18 July 2008
In an earlier update, we discussed the provisions of the Condominium Act (No. 4) 2008 ("Amended Act") which seeks to promote buyers' protection. Adding to the first part of the update previously issued with regard to the changes of condominium juristic person criteria, it is also worth mentioning that current condominium juristic persons have 360 days from 4 July 2008, which is the effective date of the Amended Act, to amend their regulations to comply with the rules and details specified under the Amended Act.
We will now review the foreign ownership provisions in the Amended Act.
The Condominium Act 1979 was first published in the Government Gazette on 30 April 1979 and subsequently followed by the Condominium Act (No. 2) in 1991 and the Condominium Act (No. 3) in 1999.
Prior to 1999, foreign individuals and foreign juristic persons ("foreigners") could only own a condominium unit if the proportion of the condominium units owned by foreigners in each condominium building did not exceed 40% at the time of the submission of the application for registration of the condominium. Subsequently, in order to enhance the property market in Thailand, the Condominium Act was amended in 1999 by the Condominium Act No. 3 (1999) which increased the foreign quota to 49% of the entire area in each condominium building.
In addition, the Condominium Act No. 3 (1999) also stipulated an exemption wherein during the period of 5 years from the effective date of the Condominium Act No. 3 (1999) (28 April 1999 - 28 April 2004) (the "5 year period"), the foreign quota in a condominium may exceed the 49% ceiling if they met the following requirements:
(1) The condominium building consisted of more than 40 condominium units;
(2) The condominium building was duly registered for more than 1 year before the date the foreigner accepted the transfer of the ownership of the condominium unit;
(3) The condominium building was not situated in a military safety zone pursuant to the laws on the military safety zones;
(4) The foreigner's use of the condominium unit was not against local traditions or good public moral;
(5) The condominium building was situated in an area in Bangkok, or other local administrative organisations e.g. Pattaya City; and
(6) The land where the condominium building and the common areas were situated did not exceed 5 Rai.
In this case the foreign quota in the qualifying condominium could exceed 49%.
However, the Condominium Act No. 3 (1999) did not stipulate what would happen to foreigners who had acquired and held units in excess of the 49% foreign quota after the lapse of the 5 year period (from 29 April 2004 onwards).Therefore, the Land Department issued Regulation No. Mor Tor 0515/Vor 16988 dated 9 June 2005 which stated:
"From 29 April 2004 onwards, a foreigner cannot have ownership of a condominium unit that exceeds the 49% ceiling, unless:
(i) the foreigner had acquired and held ownership of the condominium unit during the 5 year period, or
(ii) the foreigner consecutively acquired the ownership of the condominium unit from an existing foreign owner (either an individual or a juristic person) who bought the condominium unit during the 5 year period."
Currently, the Amended Act has deleted the exemption from the 49% ownership requirements added by the Condominium Act No. 3 (1999) in view of the expiration of the 5 year period. Except for this deletion, the Amended Act does not specify any new provision that would change foreign ownership of condominium units in Thailand. Therefore, under the Amended Act foreigners are allowed to own 49% of the total area of the units in a condominium building at the time the developer registers the condominium building.
However, the Amended Act specifies some alternatives to a certificate of remittance of funds which foreigners can use as proof of source of funds when purchasing condominium units. Under the Amended Act, the following are acceptable documentary evidence of source of funds:
(a) Document showing the remittance of funds to Thailand for the purpose of purchasing a condominium unit (e.g. "Foreign Exchange Transaction Form");
(b) Document showing the withdrawal of funds from a Thai Baht bank account of a non-resident (e.g. foreigners who purchase and acquire ownership of the condominium unit); and
(c) Document showing the withdrawal of funds from a non-resident deposit bank account.
The amount of the funds remitted or withdrawn, as the case may be, should be equal to or should exceed the total purchase price of the condominium unit.
The Amended Act confirms the current maximum quota of foreign ownership in a condominium building at 49%. In addition, it provides alternative documentary evidence as proof of source of funds which foreigners can use in lieu of a certificate of remittance of funds. This addition seeks to make it easier for foreigners to register the condominium units under their names.