Under such bleak economic climate, it is bad enough for business to have to close and lay off employees. However, employers should not make this worse by exposing themselves to unfair dismissal claims by laid off employees. To minimize the possibility of such claims, employers need to be aware of employees’ legal entitlements when terminating employees.
Gross Misconduct?
Unless the employee has committed a gross misconduct, an employer can terminate the employee’s employment without having to provide any prior notice on termination and pay severance pay to the employee. This is also known as termination with cause.
Gross misconduct is serious misconduct by the employee e.g. employee having been imprisoned by a final judgment of a court (except for offenses arising out of negligent acts or for petty offenses) or employee performing an act of gross negligence which causes the employer to suffer severe losses.
Termination Without Cause
Generally, if the employee’s employment contract had been terminated not due to gross misconduct (also known as termination without cause), the employee shall be entitled to the following:
(a) Prior Notice on Terminating Employment Contract
Prior notice on terminating the employee’s employment has to be issued by the employer to the employee. Minimum prior notification period has to be according to that provided for in the employment contract, working rules or notice of the employer.
However, the minimum prior notification period must not be shorter than that prescribed by law. According to the labor protection law, this period must at least be one wage cycle of the employee. For example, if an employee is receiving wages on a monthly basis and the employer issued prior notice on termination to the employee on February 10, 2009. The employee’s last working day will be March 31, 2009, not March 10. The employee’s wage cycle is March 1 to March 31.
(b) Damages In-Lieu (Instead) of Prior Notice on Employment Termination
Alternatively, if the employer wants to terminate the employee’s employment immediately and have the employee leave work, the employer shall have to pay the employee’s wages up to the employee’s last working day and then terminate the employee.
(c) Severance Pay
The employer has to pay the employee severance pay. In Thailand severance pay is calculated based on the latest wages amount of the employee and the duration of his or her employment.
Any fixed benefits paid to the employee must be considered as part of wages and be included in severance pay calculation. Fixed benefits are, for example, an employer pays the employee 2,000 Baht every month for traveling expenses, regardless of how much traveling the employee did.
Section 118 of the Labor Protection Act B.E. 2541 (1998) provides for the amount of severance pay payable to the employee:
If the employee had worked for 120 days but not 1 year, severance pay amount is equivalent to 30 days of wages.
If the employee had worked for 1 year but not 3 years, severance pay amount is equivalent to 90 days of wages.
If the employee had worked for 3 years but not 6 years, severance pay amount is equivalent to 180 days of wages.
If the employee had worked for 6 years but not 10 years, severance pay amount is equivalent to 240 days of wages.
If the employee had worked for more than 10 years, severance pay amount is equivalent to 300 days of wages.
Example of severance pay calculation
XYZ Company Limited employed Mr. B as the employee at a monthly salary of 10,000 Baht. Each month, XYZ Company Limited also provides 2,000 Baht to Mr. B as his traveling expenses.
Now, after having worked for 2 years and 3 months at XYZ Company Limited, his employment was terminated due to poor performance. Mr. B severance pay will be calculated as follows:
10,000 + 2,000 = wages per day
30
400 Baht = wages per day
After having worked for 2 years and 3 months, Mr. B is entitled to severance pay equivalent to 90 days of wages i.e. Mr. B had worked for more than 1 year but not 3 years. Therefore, 400 Baht wages per day x 90 days = 36,000 Baht severance pay.
Note: The employer also does not have to give prior notice on termination or pay severance pay to the employee if the employee completed a fixed period employment contract i.e. an employment contract whereby its employment starting date and ending date are clearly specified in the employment contract. (Please see my article “Fixed Period Employment Contract for a Wise Employer” in Pattaya Mail newspaper December 12, 2008 issue for the legal meaning of a fixed period employment contract)
(d) Vacation Days Not Used
Any annual vacation days that the employee is entitled to and are not yet used shall be paid to the employee.
Final Tip
The employer must bear in mind that if the employee deemed that he or she had been unfairly terminated by the employer due to whatsoever reasons, even after having received prior notice of termination and severance pay, the employee still has the right to file an unfair dismissal claim against the employer at the Labor Court.
This risk can be minimized by having the employee sign a letter of release to waive the right of making any future claims against the employer.
*Written by David Tan. David is a Lecturer of Business Law at Asian University, Chonburi, Thailand. This article was first published in the February 13, 2009 issue of the Pattaya Mail newspaper. Any questions or comments to David should be sent to blas.inter@yahoo.com
*Careful Selection For An Outsource Company
Under the current economic climate employers want to be really selective in hiring new people and current employees may have to take onboard more responsibilities. For the kind of work constituting a part of the goods manufacturing process or the rendering of services, employers prefer to outsource the performance of these works to an external company.
This begs the question: Are the employees of this external company (“Outsource Company”) entitled to the same rights and benefits as the employees of the employer (“Employer”)? If the answer is Yes! this would mean that the Employer is exposed to the risk of been claimed by the employees of the Outsource Company, if these employees are not provided with the same rights and benefits as the employees of the Employer.
For example: The Employer is a company that manufactures and sells sporting clothes. The Employer needs more people to help manufacture more sporting clothes so it outsourced some of its manufacturing work to the Outsource Company. The employees of the Outsource Company help to manufacture the sporting clothes of the Employer and they worked overtime during the manufacturing process.
The employees of the Outsource Company did not receive any overtime pay for their overtime work performed. However, the employees of the Employer received overtime pay equivalent to twice their normal wage. The employees of the Outsource Company then claim the Employer for their overtime pay.
The Employer may have to pay the same overtime pay to the employees of the Outsource Company as well. This is because the work performed by the Outsource Company’s employees are work that “is part of the production process or business under the responsibility of” the Employer. Note that this is regardless of whether the Employer supervises the performance of the work or is responsible for payment of wages to the Outsource Company’s employees. These are all expressly provided by the new Paragraph 1 of Section 11/1 of the Labour Protection Act B.E. 2541 (1998).
Tip
Given the provision of the new Paragraph 1 of Section 11/1, a company seeking to outsource its work should investigate and select an outsource company that can adhere to the rights and benefits of employees as provided by the labour law. Otherwise, the company may end up paying damages to employees of another company.
*Written by David Tan. David is a Lecturer of Business Law at Asian University, Chonburi, Thailand. This article was first published in the December 19, 2008 issue of the Pattaya Mail newspaper. Any questions or comments to David should be sent to blas.inter@yahoo.com
This begs the question: Are the employees of this external company (“Outsource Company”) entitled to the same rights and benefits as the employees of the employer (“Employer”)? If the answer is Yes! this would mean that the Employer is exposed to the risk of been claimed by the employees of the Outsource Company, if these employees are not provided with the same rights and benefits as the employees of the Employer.
For example: The Employer is a company that manufactures and sells sporting clothes. The Employer needs more people to help manufacture more sporting clothes so it outsourced some of its manufacturing work to the Outsource Company. The employees of the Outsource Company help to manufacture the sporting clothes of the Employer and they worked overtime during the manufacturing process.
The employees of the Outsource Company did not receive any overtime pay for their overtime work performed. However, the employees of the Employer received overtime pay equivalent to twice their normal wage. The employees of the Outsource Company then claim the Employer for their overtime pay.
The Employer may have to pay the same overtime pay to the employees of the Outsource Company as well. This is because the work performed by the Outsource Company’s employees are work that “is part of the production process or business under the responsibility of” the Employer. Note that this is regardless of whether the Employer supervises the performance of the work or is responsible for payment of wages to the Outsource Company’s employees. These are all expressly provided by the new Paragraph 1 of Section 11/1 of the Labour Protection Act B.E. 2541 (1998).
Tip
Given the provision of the new Paragraph 1 of Section 11/1, a company seeking to outsource its work should investigate and select an outsource company that can adhere to the rights and benefits of employees as provided by the labour law. Otherwise, the company may end up paying damages to employees of another company.
*Written by David Tan. David is a Lecturer of Business Law at Asian University, Chonburi, Thailand. This article was first published in the December 19, 2008 issue of the Pattaya Mail newspaper. Any questions or comments to David should be sent to blas.inter@yahoo.com
*Do Not Risk Your Deposit Money or Reservation Fee
You look at the brochure, poster, master plan etc. of a condominium or housing development project and you want to purchase one of the condominium units or houses offered. You express your interest to the developer or seller and subsequently sign a Sale Contract and pay a deposit or reservation fee for the condominium unit or house. Do you now have a Sale Contract with the developer or seller?
Regardless of what the developer or seller tells you, in the eyes of the law, this is not a Sale Contract. This contract is considered a promise contract. The developer or seller promises to sell you the condominium unit or house at an agreed upon future date (when the property has been built) and you promise to pay the full purchase price at that time. According to the law, sale of immovable property is payment of the purchase price and ownership title transfer by registration at the local Land Office; these have not taken place yet. Both parties are contractually bound to their promises only.
However, since you (the buyer) had already paid deposit money or a reservation fee to the developer or seller, if the developer or seller defaults in transferring the ownership tile to you by registration at the Land Office on the agreed upon future date, you will have to request the developer or seller to return all deposit money or reservation fee paid by you. If the developer or seller does not do so, you will have to claim against them in court.
Not transferring ownership title to you may be due to: the developer or seller not being able to complete building the project on time, you are not satisfied with the building specifications or materials used, creditor(s) cannot release mortgage, encumbrance or charge placed on the property, developer or seller going bankrupt etc.
Tip
Do some investigative work. Check on whether the developer or seller have being in the business for many years, is a company listed on the Stock Exchange of Thailand, is a company with a capital amount sufficient enough to fund the project etc. Unless the result of this investigation is positive, you should not risk making any sort of deposit or reservation fee payment. Instead, make a one time payment of the whole purchase price upon the developer’s or seller’s registration of ownership title transfer of the completed property to you.
Having said this, if you must pay deposit money or reservation fee, minimize your risk exposure by negotiating for the lowest possible amount.
*Written by David Tan. David is a Lecturer of Business Law at Asian University and author of the book "A Primer of Thai Business Law", available online at www.chulabook.com or at all Kinokuniya and Asiabooks bookstores. Any questions or comments to David should be sent to blas.inter@yahoo.com
Regardless of what the developer or seller tells you, in the eyes of the law, this is not a Sale Contract. This contract is considered a promise contract. The developer or seller promises to sell you the condominium unit or house at an agreed upon future date (when the property has been built) and you promise to pay the full purchase price at that time. According to the law, sale of immovable property is payment of the purchase price and ownership title transfer by registration at the local Land Office; these have not taken place yet. Both parties are contractually bound to their promises only.
However, since you (the buyer) had already paid deposit money or a reservation fee to the developer or seller, if the developer or seller defaults in transferring the ownership tile to you by registration at the Land Office on the agreed upon future date, you will have to request the developer or seller to return all deposit money or reservation fee paid by you. If the developer or seller does not do so, you will have to claim against them in court.
Not transferring ownership title to you may be due to: the developer or seller not being able to complete building the project on time, you are not satisfied with the building specifications or materials used, creditor(s) cannot release mortgage, encumbrance or charge placed on the property, developer or seller going bankrupt etc.
Tip
Do some investigative work. Check on whether the developer or seller have being in the business for many years, is a company listed on the Stock Exchange of Thailand, is a company with a capital amount sufficient enough to fund the project etc. Unless the result of this investigation is positive, you should not risk making any sort of deposit or reservation fee payment. Instead, make a one time payment of the whole purchase price upon the developer’s or seller’s registration of ownership title transfer of the completed property to you.
Having said this, if you must pay deposit money or reservation fee, minimize your risk exposure by negotiating for the lowest possible amount.
*Written by David Tan. David is a Lecturer of Business Law at Asian University and author of the book "A Primer of Thai Business Law", available online at www.chulabook.com or at all Kinokuniya and Asiabooks bookstores. Any questions or comments to David should be sent to blas.inter@yahoo.com
*Fixed Period Employment Contract For a Wise Employer
Employers have been using fixed period employment contracts on employees to avoid having to pay severance and provide prior notice of employment termination to employees. With the commencing date and ending date of the employment contract clearly specified in the written contract, the employee’s employment will just end on the ending date of the employment contract. There is no need for the employer to pay severance and provide prior notice of employment termination.
In fact Paragraph 3 of Section 118 of the Labor Protection Act B.E. 2541 (1998) provides: “Payment of severance pay is not applicable to employees who have a fixed term of employment and whose employment is terminated in accordance at the end of the specified term.” This means that for employees with employment contracts that specify clearly the starting date and ending date of employment, the employment contract will lapse at the ending date of employment. Given that the employment contract had ended and not terminated, there is no need for the employer to pay severance and provide prior notice of employment termination to the employee.
However, to be wise, the employer needs to be aware that Section 118 itself and Supreme Court decisions have narrowed down the meaning of a fixed period employment contract.
According to Paragraph 4 of Section 118, the following kinds of employment are considered fixed period employment contracts:
(1) Employed to work in a specific project that is “not normal for the business or trade of the employer, and where the schedule for commencing and ending of work is fixed”; or
(2) Employed to work in work that is of a “temporary nature that has a fixed schedule for its ending or successful completion of work”; or
(3) Employed to work in “seasonal work for which employment is engaged during such season”.
Also, the employment under (1), (2) or (3) above must not be longer than two years and the employment contract must be made in writing at the commencement of employment.
Supreme Court decisions had also provided further guidance on the meaning of a fixed period employment contract. In Supreme Court precedent Nos. 5180/2542 and 10432/2546, the employment contracts in both cases have a clause which provides for either contractual party to have the right to terminate the contract prior to its ending date. In both cases, the Supreme Court ruled that the employment contract is not a fixed period employment contract.
As a result of the above, the number of cases whereby the employer does not have to pay severance and provide prior notice of employment termination to the employee is reduced.
Tip
Employers need to ensure that their fixed period employment contracts entered into with employees do fall within its legal meaning. Otherwise, the employment contract may be considered as an ongoing contract and the employer is subjected, upon termination of contract by the employer (not due to employee’s serious misconduct), to pay severance and provide prior notice of employment termination to the employee.
*This article was first published by Pattaya Mail newspaper - December 12, 2008 issue. Written by David Tan. David is a Lecturer of Business Law at Asian University. Any questions or comments to David should be sent to blas.inter@yahoo.com
Failing Probation: What an Employer Needs to Know about Giving Prior Notice on Termination*
Most businesses, big or small, employ people to work for them. To reduce the chance of having employed someone unsuitable, the employer has an agreement with the employee that he/she will have to undergo a probation period or the employer’s working rules require the employee to undergo probation.
At the end of the probation period, the employee will be evaluated on whether the employee passed the probation. If the employee passed the probation, he/she can continue to work for the employer.
If the employee failed the probation, the employer will inform the employee on this and he/she cannot continue to work. In most cases, the employee who does not pass probation is legally entitled to a minimum prior notice period on his/hers employment termination. How long is this minimum prior notice period ?
For example: XZZ Company Limited employed Khun A to work for the company as a sales executive. In the employment contract it is stated that there is a 119 days probation period. Wages will be paid to Khun A on a monthly basis.
If XZZ Company Limited decided on September 20, 2008 that Khun A will not pass his probation due to poor work performance. XZZ Company Limited shall notify (written notice) Khun A on this on September 20 and Khun A’s last day of employment is October 30, not October 19. Termination must take effect at the following time of wages payment. Under labor laws, this is the minimum prior notice period on termination which XZZ Company Limited must provide to Khun A.
If the XZZ Company Limited thinks that it will be better for the business if the Khun A leaves immediately, then the XZZ must compensate Khun A for all wages which he is entitled to up until his last employment day i.e. October 30 and ask Khun A to leave immediately.
New amendments to the labor protection law have expressly stipulated that a probation period is not an employment contract with a fixed employment period. An employment contract with a fixed employment period would deem that there is no need to provide prior notice on termination. The employment would just end on the last day of the employment period. A probation period is not considered an employment contract with a fixed employment period because if the employee passed the probation, the employee will be able to continue working.
Tip
The employer should provide proper prior notice of termination to the employee (i.e. adhering to the minimum legal requirement). Also, prior to entering into an employment contract with an employee, the employer should consider the contractual conditions carefully. Especially conditions on the nature of work and wages payment.
*(Written by David Tan. David is a Lecturer of Business Law at Asian University. This article was published in the October 17, 2008 issue of the Pattaya Mail newspaper. Also the topic of a talk presented by David Tan to the Asian Business Club, Jomtien and Pattaya, on October 21, 2008)
At the end of the probation period, the employee will be evaluated on whether the employee passed the probation. If the employee passed the probation, he/she can continue to work for the employer.
If the employee failed the probation, the employer will inform the employee on this and he/she cannot continue to work. In most cases, the employee who does not pass probation is legally entitled to a minimum prior notice period on his/hers employment termination. How long is this minimum prior notice period ?
For example: XZZ Company Limited employed Khun A to work for the company as a sales executive. In the employment contract it is stated that there is a 119 days probation period. Wages will be paid to Khun A on a monthly basis.
If XZZ Company Limited decided on September 20, 2008 that Khun A will not pass his probation due to poor work performance. XZZ Company Limited shall notify (written notice) Khun A on this on September 20 and Khun A’s last day of employment is October 30, not October 19. Termination must take effect at the following time of wages payment. Under labor laws, this is the minimum prior notice period on termination which XZZ Company Limited must provide to Khun A.
If the XZZ Company Limited thinks that it will be better for the business if the Khun A leaves immediately, then the XZZ must compensate Khun A for all wages which he is entitled to up until his last employment day i.e. October 30 and ask Khun A to leave immediately.
New amendments to the labor protection law have expressly stipulated that a probation period is not an employment contract with a fixed employment period. An employment contract with a fixed employment period would deem that there is no need to provide prior notice on termination. The employment would just end on the last day of the employment period. A probation period is not considered an employment contract with a fixed employment period because if the employee passed the probation, the employee will be able to continue working.
Tip
The employer should provide proper prior notice of termination to the employee (i.e. adhering to the minimum legal requirement). Also, prior to entering into an employment contract with an employee, the employer should consider the contractual conditions carefully. Especially conditions on the nature of work and wages payment.
*(Written by David Tan. David is a Lecturer of Business Law at Asian University. This article was published in the October 17, 2008 issue of the Pattaya Mail newspaper. Also the topic of a talk presented by David Tan to the Asian Business Club, Jomtien and Pattaya, on October 21, 2008)
Does a 90 Years Lease of Land Exist in Thailand?*
This is possible if the plot of land is not sold to another new owner or the land owner stay alive long enough to renew your lease terms. Other than this, it is fallacious to think that you can lease a plot of land for 90 years under Thai civil laws.
Under Thai civil laws, a long term lease of a plot of land can be up to a maximum lease period of 30 years. The law also provides for leasing land for the life period of the land owner or the lessee.
A 30 years lease of land is a long term lease and has to be made in writing, signed by the lessor and lessee and registered at the district Land Office in order to be legally enforceable. In Thailand any lease of immovable property for more than 3 years must be registered. The registration of the 30 years lease period at the district Land Office means that you, the lessee, have the right to use or benefit from the plot of land for the registered 30 years lease period. No other third party would be able to use or receive benefits from the land for the 30 years.
If the land had been bought up by a new owner during the 30 years, this new owner is binding to your 30 years registered lease i.e. allow you to lease the land for the registered lease period. In legal language, you have a real right over the land for the registered 30 years.
Any promises to renew the 30 years lease term for another 2 x 30 lease terms are just promises agreed upon between the land owner and you. An example of such personal promises can be a stipulation in the lease of land contract: “the lessor agrees to renew the lease for another two 30 years lease terms”. Besides the lessor and yourself, no other person is contractually binding to these renewal promises. A third person is not a party to these promise agreements.
Therefore, when the plot of land is sold to a new owner, the new owner is not binding to the promise to renew the lease at the end of the 30 years registered lease. If the land owner dies, the promise dies too, whoever is the land owner at the end of the 30 years is not obligated to renew the lease as well.
Tip
One of the recourse would be to lease the plot of land for only 30 years. Register the written and signed lease of land contract at the Land Office. Alternatively, you may want to consider purchasing a condominium unit(s).
*(Written by David Tan. David is a Lecturer of Business Law at Asian University. This article was published in the October 24, 2008 issue of the Pattaya Mail newspaper)
Under Thai civil laws, a long term lease of a plot of land can be up to a maximum lease period of 30 years. The law also provides for leasing land for the life period of the land owner or the lessee.
A 30 years lease of land is a long term lease and has to be made in writing, signed by the lessor and lessee and registered at the district Land Office in order to be legally enforceable. In Thailand any lease of immovable property for more than 3 years must be registered. The registration of the 30 years lease period at the district Land Office means that you, the lessee, have the right to use or benefit from the plot of land for the registered 30 years lease period. No other third party would be able to use or receive benefits from the land for the 30 years.
If the land had been bought up by a new owner during the 30 years, this new owner is binding to your 30 years registered lease i.e. allow you to lease the land for the registered lease period. In legal language, you have a real right over the land for the registered 30 years.
Any promises to renew the 30 years lease term for another 2 x 30 lease terms are just promises agreed upon between the land owner and you. An example of such personal promises can be a stipulation in the lease of land contract: “the lessor agrees to renew the lease for another two 30 years lease terms”. Besides the lessor and yourself, no other person is contractually binding to these renewal promises. A third person is not a party to these promise agreements.
Therefore, when the plot of land is sold to a new owner, the new owner is not binding to the promise to renew the lease at the end of the 30 years registered lease. If the land owner dies, the promise dies too, whoever is the land owner at the end of the 30 years is not obligated to renew the lease as well.
Tip
One of the recourse would be to lease the plot of land for only 30 years. Register the written and signed lease of land contract at the Land Office. Alternatively, you may want to consider purchasing a condominium unit(s).
*(Written by David Tan. David is a Lecturer of Business Law at Asian University. This article was published in the October 24, 2008 issue of the Pattaya Mail newspaper)
Buying a Condominium Unit ? Proceed with Diligence*
The legal way for a foreigner to own real estate in Thailand is to buy a condominium unit(s) (“Condo Unit”). This was proposed in my last article on foreign land ownership. In Bangkok, Condo Unit purchases are now considered trendy among the younger generation of Thais as Condominiums are conveniently located in the inner city area and it is more economical to commute.
TIP
Whether you are going to buy a Condo Unit to reside or for investment purposes, I would like to walk you through the following due diligence steps:
(1) If you can narrow down your choices of Condo Units to 1 or 2 Condo Units, a physical inspection must be conducted by an expert or civil engineer on the Condo Unit and the condominium building. Are they as according to the promises made by the seller ?
Checks should be conducted for water leakage in the Condo Unit, proper and safe electricity supply, adequate car parking spaces allocated, fire exits, correct building materials used.
(2) What is payable by an owner of the Condo Unit for up keeping e.g. common facilities fees, water charges, electricity charges. Who should they be paid to and how much are they? Find these out from the owner of the Condo Unit.
(3) If (1) and (2) above are satisfactory to you, request from the owner of the Condo Unit a copy of the Condo Unit Title Deed. Take this to the local district or Amphur Land Office and counter check with the original Title Deed kept there on:
(a) Who is the owner of the Condo Unit ? This owner should be the person whom you are dealing with and signing the contract to sell you the Condo Unit.
If the owner is a company limited, who can sign on behalf of this company ? Does the company limited have enough capital to complete building the condominium ? The answers to these questions can be obtained from the incorporation records of the company limited at the Ministry of Commerce;
(b) Is the condominium building registered at the Land Office ?; and
(c) Does the original Title Deed reveal any registered encumbrances, lease, mortgage or charges ?
(4) Have a lawyer peruse the conditions of the Reservation Contract or To Sell and To Buy Condo Unit Contract prior to signing it. Legally speaking, this Contract does not create any property rights for you yet because the Condo Unit ownership title will transfer to you at a later date. This Contract is binding only on the promises of both the seller and you that ownership title transfer and sale of Condo Unit will take place at the agreed upon later date. However, the risk exposure to you here is that, at the signing of this Contract, you are usually requested to place a deposit with the seller. If the seller does not sell and transfer ownership title of the Condo Unit to you at the agreed date, you will have to claim the seller in court for breach of Contract to get the deposit back.
As a result, I do not recommend the signing of this type of Contract. You should make a 1 time payment of the whole purchase price at the sale and upon ownership title transfer of the Condo Unit to you. Alternatively, you could arrange for a neutral escrow agent to hold your money and hold the original Title Deed (Note: Under the new Escrow Business Law, effective on May 19, 2008, an authorized financial institution or commercial bank can provide escrow agent services).
(5) Clarify with the owner who is responsible for the ownership title transfer fee, income tax and specific business tax or stamp duties payable at the Land Office on the day of ownership title transfer. Unless agreed otherwise between the owner and you, you are only legally responsible for 50% of the ownership title transfer fee.
Please note that the amounts payable here can be calculated for you by an official at the Land Office.
(6) Make sure that the owner have obtained from the Condominium Juristic Office the following:
(a) A letter verifying that foreigners have ownership in condominium units not exceeding 49% of the total space of all units in the condominium building; and
(b) A letter verifying that the owner has no outstanding debts owing to the Office.
(7) You have obtained the required bank document to verify that the purchase price for buying the Condo Unit was remitted into Thailand.
*(Written by David Tan. David is a Lecturer of Business Law at Asian University. This article was published in September 26 - October 2, 2008 issue of the Pattaya Mail newspaper and October 21 - 27, 2008 issue of the Chiang Mai Mail newspaper)
TIP
Whether you are going to buy a Condo Unit to reside or for investment purposes, I would like to walk you through the following due diligence steps:
(1) If you can narrow down your choices of Condo Units to 1 or 2 Condo Units, a physical inspection must be conducted by an expert or civil engineer on the Condo Unit and the condominium building. Are they as according to the promises made by the seller ?
Checks should be conducted for water leakage in the Condo Unit, proper and safe electricity supply, adequate car parking spaces allocated, fire exits, correct building materials used.
(2) What is payable by an owner of the Condo Unit for up keeping e.g. common facilities fees, water charges, electricity charges. Who should they be paid to and how much are they? Find these out from the owner of the Condo Unit.
(3) If (1) and (2) above are satisfactory to you, request from the owner of the Condo Unit a copy of the Condo Unit Title Deed. Take this to the local district or Amphur Land Office and counter check with the original Title Deed kept there on:
(a) Who is the owner of the Condo Unit ? This owner should be the person whom you are dealing with and signing the contract to sell you the Condo Unit.
If the owner is a company limited, who can sign on behalf of this company ? Does the company limited have enough capital to complete building the condominium ? The answers to these questions can be obtained from the incorporation records of the company limited at the Ministry of Commerce;
(b) Is the condominium building registered at the Land Office ?; and
(c) Does the original Title Deed reveal any registered encumbrances, lease, mortgage or charges ?
(4) Have a lawyer peruse the conditions of the Reservation Contract or To Sell and To Buy Condo Unit Contract prior to signing it. Legally speaking, this Contract does not create any property rights for you yet because the Condo Unit ownership title will transfer to you at a later date. This Contract is binding only on the promises of both the seller and you that ownership title transfer and sale of Condo Unit will take place at the agreed upon later date. However, the risk exposure to you here is that, at the signing of this Contract, you are usually requested to place a deposit with the seller. If the seller does not sell and transfer ownership title of the Condo Unit to you at the agreed date, you will have to claim the seller in court for breach of Contract to get the deposit back.
As a result, I do not recommend the signing of this type of Contract. You should make a 1 time payment of the whole purchase price at the sale and upon ownership title transfer of the Condo Unit to you. Alternatively, you could arrange for a neutral escrow agent to hold your money and hold the original Title Deed (Note: Under the new Escrow Business Law, effective on May 19, 2008, an authorized financial institution or commercial bank can provide escrow agent services).
(5) Clarify with the owner who is responsible for the ownership title transfer fee, income tax and specific business tax or stamp duties payable at the Land Office on the day of ownership title transfer. Unless agreed otherwise between the owner and you, you are only legally responsible for 50% of the ownership title transfer fee.
Please note that the amounts payable here can be calculated for you by an official at the Land Office.
(6) Make sure that the owner have obtained from the Condominium Juristic Office the following:
(a) A letter verifying that foreigners have ownership in condominium units not exceeding 49% of the total space of all units in the condominium building; and
(b) A letter verifying that the owner has no outstanding debts owing to the Office.
(7) You have obtained the required bank document to verify that the purchase price for buying the Condo Unit was remitted into Thailand.
*(Written by David Tan. David is a Lecturer of Business Law at Asian University. This article was published in September 26 - October 2, 2008 issue of the Pattaya Mail newspaper and October 21 - 27, 2008 issue of the Chiang Mai Mail newspaper)
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