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Property Watch: Pitfalls in Thai property market

Legacy Phuket Gazette



PHUKET: Inevitably I have seen a fair amount of unethical and immoral behavior in Phuket connected to my work and the experiences of clients. This, combined with the huge changes in the Phuket business, infrastructure, development and demographics, has led me to conduct a quick mental check on where we stand in Phuket when it comes to morals, and how this relates to one of Phuket’s most important markets – property.

I would like to set out a few examples of some common moral issues and I will leave it to you to draw your own conclusions, based on your own moral compass. There is, as is a common saying in Thailand, no clear ‘right or wrong’.

Foreigners and land

It is quite clear under Thai law that foreigners are generally prohibited from owning land. There is no deception there. The issues that have arisen from this prohibition are that many don’t like the law and try to find ways ‘around’ the problem.

Foreigners can lease land. A Thai corporation can own land, but not solely for the purpose of owning land. Foreigners can own buildings. These have become, I hope, commonly known facts.

Even though it is legal for a Thai person to own property in the UK, for example, I haven’t heard of many Thai people being accused of circumventing any of the rules governing such purchases or holdings.

Yes, historically British governments have taken a different view on foreign property investment and ownership, but the balance of power in Thailand could easily shift if wealthy foreign corporations were simply able to start land banking here.

There are some reforms that could be made along the lines of the Malaysia second home program with some better functions, of that there is no doubt, but some perspective is required about where Thailand is in terms of its development of laws.

Keeping reservation deposits

If there is one way to destroy the market you work in, being unfair to potential buyers, who will clearly discuss their experience with other potential buyers, is a surefire way to contribute to negative impacts on the property market.

For a dozen years, I have seen miscommunication, misunderstanding and unfortunately quite a few cases of immoral unfairness in relation to ‘reservation deposits’.

A reservation deposit for a property is security for a seller against costs incurred by time wasters. If a potential buyer places a reservation deposit and then uses the sellers’ time and their advisers’ time, and simply withdraws without cause, they should lose some money if not all of their reservation deposit, if the amount is fairly small.

However, if a seller has mis-sold something – maybe told the buyer that they are buying ‘freehold’ when the purchase is leasehold, or a variation of leasehold – and the buyer feels uncomfortable about that and wishes to withdraw, then the money should go straight back to the reservation holder.

Further, if the buyer finds out there is an issue with the property, or a serious defect, they should get their money back.

Keeping promises

Promises of ‘Free golf course membership’, ‘Access to tennis court’, ‘Discounts at restaurants’, ‘Discounted school fees’, etc, can lead to problems. Golf membership promises can turn into ‘plus green fees and caddy fees and subject to availability’.

Tennis can turn out to be on ‘uncovered courts only.’ Or restaurants that serve ‘subject to restaurant opening times’, when the restaurant is in fact permanently closed. Or a gym room without any machines or air-con. Buyers remember all these small things too.

Honesty on financial position

When you ask to borrow money from somebody, a sensible potential lender will ask if you have enough money, or will have enough money, to pay it back, or the lender will already have confidence you are a good payer.

When it comes to off-the-plan property where sales require large payments from buyers to fund construction, if the developer already owes money to the bank and the payments are a priority, it is unfair to take money from potential buyers without first informing them very clearly that the developer has some debts which must be repaid as part of the financial equation.

I have seen many times situations where buyers are shocked to learn of a registered mortgage against the same title that they thought they were investing in.

It would be great to see more honesty in the world generally, and Phuket is no exception to that wish.

Desmond Hughes has been an owner and operator of his law firm in Thailand for 12 years, and is a Senior Partner at Hughes Krupica law firm

— Desmond Hughes


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