Vol. X No.7 - March 19 - March 31, 2011



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BUSINESS
HEADLINES [click on headline to view story]:

A foreigner can legally own some land in Thailand

What does the building permit have to do with legal ownership of a building?

A foreigner can legally own some land in Thailand

It is a common misunderstanding that foreigners are per se restricted from owning land in Thailand. One of the most interesting exceptions from the restrictions of foreign ownership of land in Thailand has been enacted for foreigners who bring at least Thai baht forty million equivalent into Thailand for certain prescribed investments. Such foreigners may apply for freehold ownership of up to 1,600 square meters of land under the rules, procedures and conditions prescribed by Section 96(bis) of the Land Code (as amended by the Land Code Amendment Act No. 8 (1999)) and in the 2002 Ministerial Regulation issued under the Act.

To apply, a foreigner must submit an application (the “Foreigner 4 Form”, available at any local land office) together with the following documents:

(1) a copy of the applicant's passport;

(2) evidence of the not less than Thai baht forty million Prescribed Investment, in any of the following formats:

(a) a letter of investment confirmation from a seller of bonds of Thai Government, bonds of the Bank of Thailand, bonds of a State Enterprise or bonds of which the Ministry of Finance secures the capital or interest; and/or

(b) a letter from the Asset Management Company confirming that the applicant has invested in a prescribed mutual fund relevant Securities and Stock Exchange, and law and evidence of investment in such fund; and/or

(c) evidence showing that the applicant has invested in the share capital of a juristic person who is granted investment promotion under the relevant investment promotion law; and/or

(d) evidence of engaging in an activity that is entitled to investment promotion under the relevant investment promotion law;

(3) evidence of bringing a foreign currency into Thailand, or the withdrawal of the money from a foreign currency account or from a non-resident Thai baht account for the investment (note: evidence of investment in any one or combination of (1), (2)(a) - (d) and/or (3) may be provided as long as total amount invested is Thai baht forty million or more);

(4) a letter of confirmation certifying that the land the foreigner wishes to own (the "Land") is located within a prescribed "residential area" from the relevant authority who oversees town and country planning where the Land is located;

(5) a letter from the Ministry of Defense or from the agency concerned, confirming that the Land is not located in a military safety zone; and

(6) a map showing the location of the Land.

The application documents must be submitted at the Relevant Land Office which has jurisdiction over the land the foreigner wishes to own. The decision to grant the permission to will then be made by the authorities delegated such responsibility by the the Minister of the Interior.

Any such ownership grant however is subject to the certain conditions: (1) the grantee shall maintain the Prescribed Investment for a continuous period of not less than five years as from the date of registration of ownership of the Land (the “Investment Period”) and shall submit evidence of such to the Relevant Land Office once a year, for five consecutive years; (2) the grantee shall utilize the Land for residential purposes and in a way that is not contrary to the public interest or local customs; (3) the grantee shall inform the Relevant Land Office within sixty days as from the date of utilization of the Land for residential purposes; (4) the grantee shall facilitate the Relevant Land Office in supervising the use of the Land to ensure that the utilization is in accordance the prescribed conditions; (5) if the grantee withdraws the Prescribed Investment before the end of the Investment Period, the grantee shall inform the Relevant Land Office of such withdrawal within sixty days; (6) if the grantee does not comply with (1) - (5) the Director General of the Department of Lands shall have the power to order the grantee to dispose of the Land within a period of not less than one hundred eighty days and not more than one year, failing which the Director General shall have the power to dispose of the Land; (7) the grantee shall utilize the Land for residential purposes within two years as from the date of registration of ownership of the Land. If the grantee does not do so, the Director General shall have the power to dispose of the Land.

Duensing Kippen is a multi-service boutique law firm specializing in property and corporate/commercial matters and is also the only such firm in Thailand that compliments its property and corporate/commercial legal expertise with a core tax law practice. Duensing Kippen can be reached at: [email protected] or for more information please visit them at: www.dktaxandlaw.com.


What does the building permit have to do with legal ownership of a building?

You might have heard something like the following all too common assertion: “the party named in a building permit is considered to be the owner of that building.” To have heard such may have been particularly disturbing to many foreigners who are allowed to legally own buildings in Thailand. Some of you may have wondered: is the contractor who applied for the building permit to build and who then built my house “legally considered” to be its owner? But is such an assertion accurate? In order for the statement in question to be correct, there must be some legal basis for a building permit to create ownership rights in a building. We begin then by investigating the legal nature of a building permit.

The issuance of a building permit is legally an “administrative order”. An administrative order is defined as “an exercising of powers under the law by the competent officers with an effect of creating legal relations between persons in such a way to create, change, transfer, reserve, suspend, or which renders an effect to the status of rights or duties of a person, whether it be permanent or temporary, such as, ordering, permission, approval, decision of appeal, certification, and acceptance of registration, but excluding an issuance of rules.”

The relevant law for the issuance of a building permit administrative order is the Building Control Act B.E. (“BCA”). What power then does the competent officer exercise under the BCA in issuing a building permit and to what effect? The administrative procedure is as follows. The applicant submits the application documents to the local administrative office. After a site visit and a verification of the application documents (e.g. construction drawings and specifications, etc.) and review of whether or not the contemplated structure is legally permissible, the local administrative office must either issue the building permit, or deny the issuance thereof and inform the applicant in writing with the reasons for the non-issuance, within forty-five days from the date of the application. Thus, the legal effect of this administrative order is merely the legal permission to a person to build a certain structure on a defined plot of land and that is all it is.

What then is the relevant law that actually does create ownership rights? And more particularly, how does one actually legally own a building? Ownership rights are created through the Civil and Commercial Code (“CCC”). Sections 137ff and 1308ff of the CCC describe what ownership rights exist and how ownership rights can be acquired by law. In the case immovable property, Section 139 CCC states that it is “land and things fixed permanently to land or forming a body therewith...[i.e., e.g. buildings]”. The CCC therefore provides that the land owner “automatically” by law becomes the owner of any structure permanently affixed to his land. However, it is also legally possible to own a structure on another person's land. Preferably, this is accomplished by the registration of a “superficies” which is the legal right of ownership of a structure on land owned by someone else and it is the legal instrument intended by the Code to create such a right of ownership.

Note however, that even though property ownership is generally established and detailed in the CCC, the building permit is not mentioned. It is understood that on a practical level, it is recommended to receive the building permit in one's name. The land department currently refuses to register certain rights if the applicant does not have the building permit in his name. Which is, in our opinion, an historical accident that has, unfortunately, developed into an administrative practice and which is a practical reality for the time being but which is equally without legal foundation. Therefore, no building owner who has established legal ownership rights of a building through the construction of a structure on land under a superficies arrangement should be concerned if another person's name is in the relevant building permit. Such person will not be able to establish any ownership rights to such structure through that building permit. Even if current land department practice might be an obstacle to a future sale or lease registration, the courts will follow the CCC and decide the ownership independent from the building permit.

Thus, what does the building permit have to do with legal ownership of a building? Answer: nothing.
Duensing Kippen is a multi-service boutique law firm specializing in property and corporate/commercial matters and is also the only such firm in Thailand that compliments its property and corporate/commercial legal expertise with a core tax law practice. Duensing Kippen can be reached at: [email protected] or for more information please visit them at: www.dktaxandlaw.com



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