The Thai laws regarding property ownership can be confusing. When wishing to sell a property it is wise to contact a lawyer to help with every step of the process. However, selling a property is a lot easier than trying to buy one.
It is possible in Thailand to sell a property without using an agent and many people choose to do so to save on fees. Selling independently is quite normal although if an agent is to be used then it is wise not to sign a contract with them that is open ended. The sale can be advertised in several ways including online, in newspapers and signs fixed to a window or door of the property is also common practice. If a property is sold independent of an agent this means the seller is saving themselves the fee charged on the sale which is usually around 3 per cent of the sale price, but that may vary depending on the estate agent that is used.
The next stage of the selling process is standard for most countries. Once a buyer is found and a price has been agreed, then the negotiation as to what items will be included in the sale must begin. In Thailand there is no legal obligation to leave any items in the house, but often flooring and curtains will remain. In some instances certain white goods will be left in the kitchen and buyers can negotiate with the seller for any furniture they feel they would like to buy.
Once all the terms have been agreed it is then time to have a purchase agreement drawn up which must be signed by both parties. There is no legal requirement for this document to be notarised, but any and all copies must be signed stating that they are true copies of the original document. This is also the stage at which the deposit is paid by the buyer.
The purchase agreement should also include a condition stating the requirements regarding the withdrawal of the property from sale. The standard terms are usually that the deposit is returned in full to the prospective buyer should the seller have to take the property off the market for any reason. If the terms for withdrawal are included in the sale agreement then any legal disputes resulting from the sale not being completed can be avoided.
When the sale closes then both the buyer and seller will need to be in attendance to sign the final documents. In Thailand this can be done with the selling agent or with a lawyer. The land registry office will also need to see both parties. If the property has been bought through a company then a lawyer will have to be appointed to help with the sale due to the amount of legal paperwork that will need to be dealt with.
The Thai law also states that several pieces of documentation will be required. Depending on the circumstances surrounding the sale they can include some or all of the following, Title deeds, proof of identification such as a passport, a marriage or divorce certificate if this is relevant, property tax documents, the house registration documents, the purchase agreement and the power of attorney form if this is relevant. For the sale of condos there are other forms that will also be required including a foreign exchange transfer form that is available from the bank, a document stating that there is less than 49 per cent foreign ownership in the condo building and a document stating that there are no outstanding maintenance fees for common ground applicable to the property. If there is still a mortgage owing on the property then the mortgage lender or bank will also have to be involved in the selling process as they will have the title deeds for the property.
In Thailand it is possible for the seller to finance part of the purchase. In this instance the buyer can pay a lump sum for the property initially then pay monthly instalments to the seller until the rest of the outstanding balance is cleared. If this happens the title deeds will remain in the sellers name until the full amount of the agreed sale price for the property has been paid. A title search must be performed to prove ownership of the property and all documents must be agreed and notarised officially.
Capital gains tax will apply on the sale of the house. This can vary due to length of ownership of the property, so those who have lived in their houses longer will pay a smaller percentage of tax. The tax laws in Thailand are standard regardless of whether the property was bought or was inherited or was gifted to the owner. The rules for capital gains tax in Thailand are complicated and as such a lawyer should be consulted to ensure the correct legal documents are completed and the right amount of tax is paid. This will also avoid any potential legal issues at a later date.
Property exchange is generally not an option in Thailand.
Using a Real Estate Agent or Broker
- As a first step, you have to consider whether it is worthwhile for you to use a real estate agent or a broker.
- A reputable agent or a broker may make it easier for you to find your buyer either locally or internationally.
- They have a greater access to the market and are able to vet the potential buyers saving you some time in accommodating casual inquiries.
- They are also able to assist with the negotiation, provide advice and guidance on the deal and obtain the best price they can for the property.
- Agents in Thailand normally take up to 3% of the purchase price as their commission for this service so this is something you have to take into consideration as well.
The Price is Right
- Setting your asking price is important. You may have an idea from observations of recent sales of units within your condominium or other similar condominiums around your area.
- Alternatively, you may wish to have your property evaluated by a number of surveying and appraisal firms around town.
- An agent or broker can help you with the pricing, too. Be sure to set a reserve price aside as well. This is the minimum price of the property you are willing to accept.
Other Pre-contractual Considerations
- Make a checklist of any defects on the property which should be disclosed to your potential buyer.
- It is good to have a full and open disclosure of all physical aspects of your property and state this clearly in the sales and purchase agreement.
- Keep in mind of any liens or debts you have on the property as this should be included in the contract. There is no legislative requirement to do so in Thailand but it goes a long a way in preventing any potential problems with your buyer in the future, particularly if your buyer is used to having these terms being standard in their own home jurisdiction.
- It also helps to give a good impression to any potential buyers and makes for a much less complicated transfer.
Also, Thai law retains the general principle of freedom of contract. This means that parties have the freedom in concluding any agreements as long as it is not against the law or against public morals. The principles of contract laws are regulated by the Civil and Commercial Code of Thailand which is largely based on continental European civil law concepts. However, you have the option of selecting a jurisdiction to govern your contractual obligations and this is useful if you or your buyer is more familiar with those particular sets of laws.
Remedies When a Sale Goes Bad
There are some crucial elements to protect yourself when you prepare a sales and purchase agreement for your property. Precaution and careful drafting can ensure you have remedies when something goes wrong.
Once a contract has been signed, a contractual obligation between the parties is established. As a rule, you should have some or all of the following clauses in your agreement to limit your injury when your buyer cannot complete does not go through with the contract. Therefore, you may state that at the termination of the contract, the vendor may:
- Keep or recover the deposit;
- Keep certain funds paid under the contract for security;
- Sue the purchaser to recover damages for a breach of contract.
- As a further precautionary step to suing for claiming for breach, include a further clause which can recover the deficiency on resale and the reasonable costs and expenses arising out of the purchaser’s non-compliance with this agreement.
- This ‘deficiency on resale’ concept arises out of the difference between the contract price and the market value of the property as well as any other damages which may arise out of the breach. Therefore, if there is a deficiency on a resale, you would take the difference between the contract price and the resale price and make the necessary adjustments.
- Alternatively, you may wish to use the following calculation in your agreement whereby you take the difference between the contract price and the value of the property as at the date of the breach and add on any consequential damages plus interest. The consequential damages may include items such as advertising fees, legal fees, rent costs and removal expenses.
- It is always a good idea to have an alternative dispute resolution clause in your contracts as arbitration or mediation will most definitely be a cheaper and faster alternative to attaining any damages if you happen to find yourself in a quandary.
If drafted into the agreement, it makes it much clearer what damages can be claimed for in such an event.
Certainly we all hope that a sale of a property will proceed smoothly and most vendors are happy to cut their losses and proceed in finding the next buyer if something goes wrong. This is due to the high fees and the considerable time involved in court proceedings in Thailand.
There are a number of other minor problems which may arise when selling a property but this article is too short to cover them all. If you are in doubt, your agent or broker may assist you or you may wish to seek some legal advice on the matter.