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Legal Update

Guidelines to Record Land Held in Escrow

24 February 2009
Mayer Brown JSM Legal Update
The Land Department recently issued Notification No. MorThor 0515/Wor 35860 setting out the guidelines for recording land under escrow.  
Full Update
In a previous Client Alert entitled "The Escrow Act - Investment Safeguard", we highlighted that one of the significant provisions of the Escrow Act B.E. 2551 (2008) is that land officials are not permitted to register any transfer of ownership or rights over a land covered by an escrow agreement. Under the Escrow Act, if the Land Department's records show that the land is under escrow, land officials should first get the approval of the escrow agent before affecting any transfer.
New Requirements
The new Notification was issued to give life to the Escrow Act. It provides that in order for land officials to record that land is covered by an escrow agreement in the Land Department's records, the following requirements must be met:
(i) The escrow agent should be duly licensed (currently only financial institutions are eligible to apply for an Escrow Business Licence);
(ii)  The escrow agent must present the Escrow Business Licence and the relevant escrow agreement to the land official; and
(iii) The escrow agent must be able to present proof (i.e. land title deed or certificate of land use) that the land to be recorded is the same land subject to the escrow transaction.  
If these requirements are satisfied, the land official will record such land in the list of garnished lands, and will annotate on the land title deed or certificate of land use which the Land Department retains that such land is subject to an escrow. Additionally, it shall be stated that any right to such land cannot be transferred without written notice from the escrow agent.
Once recorded, the land official will not register transfer of ownership of, or possession right to, the land in favour of any persons, other than to the party to the escrow agreement, unless the escrow agent gives written notice otherwise.
In case of requests for registration of other rights to the land, such as lease or mortgage, the land officials must review the escrow agreement and/or consult with the escrow agent before granting such request.
These guidelines further enhance the use of escrow in real estate transactions. These guidelines tighten the protection that an escrow arrangement gives buyers. To maximise the protection, buyers should ensure that the escrow agent is duly licensed, and the escrow transaction is recorded by the Land Department.
For further information, please contact:
Learn more about our Bangkok office and Real Estate practice.

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