Foreign ownership of condominiums in Thailand is in the increase as it is by far the easiest way for foreign nationals to own a property here. Purchasing this type of property may be relatively simple but potential complications may arise should the time come when you decide to dispose of the property. The problems faced are much like the sale of properties anywhere in the world but it may require a bit of drafting know-how to protect you from any potential financial damage, or in the least, any further disappointments. A number of things can go wrong in a sale of your condominium, the worst being the failure of your buyer to complete.
Unlike some jurisdictions elsewhere in the world, there are no set standard terms in the contract for the sale of a property. Contracts come in a variety of forms from a one-page document to an all-embracing Boston type contract. Despite this being the case, there are some general precautions that should be present in any sale of property contracts. Certain mechanisms should also be put in place to prepare you for an unexpected outcome.
Using a Real Estate Agent or Broker
As a first step, you have to consider whether it is worthwhile for you to use a real estate agent or a broker. A reputable agent or a broker may make it easier for you to find your buyer either locally or internationally. They have greater access to the market and are able to vet the potential buyers saving you some time in accommodating casual inquiries. They are also able to assist with the negotiation, provide advice and guidance on the deal and obtain the best price they can for the property. Agents in Thailand normally take up to 3% of the purchase price as their commission for this service so this is something you have to take into consideration as well.
The Price is Right
Setting your asking price is important. You may have an idea from observations of recent sales of units within your condominium or other similar condominiums around your area. Alternatively, you may wish to have your property evaluated by a number of surveying and appraisal firms around town. An agent or broker can help you with the pricing, too. Be sure to set a reserve price aside as well. This is the minimum price of the property you are willing to accept.
Other Pre-contractual Considerations
Make a checklist of any defects on the property which should be disclosed to your potential buyer. Keep in mind any liens or debts you have on the property as this should be included in the contract. It is good to have full and open disclosure of all physical aspects of your property and state this clearly in the sale and purchase agreement. There is no legislative requirement to do so in Thailand but it goes a long way in preventing any potential problems with your buyer in the future, particularly if your buyer is used to having these terms being standard in their own home jurisdiction. It also helps to give a good impression to any potential buyers and makes for a much less complicated transfer.
Also, Thai law retains the general principle of freedom of contract. This means that parties have the freedom in concluding any agreements as long as it is not against the law or against public morals. The principles of contract laws are regulated by the Civil and Commercial Code of Thailand which is largely based on continental European civil law concepts. However, you have the option of selecting a jurisdiction to govern your contractual obligations and this is useful if you or your buyer is more familiar with those particular sets of laws.
Vendor’s Remedies when a Sale Goes Bad
There are some crucial elements to protect yourself when you prepare a sale and purchase agreement for your property. Firstly, it is important to protect yourself in the event that there has been a failure to complete. Once a contract has been signed, a contractual obligation between the parties is established. As a rule, you should have some or all of the following clauses in your agreement to limit your injury when your buyer cannot complete it. Therefore, you may state that at the termination of the contract, the vendor may:
- keep or recover the deposit;
- keep certain funds paid under the contract for security;
- sue the purchaser to recover damages for a breach of contract.
As a further precautionary step to suing for breach, it may be valuable to include a further clause which can recover the deficiency on resale and the reasonable costs and expenses arising out of the purchaser’s noncompliance with this agreement. This ‘deficiency on resale’ concept arises out of the difference between the contract price and the market value of the property as well as any other damages which may arise out of the breach. Therefore, if there is a deficiency in a resale, you would take the difference between the contract price and the resale price and make the necessary adjustments.
Alternatively, you may wish to use the following calculation in your agreement whereby you take the difference between the contract price and the value of the property as at the date of the breach and add on any consequential damages plus interest. The consequential damages may include items such as advertising fees, legal fees, rent costs, and removal expenses.
This concept is not regulated by Thai law nor by any court precedents but having a term such as this is not uncommon in many jurisdictions elsewhere. If drafted into the agreement, it makes it much clearer what damages can be claimed for in such an event.
Certainly, we all hope that a sale of a property will proceed smoothly and most vendors are happy to cut their losses and proceed in finding the next buyer if something goes wrong. This is due to the high fees and the considerable time involved in court proceedings in Thailand. It is always a good idea to have an alternative dispute resolution clause in your contracts as arbitration or mediation will most definitely be a cheaper and faster alternative to attaining any damages if you happen to find yourself in a quandary. There are a number of other minor problems that may arise when selling a property but this article is too short to cover them all. If you are in doubt, your agent or broker may assist you or you may wish to seek some legal advice of a qualified Thai property lawyer about the matter.