Part 4: Sales and customer contracts

Chapter 12 Consumer protection law in the real estate business

Legal issues Residential buyers are protected in respect of information, fairness of contracts, safety and remedies. The sale of condominium units is subject to specific contract regulations. Sales documents, websites and advertising materials may be used as evidence or treated as part of the commitments made to buyers. Whether the right to withdraw from a purchase under direct sales law applies must be considered case by case, depending on the sales method.

What the developer must do Have a lawyer review the latest contract templates and announcements before launch. Check advertising copy, renderings, unit areas, views, facilities and returns. Keep every version of the materials together with its publication date. Set refund, cancellation and complaint-handling procedures that the whole sales team applies in the same way.

Key risks Contract terms that conflict with the regulations may be unenforceable. Reducing specifications or facilities below what was advertised may lead to a class action. A court may reduce the forfeiture of a large sum to the actual damage suffered. Guaranteeing returns without a sound basis is a risk to both consumers and reputation.

Chapter 13 Condominium sale and purchase agreement (SPA)

Legal issues A sale and purchase agreement (SPA) for a condominium unit must follow the form prescribed by law. Wording that departs from the prescribed form and is not favourable to the buyer may be unenforceable. Bookings are also subject to their own contract regulations. The terms that must be clear are the unit details, price, payment instalments, transfer day, deliverables, warranties, unit inspection and termination. The commonly used warranty framework is five years for the structure and one year for other parts, which must be checked against the contract template actually in use.

What the developer must do Separate standard clauses from negotiable terms. Maintain an approval matrix for exceptions. Set up a process for unit inspection notices, the snag list, rectification and re-inspection. Check that the payment schedule complies with the regulations and fits the project's cash flow. Set the transfer day with enough time to obtain the certificates and register the condominium. Do not use any sample contract without review by a lawyer.

Key risks The main risks are late delivery, unit areas or specifications that do not match, buyers failing to obtain loans, and a large number of terminations. Forfeiture of deposits and default interest must stay within the limits of the law. Using booking deposits for improper purposes may be challenged. A large number of contracts amended without a system makes it impossible to track all obligations.

Chapter 14 Sale and purchase agreement for housing estate homes

Legal issues A housing estate differs from a condominium in that the buyer obtains ownership of a subdivided plot of land together with the house, and the project is governed by the land allocation law. The allocator must obtain permission before allocating land, provide utilities in accordance with the plan and remain responsible for maintenance until handover under the prescribed process. The housing estate juristic person and the maintenance fund are matters to plan before sales begin. As a general rule, foreigners cannot buy subdivided plots of land.

What the developer must do Check the allocation permit, the project plan, the utilities guarantee and the contract template as prescribed by the Land Allocation Committee. Plan the establishment of the juristic person and the handover of roads, the drainage system, lighting and common areas. Set out land-use restrictions, such as extensions and short-term letting, clearly in both the sales documents and the regulations.

Key risks Selling before permission is granted, or not providing utilities in accordance with the plan, carries legal risk. Utilities that are not in proper condition may be refused on handover, leaving the allocator with outstanding obligations. Land-use restrictions that are too broad may be difficult to enforce. The rules on percentages, the maintenance fund and the handover period must be checked against the current law and announcements.

Chapter 15 Selling to foreign buyers

Legal issues Freehold in a condominium is subject to a 49% ceiling on the total area of the units, not on the number of units, and the buyer must have evidence of funds brought into Thailand as required. Any proposal to raise the ceiling must be checked against the latest legal status. Leasehold does not use the ownership quota but is subject to limits on the lease term. Direct payment in crypto carries legal risk and creates problems in evidencing the inward remittance. A visa does not determine the right to buy real estate, and the conditions can change.

What the developer must do Control the quota in real time by area. Advise on the remitter, the currency and the purpose of the transfer before the customer sends the money. Keep the original evidence, carry out KYC and explain the difference between ownership and leasehold rights candidly. A purchase through a Thai company must be a genuine investment by the Thai shareholders and must be reviewed by an independent lawyer.

Key risks Incomplete funding documents may make it impossible to register ownership. A quota that fills up before transfer affects customers who have already signed contracts. A nominee arrangement is unlawful and carries penalties for the nominee holder and the beneficiary, and may affect whoever arranged it, as well as exposing the property to forced disposal. Signs such as share capital coming from foreigners, or Thai shareholders with no real interest, are matters the authorities can investigate. Developers should not offer or arrange such structures.

Chapter 16 Condotels and rental pool agreements

Legal issues A condotel combines condominium law with hotel law. The operator must hold a licence, and the building must be usable as a hotel under the zoning and permits. A rental pool sets out the sharing of revenue, expenses, the owners' days of use and termination. Guaranteed returns may raise issues of advertising, ability to pay and tax interpretation. If the arrangement resembles fundraising, capital markets law must also be checked.

What the developer must do Decide at the outset who will apply for the hotel licence and who will bear the operating risk. Present revenue information as targets, together with the assumptions. Keep the reserve fund separate. Review the Hotel Management Agreement on fees, budgets, performance tests, termination and disputes. Have a tax adviser review the revenue and the owners' use of their units.

Key risks If the operator cannot pay guaranteed returns when revenue falls, this may lead to a class action. Unit owners who do not join the pool make operations inconsistent. Using units as a hotel without permission risks a suspension order. The tax treatment of rental income, services and VAT should be reviewed structure by structure.