer to inexperienced client -

Well a free hold title it will have to be then.... that will be 1 million baht please!!!

Not a scam ??? Well read into it what you want but i know what i believe

I specifically put "inexperienced" because so many of these dumb asses come here blinkered with their "living the dream" fantasy and go head first into committing into buying property without any idea of Thai law, current climates for properties and all the rest of the pitfalls that surround Thai real estate.

We as expats have a significant advantage over a 1st time tourist for example which is the reason for posting this to an unsuspecting client.... i'm just sick to death of Real estate tycoons exploiting loop holes which they indeed manufacture themselves to rip off innocent hard working people....

[ATMwalking]

MWM, kinda surprised you are stepping up to the plate again.

How much value does a condo have after 30 years anyway? In Thailand, does condo ownership translate into fractional ownership of the entire property?

I know developers are shifting to condos because 1) the can fan the flames of fear just as DrDave outlined and get a premium 2) they can knock these babies out on the cheap.

Personally I'd view any bump in condo interest as a short-term thing. Thaksin is back and I think that could mean a reversal the foreign ownership trend. Not to mention Malaysia and Vietnam are becoming very competitive. So what if the Thai government moves to a (truly) renewable 50 or 90 year lease? or even a truly renewable government held lease for 30+30+30? Won't that push people back into houses?

Aside from that, how many of the condo corps are really legit? If the government goes the other way and really looks hard at companies with a foreign interest, how many would pass the test? How many of these freehold condos are doggy and got by with local bribes? How many of these freehold deeds would be reversed without compensation? And yes the government did reverse land titles without comp a few years ago during the Phuket land office scandal.

I'd suggest that this is why projects on hotel grounds can command a real premium. Most of those projects/companies were run through the Board of Investment and have a federal level seal of approval.

Aside from that, tend to agree with LiL that it is just another dual pricing thing that you just have to accept or leave. Being a free market kinda guy I think it is actually good they are making git clear they are charging this premium and they should charge all they can get for this premium. But you won't see me paying it.

[Masterwoodsman]

Originally Posted by ATMwalking

MWM, kinda surprised you are stepping up to the plate again.

How much value does a condo have after 30 years anyway? In Thailand, does condo ownership translate into fractional ownership of the entire property?

I know developers are shifting to condos because 1) the can fan the flames of fear just as DrDave outlined and get a premium 2) they can knock these babies out on the cheap.

Personally I'd view any bump in condo interest as a short-term thing. Thaksin is back and I think that could mean a reversal the foreign ownership trend. Not to mention Malaysia and Vietnam are becoming very competitive. So what if the Thai government moves to a (truly) renewable 50 or 90 year lease? or even a truly renewable government held lease for 30+30+30? Won't that push people back into houses?

Aside from that, how many of the condo corps are really legit? If the government goes the other way and really looks hard at companies with a foreign interest, how many would pass the test? How many of these freehold condos are doggy and got by with local bribes? How many of these freehold deeds would be reversed without compensation? And yes the government did reverse land titles without comp a few years ago during the Phuket land office scandal.

I'd suggest that this is why projects on hotel grounds can command a real premium. Most of those projects/companies were run through the Board of Investment and have a federal level seal of approval.

Aside from that, tend to agree with LiL that it is just another dual pricing thing that you just have to accept or leave. Being a free market kinda guy I think it is actually good they are making git clear they are charging this premium and they should charge all they can get for this premium. But you won't see me paying it.

Yeah so am i..... but i have done a deal whereby i have traded my house for 2 condo's with free hold and a cash sum to make up the figures. Although my house has a Chanote title to most foreigners its no good. Everyones loves the house but doesn't like the lease hold agreement.

Anyway i'm really happy as its freed the house from around my neck, freed up some spare cash for toys and put me into another project with more sellable assets this time.....i hope

You Chris, like many others are expecting Thaksin to change things around, its wishful thinking on many peoples behalf as they are stuck with properties as i was..... however i do think given time things may change for the better as right now they couldn't be much worse...

[ATMwalking]

Originally Posted by Masterwoodsman

...are expecting Thaksin to change things around, its wishful thinking on many peoples behalf as they are stuck with properties as i was..... however i do think given time things may change for the better as right now they couldn't be much worse...

If the rumors are true Thaksin and family is stuck with more property than any of us. They won't get the big money by unloading to thais. They need to unload it with something approaching freehold in a much in a hotter property market.

BTW, sounds like it was a good trade for you. Assets that are more marketable and some liquidity.

[LivinLOS]

Originally Posted by DrDave

One thing to consider is that while most developers talk about a 30+30+30 (total 90 year) lease for a leasehold, there's been a lot of discussion as to whether Thai law will recognize the commitment for the additional two 30 year extensions. Only a single 30 year (maximum) lease period can be registered with the land department. In my mind - assuming that the extensions will actually be granted is somewhat of a gamble. The developer's company could go bankrupt, or be sold to someone with a different business agenda. It seems foolish to assume that the same developer, company and attitude toward extending leases will be in place after the initial 30 year lease period ends, knowing that the courts may not uphold your right to extensions if later, the owner of the freehold title refuses to honor the extensions. Developers and their legal assistants tend to write a lot of things into contracts that probably cannot be upheld under Thai law.

100% correct.

Thai law is only able to hold the initial 30 years, the +30+30 options are merely 'a future intention' and one with huge holes in the law if the owner could demonstrate any material change which after 30 years is guaranteed. Thats even assuming the same person still owns the land which the lease is drawn up on.

A usufruct is possibly better but all of these options presume that the home is purely a dwelling not a tradeable asset. The whole idea of 'investing' in real estate over providing yourself a place to live long term is simply not catered to in the options.

[ATMwalking]

Originally Posted by LivinLOS

100% correct.

Thai law is only able to hold the initial 30 years, the +30+30 options are merely 'a future intention' and one with huge holes in the law if the owner could demonstrate any material change which after 30 years is guaranteed. Thats even assuming the same person still owns the land which the lease is drawn up on.

Not 100%.

I think the problem here is a natural person is being treated the same as a juristic person. I believe a company has different obligations and restrictions (such as ownership transfer or bankruptcy) than an individual.

In addition, you can't put all companies in the same basket.

Clearly a large company like Land & House and Ramond Land are in the business for the long term. Sure even a crack wh0re could get listed on the Thai stock exchange, but at least it gives you some additional visibility into the company. A BOI approved company like Laguna, or perhaps an established wealthy local family (like Villa 5) can't be compared with a fly-by night thai or farang taking there first run at a property project looking to make a fast buck.

Condos are a fairly new thing for phuket so they aren't necessarily better than a lease if you get in with the wrong company. And I'd never get involved with an individual.

Originally Posted by LivinLOS

A usufruct is possibly better but all of these options presume that the home is purely a dwelling not a tradeable asset. The whole idea of 'investing' in real estate over providing yourself a place to live long term is simply not catered to in the options.

I think usufruct is a stretch and I wouldn't want to test this one in the courts.


FYI, dense but semi-interesting rant here
The Thailand legal website - NEED TO KNOW - buying real estate, land, house sale and purchase procedure

[LivinLOS]

Originally Posted by ATMwalking

Not 100%.

I think the problem here is a natural person is being treated the same as a juristic person. I believe a company has different obligations and restrictions (such as ownership transfer or bankruptcy) than an individual.

In addition, you can't put all companies in the same basket.

Clearly a large company like Land & House and Ramond Land are in the business for the long term. Sure even a crack wh0re could get listed on the Thai stock exchange, but at least it gives you some additional visibility into the company. A BOI approved company like Laguna, or perhaps an established wealthy local family (like Villa 5) can't be compared with a fly-by night thai or farang taking there first run at a property project looking to make a fast buck.

Chris, doesnt matter what the company is (tho a large listed company is far more likely to honour a future obligation) but the fact remains there is NOTHING to stop that company selling the land plot to a 3rd party. Once that plot is no longer owned by the person on the lease papers they +30+30 holds no power over the next owner and now current land owner.

I look at it like this.. What was land worth 30 years ago here ?? I heard beachfront being 10k a rai.. Only a decade or two back I know lots of beachfront was sold off at 50 - 100k per rai in the early 90's stage. Same stuff now would be 10mil. In 30 years time ??

So now you have a thai.. They have a lease which is saying that thier land which they (or thier parents even) gave a 30 year lease away, for what looks like pennies in 30 year future money. And they are supposed to help you renew, just because you ask them to, or for a pre agreed sum (that again looks like pennies). They simply wont IMO. They will look at it as land worth 50 million, and thiers, it will be legally thiers and they wont even see it as not morally thiers. Listen to the Thai national anthem, played multiple times daily on TV, in schools, etc etc

Thailand is the unity of Thai blood and body.
land of Thailand belongs to the Thais.

While I am not saying that land and houses Raimon etc will default.. You have to believe with 100% faith that all of these legal entities will be around and the climate of farang acceptance will still be there and that legally unenforceable contracts will be honoured simply as that was thier intention.. Just too large a risk IMO it certainly isnt water tight as many pretend.

And the idea of simply leasing +30+30 of a land owning Thai family.. Forget that as having a hope in hell IMO.

[K2]

One of the best threads of the year guys

[Masterwoodsman]

This is why the whole +30 +30 lease hold agreement isn't really worth the paper its written on hence why smart foreign investors wont entertain it.

There are exceptions however, for example the house i just sold was classed as a 4 story town house, being that there was a block of 5 units and a block of 4 units. Each unit although attached was individualised as having it own Chanote land title.

So whats gonna be the scenario when "for example" in one block of 5 i live in the middle with the Thai missus who holds a free hold chanote title in her name all above board and all law abiding. However the 2 units either side are both farang owned and they are at the end of their 1st 30 year lease. Land prices have escalated in this 30 years and the land which the property is built on is worth a hell of a lot if sold. So long as my missus was holding the freehold Chanote title on our middle unit and they somehow refused to honour another 30 year lease to the 2 farangs either side could they really hack down the attached units either side even though they were attached....

I know the above example is a worst case scenario but the lease hold option is so complex for various reasons and foreigners spending big money are usually smart enough to use the services of a decent lawyer....

I'm sure as someone wrote above that these free hold titles being offered on new projects aren't maybe as legitimate as maybe expeceted. The fact is Thai law is ridiculously complicated and i'm sure many legalities have their own such loopholes, when exploited, which makes piece of mind for a foreigner hard to achieve nowadays....

[garyteets]

I'm looking at a housing project where the developer is giving me the Chanote title with a power of attorney to do with it what I want whenever I want. Does this seem feasible and legal ?

[Masterwoodsman]

As i understand a Chanote title to one who has the legal capabilities of owning that title sure has the right (according to Thai law) to do as they please....as is with a free hold title to a house in England. The land and house belong to you the owner and having the right to do what you will with the allocated space subject to environmental, local government and land office clearance IIRC

[garyteets]

Originally Posted by Masterwoodsman

As i understand a Chanote title to one who has the legal capabilities of owning that title sure has the right (according to Thai law) to do as they please....as is with a free hold title to a house in England. The land and house belong to you the owner and having the right to do what you will with the allocated space subject to environmental, local government and land office clearance IIRC

My question pertains to since I am not Thai I can not legally own the land. If I have power of attorney to transfer the ownership of the land does that give me the same rights as actually owning it? Or can the owner/siblings come along at any given point in time and say "Oh we are taking back the power of attorney and selling the land to someone else or demanding payment of some type since my house is sitting on "their" land". Does the fact that I have POA give me total conveyence and ownership?

[Masterwoodsman]

Originally Posted by garyteets

My question pertains to since I am not Thai I can not legally own the land. If I have power of attorney to transfer the ownership of the land does that give me the same rights as actually owning it? Or can the owner/siblings come along at any given point in time and say "Oh we are taking back the power of attorney and selling the land to someone else or demanding payment of some type since my house is sitting on "their" land". Does the fact that I have POA give me total conveyence and ownership?

I see what your saying Gary but in order to get a 100% clear answer on this i would you suggest you ask a lawyer as the subject is quite complex and wrong info would be ill advised..

[LivinLOS]

Originally Posted by Masterwoodsman

So whats gonna be the scenario when "for example" in one block of 5 i live in the middle with the Thai missus who holds a free hold chanote title in her name all above board and all law abiding. However the 2 units either side are both farang owned and they are at the end of their 1st 30 year lease. Land prices have escalated in this 30 years and the land which the property is built on is worth a hell of a lot if sold. So long as my missus was holding the freehold Chanote title on our middle unit and they somehow refused to honour another 30 year lease to the 2 farangs either side could they really hack down the attached units either side even though they were attached....

Sure theres complications with co-joined buildings.. But the fact of the matter is they will not 'own' the ground underneath that building.. And can no longer 'use' the house above it.. Plus then if the farang doesnt just walk away and attempts to bash the building down in spite, they will have problems to not cause damage to the standing other property..

Again net result is 'walk away'..