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Due diligence   By Frédéric Rétif (Legal advisor, Titulaire du C.A.P.A)

Ake & Associates

  Phuket City

In some western countries, during the process to transfer ownership of real estate, the law obliges the interested parties to use the services of a public body or representative to protect the buyer by making 'due diligence' compulsory.

In Thailand however, parties can directly go to the relevant administration to register the ownership or rights in immovable property transfer. But some choose not to. Consequently, some buyers take the risk to be engage (in a purchase) without performing a competent and comprehensive due diligence process and unfortunately stand to lose a lot of money if they don't comply. In Phuket, land use restrictions are encompassed under three laws with the relative ministerial regulations.

  • The Building Control Act
  • The City Planning Act
  • The National Environmental Control and Maintenance Act

All of these have been enacted within the last 40 years.

Due diligence is implemented basically on the title deed, the building, the owner or holder of the immovable rights and legal relations between them and third parties.

The title allows certain private use and grants rights to use, possess, own, or to transfer rights by freehold and leasehold. There are three titles to be considered: the Nor Sor Sii Djor (chanote), the Nor Sor Sam Gor and the Nor Nor Sam.

The due diligence report regarding the title deed will show all historical transactions and any encumbrances as servitude or mortgage.

The said building has also to be free of any debt, charge or other restriction of private or public laws other than the usual easements. To avoid future legal litigation, the construction must correspond to the correct permit issued.

In condominium projects, rules and regulations are even stronger, and some developers use the word 'condominium' only for marketing purposes with the result that at the end of negociations the condominium license won't be issued and the unit will not be registered under your name.

In the case of land and building, the owner of both can differ, in this case, one of the assets can be subject to checks made for each particular owner as to his/her criminal and civil background which could impact on the legal process of acquisition.

A Thai company can also be the owner of the whole asset. In this case, the buyer can purchase shares and become director of the company. The due diligence procedure will request specific verification in accounting and tax domains.

For the above reasons, the first step of your real estate investment should be followed through with due diligence. It makes perfect sense.

Ake & Associates
Ake & Associates is a law firm with in-depth experience in both civil and criminal law and regularly handles real estate transactions on behalf of Thai and foreign clients who want an experienced local law firm.

GPS coordinate: 7.900257, 98.381602

 Contact info:

367/2 Yaowarat Rd., Talad Yai, Muang, Phuket.,
Tel: +66 76 355425, +66 92 679 5999

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