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6 ways to avoid being defrauded in a property investment

The Thaiger

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6 ways to avoid being defrauded in a property investment | The Thaiger

By Desmond Hughes

As today’s local Phuket property news is soured by the story of a development ‘scheme’ resulting in losses for investors and third parties, the perception of real estate may be besmirched with negativity, all the while honest families who have elected to take their own risk on the market by developing their land banks, working with architects, designers and contractors to try and provide good solid homes or investment properties, suffer the commercial shockwaves as the inevitable output of publicised property development failure.

I personally know very bright, educated successful businesspeople who have suffered fraud in property markets and I have as much respect for them as I do for people who have never lost on investments.

I have no feelings of ‘this could never happen to me’. Some frauds are seriously difficult to detect, cause embarrassment to the victims which perpetuates or extends the fraud, and unfortunately frauds are a natural result of the freedom available to those that conduct business in any market, regardless of the amount of regulation that exists.

Where there are rules, rules are broken. 

As a humble student of balance, subjective and objective criteria, theoretical analysis of legal systems and regulation, I believe in pre-emptive investment protection or to use a more common description ‘being cautious’.

Therefore, all those who are currently considering diverting all their monies away from property into the exciting world of blockchain and cryptocurrencies, kindly consider the following as guiding principle for navigating the property market with a certain degree of respect:

1. Winning the Last Game Doesn’t Mean You Win the Next Game

Anyone that understands sport will understand the heading. If a private developer has completed 1 or more projects prior, it does not mean that they will successfully complete the next project, or even start it. It is, however, natural to read into the credibility of a developer if they have completed a project well before. However, this should not be taken as any form of implied guarantee of future performance.

Developers can lose money by speculating on other businesses, diverting funds, get into trouble with moneylenders or even reputable but unsympathetic financial institutions. They can also die with no succession plan in place.

The very simple solution to this logical set of facts is to (a) consider buying something that is already built to limit risk or (b) when buying off the plan, demand better payment terms allocating a large percentage of payment to the final payment and review contract and risk carefully.

2. Choose Experienced Lawyers, not the Cheapest Lawyers

Here are some characterised liberally interpreted sound bites close to statements I have heard over and over again over the last 15 years. If you can’t see any issue with these statements, then as many a con artist has said – “you deserve to lose your money.”

“The agent who stands to make commission from the sale recommended the law firm and I chose that law firm without checking their credentials”

“I contacted three law firms and chose the fastest responder which was the cheapest”

“I used the same law firm that represented all of the other buyers before me”

“I used the same law firm that represents the developer”

“I used a law firm because they said they were ‘well connected’”

“I used a law firm because they had some foreigners”

“I used a law firm because they didn’t have any foreigners”

“My lawyer said he studied in my home country for 12 months and understood me”

“My lawyer was polite to my spouse / girlfriend / boyfriend so I felt comfortable with using them”

“The law firm I chose told me that all land is safe it is issued by a Government Department and can never be ‘taken back’”

“My law firm said not to worry that the developer has a huge mortgage or loan and that it is normal for developers to borrow money to develop property. He/She said there was no need to look at the loan agreement or ask the developer about the relationship with the bank as that would be considered ‘rude’”.

“I used a Bangkok Law firm because Bangkok is big. Bangkok is a city. People in Bangkok are cool. I like tall buildings in central business districts – better advice comes from there.”

“I used a Phuket law firm because the parties are based in Phuket.”

“I used a law firm that has the same logo as a law firm that has over 10,000 lawyers around the world, because surely all of the lawyers are good – like the burgers in a fast food chain are also always delicious wherever you buy them.”

I could go on for a few pages more…

3. After you Have Chosen Lawyers, Listen to Them

Let’s say you used a good set of criteria to appoint legal advisers. Then you obtained their advice and you didn’t like it. So you proceeded to ignore them. This is tantamount to choosing a car for its safety features and then disabling all of those safety features before braving the death-filled roads of Thailand.

4. Examine the Fundamental of the Project and Conduct a Real Strengths and Weaknesses Analysis

Think about the following…

  • Type of developer – public company listed on the Stock Exchange versus private developer
  • Private developer – financially sound, happy to disclose financial status, good sets of clean audited accounts, good reputation
  • Marketing strategy – style over substance or a mixture of both
  • Land legality – check the entire history of the land from when it first came into existence. 60 to 90 years or so of documents isn’t a long time in the history of the Universe. Check them all.
  • Understand what legal compliance actually means. Obtaining “EIA approval” just means approval to do something subject to complying with laws. It is the complying with laws part that needs to be checked, not the existence of the conditional approval. “EIA Approved” doesn’t mean “We are compliant with all the laws”. My wife approved me going out with friends for a late night, and she set some conditions such as getting home at a reasonable hour. Whether I met those conditions or not is a matter of review and inspection.
  • Don’t accept shoddy contracts. If the contracts aren’t good, it means there is poor judgment on the part of the developer as to which service provider to use. Similarly they may exercise poor judgment on the carpenters; plumbers; electricians; structural engineers and project management team. Try and look at the whole package.
  • Developers who don’t negotiate are either so good they don’t need to, or so bad they hide behind a wall of ‘no’. Some public companies can’t change their contracts – because they need Board of Director and committee approval to do so. However, some companies hide behind this and some private developers take an inflexible approach to negotiating changes. Choose changes to contracts carefully, only points you really need for comfort and security, but don’t take an off-the-shelf product with defects. Contracts also, like any product, can become aged and past their sell-by-date. Developers cutting and pasting contracts from 2005 aren’t confidence-inspiring organisations.

5. You Will be Punished for Arrogance

Most of my clients are far wealthier than me and I have no shame in that having risen from the metaphorical ashes of a working class family to make my own way in life aided by student grants and part time jobs before obtaining my qualifications and penetrating elite walls and ceilings on my own terms.

I am in a service business, and therefore I must serve those that can afford to pay for knowledge and know how they do not possess, or support for resource they cannot muster. Many such clients freely admit their wealth came from inheritance, from a healthy dose of luck in selling a business at the right time – dot.com boomers being a case in point, or from their own hard and constant graft.

However they came by their money, they do not deserve to be unfairly cheated out of it. Such people do not possess a Midas Touch. They are fallible. The smart ones admit that and behave accordingly.

I offer my respect to those that recognise their own successes and capacity for failure and catastrophe. Those people wearing sunglasses on a cloudy day who won’t make eye contact while they drop their children off at school because you clearly aren’t in their perceived ‘ life club’ are prime targets for life readjustment lessons but I still pity them when they lose, even financially. Life has a strange unfairness about it but many who think they are cheating life are rewarded exponentially in kind.

Don’t be arrogant. Don’t think people with less wealth than you know less. Such persons may have studied far harder than you and have read more books. Think about why they did that. Then pay to get some advice before you make a decision, not during the litigation or dispute process.

6. In Business, Timing is Everything

If a sales person is rushing you to make a decision, is it do you a favour? Is it because they are your “bestest bestest friend” and after two dinners with you and searching for aligned topics of interest suddenly you have ‘connected’ and therefore you must go along for the ride, at their pace and behest.

It does no harm to retain some cynicism about timing. Yes, if the market is hot and rising, being quick to buy makes sense. That is what commodities trading is all about and some have studied that which is different to property by a long stretch but still has some similar principles in terms of profit and leverage.

Unlike damaged grain, if your property target purchase is rushed, you might not be insured against the losses, you may wish you had taken more time to conduct a survey and there may be no ‘association of damaged property investors’ to call upon to help you out.

Contractors and Developers who need you to buy ‘now’ most likely need ‘cash now’ which isn’t a good sign. Yes, professional property developers and agents do not like dawdlers, time-wasters, tire kickers, property viewing tourists and the like – these people costs professionals a lot of wasted time and resource and hinder the effective mechanics of an efficient property market. However, these people exist in many  markets and there are strategies for uncovering the charlatan mystery shopper buyers.

Rushing someone to make a life decision isn’t a good idea.

Plan the timing of your transaction with your advisers, and don’t be swept along the road to a court case at a pace far faster than a court case would be conducted.

At wakes or funerals, it often isn’t appropriate to make jokes or be jolly, or to refer to certain topics that relate to living life when someone dear has passed away.

When property fraud hits the market, it often isn’t fashionable to remind people that there is not just bad in the property market, but a lot of good, for fear of being rebuked as a self-serving property professional. However, the truth of life and humanity is that the world is progressively becoming a better place, Thailand is becoming a better place to do business, and the property market does have more to offer than before. Issues will continue to arise, mistakes will continue to be made, and the bad actors in the market will continue to disrupt progress.

Please stay safe. Please be cautious.

6 ways to avoid being defrauded in a property investment | News by The Thaiger

Desmond Hughes FCIArb
Senior Partner
Bangkok | Phuket
hugheskrupica.com | +66 (0) 828 897 897
Bangkok: +66 (0) 22 872 173
Phuket: +66 (0) 76  608 468



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Phang Nga

Hong Kong property tzars team up for new Phang Nga development “Aquella”

Bill Barnett

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Hong Kong property tzars team up for new Phang Nga development “Aquella” | The Thaiger

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Two of Hong Kong’s leading entrepreneurs Allan Zeman and Richard Li are developing a mixed-use project in Thai Muang, Phang Nga named Aquella.

The initial phase of the development includes a par 72, 18 hole golf course, resort pool villa residences with two to four bedroom unit configurations back of a massive land site that offers over 2.5 kilometres of white sand beach.

Previously, the approximate 1,000 rai site was the home of the Thai Muang golf course. After acquisition the course was closed, and the master planned Pinetree project that was to contain a marina and luxury Park Hyatt hotel stopped when land zoning issues changed in Southern Phang Nga.

Today, the new golf course has been reconfigured and Zeman’s Paradise Group who developed Kamala’s posh Andara ultra villa resort in Phuket are collaborating with Li’s Pacific Century Premium Developments (PCPD) group.

South West Phang Nga hosted some of Asia’s most significant luxury villa sales in the mid 2000’s given it’s close access to Phuket International Airport, over the Sarasin Bridge.

Changes in the zoning regime stunted the area’s growth over the past decade but a new wave of interest has been born in projects such as Charn Issara’s Baba Beach Club.

Land prices in Koh Pilai and Koh Kloy have sharply escalated in recent months on the announcement of a second Greater Phuket airport by Thai aviation authority AoT.

That said, the area has a rich history in demonstrated luxury residential sales in projects such as Aleenta and Sava.

With Phuket bursting as the seams, and prime oceanfront plots limited, the recent transaction of the former greenfield site of the Ritz-Carlton Reserve has indicated positive sentiment.

Hong Kong property tzars team up for new Phang Nga development

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Property

Car and house loans surged in 2018

The Thaiger

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Car and house loans surged in 2018 | The Thaiger

The Bank of Thailand says they’re concerned about the double-digit growth in loans for cars last year. The central bank is now monitoring the trend and will keep track of statistics for the rest of 2019. Their concerns about the Thai mortgage market the year before resulted in new regulations coming into effect this April.

Loans for cars were up nearly 13% in 2019, up from 8% growth in 2017 and much smaller growths in the years before.

They reported that commercial bank auto loans rose to 1.07 trillion baht last year, a rise of 12.6% from the previous 12 months. Defaults on loans has also risen during 2018 but the BoT says the rate is still “manageable” at 1.66%.

The BoT says they will need to continually monitor the business of loans for cars for at least the rest of 2019.

Last year they put the spotlight on property mortgages. The study resulted in more stringent conditions for the loan-to-value ratio, especially for second or subsequent housing loans.

Mortgage lending expanded nearly 8% in 2018, compared to 5.5% in 2017. The more stringent requirements for housing mortgages comes into force on April 1 this year.

Generally, the loan sector for commercial banks rose by 6% last year, again a rise from the previous year where the rise was 4.4%.

But the BoT reports that the profitability of the banking sector remains in positive territory. Interest income is now the main source after the fee-based income of some banks, particularly fund transfer fees, declined.

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Phuket

Kamala’s Twinpalms Montazure poised to welcome guests in July

The Thaiger

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Kamala’s Twinpalms Montazure poised to welcome guests in July | The Thaiger

Set on the golden sands of Kamala Beach, Twinpalms MontAzure will welcome its first guests in July this year.

Already a member of Small Luxury Hotels of the World, the boutique beach hotel offers beautifully appointed Suites, Penthouses and Private Pool Suites.

Suites range in size from 70m2 to Penthouses with private pools and sea views boasting large living spaces of up to 300m2. Guests will also enjoy using a lap pool or an infinity pool offering views of the Andaman sea.

Twinpalms MontAzure will also launch its beachside restaurant and lounge, ‘Shimmer’, with uninterrupted sea views. Shimmer restaurant will serve vibrant and tasty food with an Asian focus, delicious and creative cocktails, and a great wine list, all served with the customary gusto and flair expected from the Twinpalms brand.

Olivier Gibaud, General Manager of Twinpalms Hotels & Resorts says, “With 15 years’ experience refining Twinpalms excellent service standard complemented by a luxurious dining and entertainment quality that sets itself apart from other destinations on the island, we are very excited to bring this knowledge to a new hotel”.

Designed by Martin Palleros, following the original Twinpalms concept and style, of utilising Phuket’s beautiful landscape, Martin has allowed the design to maximize the sea views from most of the Suites and areas within the buildings, whilst also ensuring the preservation of the views of the mountainside from other perspectives.

Resident Manager, Thipwimon Chatchavansilachai says, “For respect for our island location, we will launch with a ‘no single-use plastic’ policy, meaning alternatives to common plastic items such as straws, packages for bathroom amenities and water bottles will be replaced with materials such as bamboo, ceramic and recycled paper.”

“We will continuously find better alternatives in our hotel operations for the preservation of the environment”.

Naturally, guests of Twinpalms MontAzure also have access to the brand’s other dining destinations, taking full advantage of the three beaches Twinpalms has a presence: HQ Beach Lounge – a few steps away on Kamala Beach, Catch Beach Club, Catch Junior and Palm Seaside, located on Bang Tao Beach and the flagship resort, Twinpalms Phuket, is just a few steps from Surin Beach.

Kamala's Twinpalms Montazure poised to welcome guests in July | News by The Thaiger

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