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BANGKOK 24 May 2019 03:50

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I am currently in a rented property and live and work in Thailand.

I have been offered a property to buy which is owned by a Company .

The seller wants a quick sale to move back to Germany.

I have agreed to a sale price and the seller has told me can all be done by change of Directorship in the company.

He signs off the company papers and then I am signed on as the new director of the company that the house is in by his Lawyer.

10 year lease left on the land that the property is on that will be renewed when the lease is up.

Is this a common way to buy or will I end up with problems somewhere down the line.

 

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Get the advice of an attorney.  

 

You may be signing onto the debts of a company you know nothing about.  You'll also have other shareholders that may own more of the shares than you do.  They may have different plans.  

 

Do the diligence.  It may be a great deal.  Or it may be a snakepit. 

 

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Posted (edited)

Ehmm don't ever do that.

 

No such thing as leases that get automatically renewed by law, they are not enforceable...

 

This is a completly sketchy setup, there are tons of threads about that in here: 

 

 

And never ever trust a lawyer that you didn't hire yourself, it's their job to screw you over!

Edited by ThomasThBKK
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Properties were sold with 30+30+30 leases which have never really been tested, is the property 20 years old now? Usually the foreigner would own the buildings on the leased land without the need for a company. This set up seems to incorporate every possible means of something going wrong and you loosing your money. What are ongoing costs with the company. What renewal costs for lease in 10 years. Personally I wouldnt touch it with a barge pole.

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Good to remember that it is the lawyer who is the de facto owner, and can bring you major unpleasant and unexpected surprises.

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Walk away and save yourself some money and a lot of heartache! 

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Posted (edited)

The lure of buying property in Thailand, a third world, corrupt, authoritarian country that attracts foreigners for cheap sex in exchange for smog, stinky sois, and scorching heat. 

Edited by onera1961
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Ever heard of Forest Gump, run Forest run.

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Leases in Thailand are not automatically renewed, the maximum term for a lease is 30 years, if a lease has been set up giving 30+30=30 then by law the original lease is null and void. If a Company was set up to buy land and allow shareholders to lease the land then this could be a real problem. If the Company was set up with Thai nominee shareholders who did not put money into the project then this is illegal and the land properties could be confiscated. Find a good lawyer there are some good European lawyers in Phuket for example.

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Posted (edited)

as a director, not having a blocking vote, you can be ousted within minutes seconds.

Edited by KKr

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On 4/15/2019 at 3:03 PM, CaptainJames said:

Is this a common way to buy or will I end up with problems somewhere down the line.

Owing land as a foreigner via a shell Thai company limited is in theory illegal, but in practice an often used method.

 

The benefit of "taking over" an existing company limited is that you don't need to transfer the property to a new owner, and you don't need to pay transfer fee and stamps at the Land Office, and the seller don't need to pay transfer tax, and might also be able to avoid income tax when selling shares.

 

However, you say

Quote

10 year lease left on the land that the property is on that will be renewed when the lease is up.

When its a lease for the land, there is no need for a Thai company limited. It sounds like the property in question is a house, or building, which can be legally owned by a foreigner, whilst the land under the building cannot be owned; if its a condo, there are different rules, but then a land-lease would not be normal to my knowledge.

 

Furthermore, you have no guarantee for that the lease will be renewed after the remaining period on 10 years, and if renewed, you don't now the the new conditions, herunder lease fee. If the present lease agreement include any renewal option, the lease agreement is in principle legally void, as a lease cannot include renewal option. The land can be sold or transferred, and a new owner is not committed to renew a lease. If the renewal option is a separate document, it has no other value than any written agreement between two parts, where you might need to sue through the court system, if not fulfilled.

 

A lease can legally run from 3 years and up to 30 years, and shall be registered at the Land Office on the back of the land title deed. A tax for the full lease period – i.e. the full amount of lease fees – shall be paid upon registration. An unregistered lease running over 3-years is void.

 

Concerning Thai company limited used to hold property. A foreigner can only own 49% of the shares, whilst 51% need to be owned by Thais. So in theory you can only own 49% percent of the property – who owns the 51%, and thereby "your" property?

 

Changing name of a director do not make you "owner" of anything, or give you full power, as the 51% of votes can change the name of director. Who has the majority of votes in the company limited?

 

Taking over an existing company need a due diligence into the company, so you don't take over any debt, or any open problems from the past.

 

I dont understand what you mean with "that the house is in by his Lawyer"?

 

There are numerous threads about property ownership via a Thai company limited, where you can read more – and you can also find information on many Internet home pages, for example on SamuiForSale, the link here is "Overview Property Law in Thailand".

🙂

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Agree with all the warnings issued here - don't touch it with a bargepole there are countless second-hand properties to buy without any such encumbrances. Is it a house or a condo ?

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On 4/15/2019 at 2:03 PM, CaptainJames said:

Is this a common way to buy or will I end up with problems somewhere down the line.

Not so sure what the thing with the lease is - I think you need to clarify this. There would be no reason to set up a limited company to lease land - I suspect that the company actually 'own's the land and then leases it to one of the directors.

 

Owning property through a limited company can work if its done properly.  Many have 'owned' their property this way without a problem for years but..........if the company was set up purely to own the house the transaction is likely to be considered as illegal and against the Thai land laws which are available in English - read the clause on circumvention.  The company paying a little tax each year is not sufficient - even though many will tell you that's what they do, it should actually trade and have a reason to own land. You could get away with it for years but a problem could crop up at any time that leads to you losing the property.

 

If the company trades and has a reason to own land, the company can legally own the land and the shares can be structured in a way that gives you full control but you need to talk to a good lawyer who knows how to do this and stay within the law. I wouldn't go near any of the Thai lawyers that advertise in property mags etc. or has offices in one of the property 'hot spots' like Pattaya of Phuket. Find one through the Lawyer's Council of Thailand or your embassy should have a list of lawyers.

 

As others have said, taking on a ready made company has that advantage of not having to pay property transfer tax as you simply buy the shares but you need to check that the company doesn't have debts - on the day the shares are transfered. If the company wasn't structured correctly in the first place you may have to set up a new company - in which case you would have to pay transfer tax.

 

Done properly the company method is about as close as you can get to actually owning the land and you can leave the shares in a will.

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On 4/17/2019 at 8:50 AM, khunPer said:

Concerning Thai company limited used to hold property. A foreigner can only own 49% of the shares, whilst 51% need to be owned by Thais. So in theory you can only own 49% percent of the property – who owns the 51%, and thereby "your" property?

 

Changing name of a director do not make you "owner" of anything, or give you full power, as the 51% of votes can change the name of director. Who has the majority of votes in the company limited?

According to my lawyer, most land offices will not (nowadays) accept the transfer of land to a company where the foreign share issue is greater than 39%.  However, whatever the foreign shareholding is, voting rights can be taken away for the Thai shareholders, thereby giving control of the company to the foreign shareholder.

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8 hours ago, KhaoYai said:

According to my lawyer, most land offices will not (nowadays) accept the transfer of land to a company where the foreign share issue is greater than 39%.  However, whatever the foreign shareholding is, voting rights can be taken away for the Thai shareholders, thereby giving control of the company to the foreign shareholder.

Yes, the 39% has been in force for many years. Often a law firm would solve it by moving 10% to a nominee shareholder – or other real shareholder, if that is present – for a limited period, and after land registration move the 10% back to the original foreign shareholder(s).

 

Voting rights can be controlled by "preferred shares"; which for example can be the foreign shareholder having a number of preferred shared with 10 votes each, whilst normal shares have one vote each; or a Thai shareholders for example has 3% preferred shares with no voting rights in return of a guaranteed annual dividend, which could be 4% of the nominal share value.

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