Part 2: Land law and acquiring land for projects

Chapter 4 Land acquisition and due diligence

Legal issues Each type of land document confers different rights. A title deed (Nor Sor 4) confers ownership. Nor Sor 3 Gor and Nor Sor 3 are certificates of utilisation. Land under Sor Por Gor (agricultural land reform) and tax documents such as Por Bor Tor 5 should not be developed commercially or treated as ownership. A seller's statement that the land "can be converted to a title deed" is not evidence. Good land due diligence covers seven dimensions: ownership, encumbrances, actual condition, zoning, environment, litigation and tax.

What the developer must do Obtain the land register extract at the start of negotiations and again before signing, and trace the chain of transfers backwards. Engage an independent surveyor. Check access, encroachments, mortgages, easements, leasehold rights and attachments. Check zoning, both the version in force and any draft under public consultation, including FAR, OSR, height limits, setbacks, coastal zones, forest areas and EIA thresholds. High-value land should be supported by a legal opinion.

Key risks Several plots may carry different types of title document. Easements reduce the developable area, and height restrictions may reduce the number of units to the point that the financial model must be recalculated. Convert the findings into price negotiation, staged payments or conditions precedent to transfer. If the seller holds the land through another person's name, the buyer must assess the risk to the validity of the acquisition.

Chapter 5 Land sale and purchase agreements and ownership transfer

Legal issues A sale and purchase agreement (SPA) binds the parties before ownership transfer. The main issues are the seller's warranties, conditions precedent to transfer, deposits, costs and the consequences of breach. Conditions Precedent protect the buyer from bearing risk relating to the EIA, permits, financing or unclear ownership. Registration must be carried out at the land office with jurisdiction over the area, with the correct documents and signing authority.

What the developer must do Write conditions so that they are measurable. Specify the long stop date, the responsible party, how a condition may be waived and the outcome if a condition is not satisfied. Consider escrow where the deposit is large. Arrange for the mortgage to be discharged at the time of transfer. Estimate the standard transfer fee at 2% of the appraised value, SBT at 3.3% for juristic persons, and WHT according to the seller's status. Fees can be shared as agreed in the contract. Fee reduction measures must be checked transaction by transaction.

Key risks Paying the seller directly before the conditions are met exposes the buyer to a recovery risk. When buying multiple plots, there is a risk that a key plot will not be sold or its price will be pushed up. Use an option, or tie conditions across plots in a transparent way. Nominees should not be used to conceal the true buyer. Paying for land in instalments carries the risk of a second mortgage and default, so appropriate security and registration are needed.

Chapter 6 Alternative forms of land holding

Legal issues Freehold is ownership. Leasehold is a right of lease, which must be registered when the term exceeds 3 years and can be registered for no more than 30 years at a time. The market often refers to 30+30+30, but the renewal periods are contractual obligations, not an immediately guaranteed 90-year lease. Usufruct is a personal right in property that ends on the death of the holder and may last for no more than 30 years or for life. Superficies gives the right to own a structure on another person's land, while an easement attaches to the land.

What the developer must do Choose the form according to the purpose, holding period, succession to heirs and resale. Register the rights that must be registered. State clearly the sub-leasing rights, the transfer of rights and the procedure if the landowner changes. Have a lawyer review whether the renewal undertakings are binding, and tell buyers about this limitation plainly.

Key risks A clause that makes the lease exceed the permitted term from the outset may be problematic. A renewal undertaking may not directly bind a new owner in every case. Foreigners cannot use a Thai company with Thai shareholders as a nominee to control land. Structures of this kind carry penalties and undermine the security of the rights. Consult a lawyer before offering any form to buyers.

Chapter 7 Related permits and approvals

Legal issues A project requires several permits, and some are conditions for the next. A project that divides land into 10 or more plots for sale falls under the land allocation law. Buildings must obtain a building permit (Or 1), and buildings in controlled-use categories must obtain a construction certificate (Or 6) before the building may lawfully be used. A condo that meets the criteria must have an EIA. In practice the threshold commonly applied is 80 units or a total area of 4,000 sq m or more. The current notification should be checked.

What the developer must do Prepare a permit master schedule that sets out the relationships between permits, timelines, responsible persons and the critical path. Start the EIA alongside the design, as it is often a bottleneck. Projects with a hotel, spa or pier, or that use public land, must check the specific laws and the agencies involved. Set transfer days with customers, allowing time to obtain the certificate and register the condominium.

Key risks Launching sales before the EIA position is clear may require refunds and lead to losses. Building contrary to the plans or changing the use of the building without permission makes it impossible to obtain the certificate. The timelines and costs in the source documents are only estimates and should not be treated as commitments in contracts.