Property Watch: Foreigners: beware of condo laws

PHUKET: Every year I learn a host of new rules and regulations which impact property investors in Thailand, sometimes positively but often detrimentally. This year I learned something new, which either by chance or good fortune, my clients over 13 plus years here have never experienced. Unfortunately, I view the situation as being severely detrimental and anti-foreign investment in nature.

If you are foreign and you marry a Thai, and you agree between you that all of your marital assets will be split 50:50 and designated as such, the Thai Government has found a way under which, even post marriage, part of this agreement can be completely excluded.

This does not relate to the well-known exclusion of land, but to condominiums. Condominiums are much heralded as generally being available and favorable for foreign investment. Unfortunately, this is not always so.

Most of my clients over the years have bought their condominiums outright with cash from overseas, or had the cash in Thailand, and due to the quirky rules on ensuring you have a ‘Foreign Exchange Transaction Form’ had to move monies out and then move those monies back into Thailand again with the bank fees and potential foreign exchange losses thrown in for good measure. I took out a loan many years back for my first condominium purchase in Thailand and the monies were loaned in foreign currency through HSBC Thailand which had its retail banking in Thailand taken over by the Bank of Ayudhya.

My wife and I agreed on 50:50, for our own private reasons.

We then decided to buy a condominium for rental investment purposes in Bangkok. We went through the mill when it came to applying for and obtaining a loan. We applied through seven banks. The first was the ‘favored’ bank of a well-known developer in Bangkok. They took literally every piece of financial information imaginable about me and my wife and looked at my various companies’ assets and credit history; tax payments and even the number of employees in my business. After three months, we were told we could obtain a loan only for an amount of 20 per cent of the outstanding balance due on the condominium. We then rushed out and made six further applications. One bank came through but the conditions were:

(i) we had to take out a loan for furnishing the condominium

(ii) we had to take out the hefty insurance premium through the bank’s ‘preferred’ insurer

(iii) the loan had to be taken out by my wife because “she is Thai and you are a foreigner”

Notwithstanding this, I was still expected to sign all the loan documentation and be involved.

Fast-forward, and we were close to the transfer date. All of a sudden, I am informed that I must sign a ‘declaration of Sin Suan Tua‘ (personal property). What is all that about, I thought – I have already made my agreement with my wife when I got married. Also Sin Suan Tua is by definition supposed to apply to all matters before marriage.

Then the reality of the situation became apparent. Due to the fact my wife was borrowing the money from the bank, regardless of who would be making the mortgage payments, the authorities have found a way to exclude a marital asset from the marriage and adjust the entire concept of Sin Suan Tua.

The Land Department insists that a foreigner must declare that a condominium belongs entirely to his/her spouse and that he or she (the foreigner) has absolutely no rights or interest in such condominium unless:

(i) He/she pays for the unit and obtains a Foreign Exchange Transaction form – an impossibility if the monies are loaned in Thailand

(ii) He/she has Permanent Residency – and many long term expatriates know how long and difficult that process is

(iii) He/she is permitted to enter Thailand under the ‘Investment Promotion Act’ – which is very rare.

So… if you believe being married to a Thai is somehow advantageous when it comes to investing in property as a foreigner, the reality is quite the opposite. The Land Office I attended in Bangkok was very helpful, efficient and polite while I signed the document confirming that our condominium would have nothing to do with me despite the fact of my marriage and that I’d paid the down payment.

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 www.hugheskrupica.com