Ownership in Thailand
When arriving in the "Land of a Thousand Smiles" and setting foot on the hospitable Thai soil, you may recall the familiar words "all the land in Thailand belongs to the King." You may not immediately remember where or when you first heard this information, but somehow the conviction that this is true has taken root within you.
However, we would like to inform you that this is actually a myth. Let us delve briefly into history, specifically into the early 20th century during the reign of King Chulalongkorn, also known as Rama V. He was referred to as "The Great Beloved King" (พระปิยมหาราช) by the local population.
During King Rama V's reign, land disputes were a common occurrence. At that time, there was no land legislation or legal documents regarding land ownership, making it difficult to determine who owned a particular plot of land.
King Rama V aimed to resolve these age-old disputes with justice. Thus, on February 17, 1901, the Department of Land was established under the Ministry of Agriculture, and on September 20, 1901, the first document confirming the right to ownership, known as a "Chanot," was issued. This document remains the only legal proof of land ownership to this day.
For 40 years, the Department of Land Administration has changed its name several times and even functioned under the management of the Ministry of Finance. In 1941, it finally came under the jurisdiction of the Ministry of Interior and was renamed the Land Department.
As you can see, it's not necessary to be a King to own land in Thailand :)
How to obtain a chanote to confirm property ownership rights or become a real estate owner in Thailand?
It is essential to understand that there are two forms of land ownership in the Kingdom - Freehold and Leasehold. However, the positive news is that regardless of the form of ownership, you will obtain a chanote, which is a legal land title deed.
Freehold is an unconditional form of property ownership that grants all rights of possession and disposal of the property for an unlimited period of time. As the owner of a freehold property, you have the right to use, sell, lease, gift, or bequeath it as you see fit. The Chanote, a document confirming ownership rights, is issued by the Kingdom's Land Department.
Leasehold, on the other hand, is a form of property ownership that has a time restriction, typically 90 years. It is important to note that leasehold is not the same as a typical rental agreement. As the owner of a leasehold property, you can still sell, lease, gift, or bequeath it, and use it for the remaining years specified in the contract. Upon registration, you will also receive a Chanote indicating the duration of the lease agreement.
Interestingly, while leasehold ownership may seem uncommon to some, it is a popular option for property ownership in many countries, including the United Kingdom and the United Arab Emirates (although only residents of Arab countries may use this method). In China, leasehold with a duration of 70 years is the only form of property ownership allowed for both foreign and local residents, and owning more than one property is prohibited.
Why do experienced investors choose Leasehold? What is the decisive factor for you when purchasing real estate? Most likely, the cost of the property and its return on investment. Leasehold and Freehold have a fundamental difference in price and the duration during which you can be the rightful owner of your apartment or villa.
Let's say you are purchasing a 3,500,000 baht apartment. You have a choice between Leasehold or Freehold.
The first option is Freehold. The cost of any real estate purchased in Freehold typically increases by an average of 10%. This means that your apartment will increase in price to approximately 3,850,000 baht.
Adding taxes and government fees for registration with the Land Department, which can reach up to 6.3% when buying in Freehold and is usually paid 50/50 with the seller/developer, we will take this into account in our calculations. If you pay half, which is 3.1%, your total apartment price will be practically 4,000,000 baht, or more precisely, 3,969,350 baht.
"Well, what if I buy a 3,500,000 baht apartment in Leasehold?"
Let's do the math, although there's not much to calculate :) Unlike Freehold, the cost of the apartment in Leasehold does not change and remains 3,500,000 baht. When registering with the Land Department, only a fee of 1.1% is charged, which, like in Freehold, is split 50/50 with the seller/developer. This means that you pay 0.55% or 19,250 baht for registration.
In conclusion, the cost of your apartment with registration in Leasehold would be 3,519,250 baht, compared to almost 4,000,000 baht in Freehold.
As you can see, the choice is obvious.
Leasehold is cheaper and more suitable for investors because the return on investment will be higher. You are entitled to dispose of your real estate and are legally protected.
Freehold is more expensive, but it will be completely owned by you without any time restrictions.
It is not surprising that not only investors choose Leasehold, but also clients who often find that Freehold is the most suitable option. It all depends on priorities.
About Land or How to Buy a Villa in Full Ownership
During the process of purchasing a villa or a house with land in Thailand, the building and the land are considered separately. The building itself can be registered as either freehold or leasehold for a non-resident of Thailand. However, the land surrounding the building can only be registered as leasehold.
There is an exception to this rule: land can be acquired as full ownership, but the transaction must be carried out through a legal entity such as a company, where at least 51% of the shares belong to a Thai citizen. This is a well-established and safe legal procedure that is typically facilitated by the developer or agent when purchasing on the secondary market.
With apartments, similar restrictions do not apply. Purchasing can be done under either freehold or leasehold ownership.
To summarize, you can purchase real estate in Thailand either as full ownership (freehold) or as the right to own (leasehold) for up to 90 years. If desired, land can also be acquired as freehold, but only through a legal entity that requires the establishment of a company in Thailand.
Determining the best option for you is an individual question that depends on your goals and priorities. Regardless of whether you purchase under leasehold or freehold ownership, your ownership rights are regulated and guaranteed by the legislation of the Kingdom.
What is your choice?
The cost calculation presented in the article is for illustrative purposes only. For a detailed cost estimate of a specific apartment or villa when purchasing in freehold or leasehold, please do not hesitate to contact us using any method that is convenient for you.
Still have questions?
Feel free to reach out to us via social media, call us or send us a message, and we will be happy to provide you with free advice on any matter ⬇️
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