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Do I really own my Villa? – The Construction permit may tell

Many foreign property buyers in Thailand decide to purchase a villa either in managed estate or on single plot rather than apartment or condominium as such usually do not provide circuitousness and privacy as villas do. Due to legal restrictions, prohibiting land ownership by foreign person in Thailand, it is common for foreign purchaser when buying a villa, to enter into set of agreements comprising of villa sale and purchase and land lease agreement providing a buyer with purchase rights to the building, and lease rights to the underlying land. Alternatively, a construction agreement, beside the land lease, might be executed in relation to construction of a residential building.

With regards to the building, a property buyer should carefully examine how his ownership rights to the building shall be constituted and secured. Unfortunately, land departments in Thailand do not issue title deeds for buildings as they do for land. However, a government policy has been established which considers other documentation as relevant and acceptable when it comes to determination whether someone legally owns a building or not. Usually, such documentation is a valid Construction permit referring to a specific building mentioning the buyer as the owner of the building for which permission to construct has been granted. Alternatively, an official building sale and purchase agreement issued by competent land department at the time of registering the transfer of a building from the seller to its buyer is recognized by the authorities if someone wishes to demonstrate its ownership rights to a building.

Important to understand is that the right of habitation is required to be registered at the competent land department and creates an encumbrance over a building for the benfit of its specified beneficiary, as opposed to servitude created over land, providing secured access thereto, which usually burdens a specific land plot in favor of another but not necessarily a specific person holding rights to such land. This means that such personal right, as the right of habitation, is not transferrable even by way of inheritance as stated under Section 1404 of the CCC. Therefore, in the event of the grantee´s demise, it can not be passed on to heirs but simply ceases to exist and the property must be returned to the grantor pursuant to Section 1408 of the CCC. Furthermore, the fact that the right of habitation can not be transferred, means that it does not provide a property with a marketable title which would qualify a property for a resale.

Sometimes developers or sellers do not wish to register transfer of a building to a buyer at the land department which may result from tax reasons. In such cases the only remaining and by the land departments generally accepted evidence of ownership to a building is the construction permit and this is very usually the problem starts. Typically, the construction permits are obtained in the name of the developer or its builder who is, from the point of view of the land department, regarded as the owner of the building. In case that the person who is mentioned in the permit as owner does not apply for a change of the permit into the name of the buyer with the relevant authorities upon completion and full payment, this person, from the point of view of the land department, remains the owner of the building despite the fact that the buyer may have entered into a construction agreement, paid for the construction works and moved into the completed building. Issues regarding change of construction permit may also occur in case that a permit was issued for several buildings which have been sold to different buyers. In such case the change of the owner´s name on the permit would ultimately provide one of the buyers with rights to all buildings which obviously does not reflect the intentions and interest of the effected parties.

Unfortunately, buyers of residential buildings often live several years in their property not knowing that the land department may not recognize them as the owner of their homes. Typically, at the time when a buyer decides to offer his property for (re)sale and a due diligence in the property is performed by the lawyer of the new buyer verifying the ownership rights of a seller to its property, the issue comes up with often drastic consequences for the seller as his buyer may loose confidence in the deal, withdraws and just walks away from the deal.

In summary, it is of paramount importance to understand that ownership rights to a building need to be secured and potentially demonstrated in the event a third party would try to challenge or such shall be transferred, i.e. in connection with a sale or inheritance of a property. Therefore, it is highly recommended to consult with your lawyer or advisor what options are available to secure your rights to your property before making any down payments or signing of sales documentation.

This article is written by International Law Office Patong Beach Co., Ltd., a Phuket based law firm. For enquiries, please contact Michael Greth, Consulant, by email (michael@ilo-phuket.com) or phone (+66-(0) 76-222 191-5).