Do you plan on purchasing a property in Thailand? If yes, then you have come to the right place. Sometimes what happens is that people enter into sale and purchase contracts without reviewing the contract properly, which results in their interests not being taken care of. In this article, we will be discussing the importance of conducting a property contract review to prevent the other party from taking advantage of you or even defrauding you in some cases. In addition to this, we have also laid down the top five things that one must keep in mind when conducting a contract review in Thailand.
Sale and Purchase Agreement
In a Sale and Purchase Agreement (SPA), there are two primary parties involved, which is the buyer and the seller. SPAs are also known as legal contracts and it is a binding agreement between these two parties. The contract outlines all the terms and conditions that both parties agree on in relation to the concerned property. Once the buyer considers to purchase the property and makes the final payment, then the seller is obligated to transfer his right of ownership to the buyer. This process takes place at the Land Department, where both parties will have to pay the appropriate taxes and fees involved as they handover the property ownership rights. Hence, a sales contract must always be reviewed properly to avoid potential disputes in the future. SPAs can either be written in English or Thai, but if any party is unable to understand the language of the contract, then it must be translated for them to be aware of its terms and conditions. In cases like this, it is essential for the contract to be executed in both languages.
Why is it Important to Conduct a Contract Review?
Conducting a thorough review of a sales contract is incredibly important to avoid facing unfair terms and conditions that may favor one side of the party over the other. In some cases, the SPA can be so poorly drafted that the rights of one of the parties are not taken into consideration. There are also instances where a contract may be missing an important provision, so by reviewing the contract, you can add or remove any provision in order to avoid any problem in the future.
As foreigners may face a language barrier, they can sometimes get confused between a title deed and a sales contract, so it is essential to understand the differences. In Thailand, a title deed of an immovable property is referred to as the Chanote (โฉนด) which contains information regarding the location of the property and who currently has the ownership it. Conversely, a Sale and Purchase Agreement is called the Sanya Ja Sue Ja Kai (สัญญาจะซื้อจะขาย) contains the terms and conditions on the basis of which the seller will transfer his right of ownership in the relevant property to the purchaser. The SPA also specifies how and when the right of ownership in the property will be transferred from the seller to the buyer. Sales contracts made in Thailand usually contain only the basic rights of the parties and do not mention the exhaustive rights and obligations of both the parties, unlike the sales contract of other countries. It is crucial to note that the interests of both the buyer and the seller must be kept in mind when drafting an SPA.
Sometimes, what happens is that people take SPA samples readily available from a legitimate real estate website and make only a few changes to them. The parties must make sure to thoroughly review the contract and customize it according to their terms and conditions.
Five Things to Consider When Reviewing a Contract
Now that you are aware of how important it is to conduct a contract review, you may be wondering what are some core aspects to look for as you thoroughly read the SPA line by line. Here the five most important things we have listed so that both parties must check for when reviewing a sales contract:
- Make sure that the property and information mentioned in the title deed and the sales contract is the same. What happens is that sometimes the information is not the same, which leads to legal issues in the future. Check also whether the land and the building made on it adheres to the zoning and environmental regulations of Thailand, and has been granted all the relevant permits by the government authorities.
- You should always check for the original assessed price of the property by verifying it from the Land Department. While it is common that most sellers tend to ask for a higher price beyond the property’s appraisal value, some go too far to the point where the buyer ends up paying much more than what the property is actually worth.
- The seller must check that the title deed was legally transferred to the seller and that the owner of the property did not acquire the property through illegal means. Both parties must also ensure that the other party is a Thai national and not a foreigner since a foreigner is not permitted to own immovable property in Thailand.
- When reviewing a sales contract, both parties should make sure that all their rights and obligations are correctly mentioned in the contract. Never rely on the basic rights mentioned in an SPA sample, and always make sure to negotiate and customize the contract according to your own requirements.
- The parties must also check the payment schedule before signing an SPA. A lot of times due to typographical errors, the date, and place that is fixed for making the payment is not correct in the contract, which can lead to a problem. In addition to this, the parties must ensure that the mode of payment and the duration in which the buyer will make the payment to the seller is stated correctly in the sales contract.
Thailand Property Lawyer
Siam Legal International is a full-service law firm in Thailand offering various services that are designed to protect the rights and interests of foreigners wishing to acquire or buy property in Thailand. Our firm offers a wide array of property-related services to best suit our foreign and Thai clients’ property needs. Should you have any questions relating to the property contract review or issues that need to be addressed, our team of Thailand property lawyers invites you to contact us through the link below:
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