Property Due Diligence is the method or process to find out the status and history of the property that you are intending to buy. This process will include checking the status of the current owner that they are in a good position to sell the property to you.
As you know, scammers are always looking for someone to suck money out of their pockets, they are everywhere. So, you need to make sure that you will not lose your money and gain nothing but stress and disappointment.
Our firm has been handling a lot of cases regarding Foreigners or even Thais who were fooled or lured to purchase a property which turned out to have a lot of underlying issues in their documents.
It is important to see the history of the property and its developers or current owners as it is relevant for you to consider buying the property or not.
Problems regarding properties may persist therefore it is best buying a clean property with clear record.
Table of Content:
- The reason why you should conduct the property due diligence in Thailand
- Combine document from the Seller
- Conduct the property due diligence at Land Office
- Checking the Construction Permit at Municipal Organization Office
- Due diligence the property tax at District Office
- Checking the court case against the property and owner
- Due diligence of the Bankruptcy status of the owner
- Due Diligence the property by site visiting
- Property due diligence serviced by our experienced lawyer
1. The reason why you should conduct the property due diligence in Thailand.
Before you move ahead to buy or acquire the property such as condominium, house, villa, land, etc., we suggest that you must have a third party to conduct the property due diligence report for you first.
You need to make sure that the property is in good condition to buy because some property even if it’s a finished construction, some sellers cannot issue the title deed to transfer the property to you and it is a clear violation of your rights and the law.
There is a chance that you are talking to someone who is not the real owner and pays them, but they are pretending that they are the owner. So, you may lose money by dealing with the wrong people. This is one of the reasons why we suggest conducting property due diligence report first.
Also, the owner or developer may have some legal issue that prevents them to enter into any civil transaction because of a court order that froze all of their properties or their business.
And, in some cases, they promote to sell the property with the great privilege such as guarantee return of investment but they will never fulfill such promises to their Buyers (this a lot happened in Phuket and tourism area).
You may read additional information from here: Lawyer’s overview
For the above reason, you should proceed with hiring someone to process the property due diligence report to dig deep about the property, its developers, and owners before you enter into any agreement or pay the reservation fees. This will be beneficial to you in the long run.
This article will guide you on how to proceed and look for the perfect firm or lawyer to assist you with the property due diligence process and provide beneficial information for those who are looking forward to investing or buy a property for personal use in Thailand.
2. Combine document from the Seller
Before we start the process of due diligence, we should ask the Seller to disclose several documents and information that is relevant to the property and personal details of the owner.
Some of the information and documents can be acquired by our firm during the due diligence process. However, it is best to ask the Seller for such documents and information as well to give us an idea on whether or not they will comply with our due diligence process or not.
Here is the list of documents that you should ask from the Seller:
- The title deed of the condominium or land (all pages)
- Sale Agreement in the Land Office format of the latest transfer
- Liability that belongs to the property such as mortgage document, lease agreement, etc.
- Construction Permit
- Floor Plan
- Architect plan and design
- List of included furniture and appliances
- Project plan showing every unit
- Brochure of the project
- House registration of the property (Tabien Baan)
- Receipt of the property tax payment
- Thai ID card or passport of the current owner
- Corporate document if the owner is a juristic person (Company)
In case the Seller cannot provide the above documents by whatever reason, we can track and acquire important information from the government authority as well.
3. Conduct the property due diligence at Land Office.
The lawyer’s team needs to visit the Land Office that supervises the property in such area of the province or district for due diligence. Let say if the property is located in Phuket, they need to visit the Phuket Land Office for checking.
The lawyers need to submit an application for review of the folder of the property. By the way, the Land Office in Thailand keeps the folder in a paper format. They do not have a digital or online format as they prefer to record their documents in a traditional way.
After waiting for a few minutes at the Land Office, the Land Officer will provide the folder that holds relevant information to such property for review of the lawyer’s team. No one can take the folder which holds the documents about the property anywhere without the approval of the Land Officer, usually there is a private designated area to review the documents.
The lawyer who conducts due diligence should start to review the title deed first to understand the overall transaction related to such property. Because every transaction must be registered at the back of the title deed. (The Thai Law stated that if it is not registered then it will not be considered as valid)
Then, the lawyer can review who is the current owner that the buyer needs to engage with. On the file, it will have the address and telephone number of the current owner as well.
Some title deeds may have complex and complicated registered records such as the land has divided some part and sold it to another person, or the land has been combined with other lands. So, the lawyer needs to carefully check every single detail to make sure that the land is in secure condition to purchase or sell.
In case the property is under encumbrance such as a mortgage, lease more than 3 years, usufruct, or others, it can be checked from this folder as well. (By the way, if the lease is less than 3 years, it may not be present on the registration record)
If the property is frozen by court order, it will have a pink paper note in the folder indicating that this property is suspended for any type of registration.
In case the property is a land and house/villa, the lawyer needs to review the house/villa construction if it has been recorded and is existing in the land record or not. Because there is a possibility that the land and the house are owned by two different people.
Once the review of the document from the Land Office is done even if it showed some flaws or no flaws at all, the lawyer who conducted the due diligence should meet the Head of Registrar of such Land Office to doublecheck all matters relating to the property especially if the information on the folder is true and correct according to what was shown on the file. This is because every property must pass their eye before they put it on the folder for record and sometimes, meeting the Head of Registrar always reveals shocking information about the property.
As abovementioned, in case the house or villa is owned by another person, the lawyer who conducted the due diligence must go to the other unit of the Land Office as well to further check the information of the owners of both the land and house or villa. It is advised to thoroughly check the information of the property rather than settle for less.
4. Checking the Construction Permit at Municipal Organization Office
Once the Lawyer’s team are finished from the Land Office, we need to move forward with the due diligence process to the Municipal Organization Office at the area of the property to check the Construction Permit.
The lawyer needs to go to the Civil Work Unit because the lawyer needs to know whether the unit is in control of the construction work that is currently being done on the land you intend to purchase or is it regulated by the Civil Work Unit. Most of the constructions being done are overseen by the Civil Work Unit of the area where the property is situated.
You need to make sure that the construction like a house, villa, swimming pool, gym, etc. have been approved by the Municipal Organization Office. Otherwise, you may encounter some problems during the transfer.
If not, such construct may be required to withdraw from the land later on.
In this process, the lawyer can track and see whether the file shows and presents the copy of the construction permit or the lawyer can also inform the house registration number to the office to check further.
5. Due diligence the property tax at District Office
Every property including land, house, villa, and condominium needs to pay property tax to the local District Office every year.
The tax rate is different base on the purpose of the property. The property used for a business needs to pay more tax than the property that is just used for residential purposes.
The lawyer who conducts the due diligence need to present land title deed and house registration to the officer to verify and get information regarding any outstanding of tax related to the property.
After that, the lawyer needs to meet with the Deputy District Chief to finalize the property tax matter and confirm whether the information is correct or not.
The lawyer who is in charge of the due diligence process needs to ask for the receipt of the property tax payment from the Seller as abovementioned. Failure of the Seller to provide the receipt means either they have not settled their property tax, they are avoiding paying the property tax, or there are some underlying issues that they do not want to disclose to the Buyer. It is important to acquire the property tax receipt from the Seller.
6. Checking the court case against the property and owner
The objective of this due diligence process is to check if the property has any outstanding legal issues at the court or not.
And, to further verify who has been sued and what was the main reason for the legal problem that the owner of the property is facing.
Due diligence is one of the methods to check the reliability of the property and the owner.
For the process, we can go to the court who controls the area of where the property is located. This is usually done at the court where the owner’s registered address is located.
Lawyers can actually check the name of the owner in the database system of the court.
If the owner has a record of any civil or criminal case or is currently facing a case, the database will show all of the details of the case. Please see the photo below for your reference.
If they never had a court case issue, it will not show any record of the owner in the database of the court. Please see the photo below for your reference.
After that, we can take a copy of the title deed to check with the officer again to verify if the property is currently facing any issue or has some case pending at the court.
The court officer can check in their database system and provide the report to the lawyer. The result of this will be reported by the lawyer to you which will also be one of the considering factors for Buyers to either continue buying the property or let the Seller settle the case issue first prior to moving forward with the transaction.
7. Due diligence of the Bankruptcy status of the owner
Under Thai Bankruptcy Law, a bankrupt person cannot proceed with any civil matter or transaction. Unless the court allowed them, it is still a case by case basis and lawyers highly suggest not to proceed unless the Seller can provide a good reason as to why the Buyer should still proceed with the transaction.
So, we need to make sure that the owner has the legal capability to sell the property to you.
For this part of the Due Diligence report, we need to go to Central Bankruptcy Court of Thailand.
Then we need to insert the name of the owner into the computer of the Central Court to verify the information.
And also ask the Court Officer to check via Thai Identification Card number as well. Because some people may change the name or surname to avoid the checking.
8. Due Diligence the property by site visiting
To complete the Property Due Diligence process, the lawyer must visit the actual property to check its physical, visual, and circumstantial facts as declared by the Seller around the property
“Seeing is Believing”
We firmly believe that “to see is to believe”, you cannot just trust someone who says, “Our property has this” or “our property has that”, it is best to have someone visit the site to check the property physically to access and to make sure there is progress in it or there is really a property.
We need to check the main access road if it is accessible to enter into the property or not.
We need to check the “pin” and “boundary line” that if it is existing in the proper or not.
If the property is connected to the beach, we need to see the pin from the Marine Department and measure the tidal current and distance to follow the law.
In case the property project has a common road that is considered as shared use, such road needs to be registered for servitude to allow the property owner to use it as well.
If the property is still under construction, we need to observe the risk of construction delay or the possibility that it will never be finished due to certain circumstances within the Seller’s party.
The lawyer who conducts the site visit must be experienced in property due diligence for many years. This is because every project has what we call a “hidden agenda” which you need the lawyer to question the developer or seller regarding such matter.
We should not assume that by seeing the property or by physically checking it, all is done and all is well, we have to see and check some possibilities in the future as well.
9. Property due diligence serviced by our experienced lawyer
If you read the information above, you will understand that you should not skip the property due diligence process because it may harm your long-term investment and you may need to spend more money to solve the property issue in the future.
We at Siam Attorney International Law firm have practiced in property matter for several years. We have handled and faced different scenarios while doing the due diligence process. We always foresee property issues from the developers that need to be adjusted before engaging in an Agreement with them.
No matter where your property is, even if it is in Phuket, Bangkok, Krabi, Chiang Mai etc., we are willing to accompany you for this matter to make sure that you get the right transaction.
Buying a property in Thailand will cost you a lot of money. So, it is necessary for you to do the due diligence of the property before you start to pay any amount or signing any agreement.
To do that, you must assign the right person for the right job and that person needs to be experienced and understand the objective/goal of each activity when conducting the due diligence of the property.
The outcome and report from the due diligence process will be of great value for you to decide to engage or not engage with the property developer.
We at Siam Attorney International Law Firm aim to do 360o of property due diligence in Thailand for you.
You can start to contact us by pressing the WhatsApp button on your right-hand side.