Land Office Fees Expected to Rise Next Quarter

The Ministry of the Interior which oversees the Land Offices in each District in Thailand has announced that  before March they will determine if fees will revert back to the higher charges in place prior to 2008 or remain at the same lower rate.

If you are thinking about getting your property out of an illegal Thai company formation that does no business except own your house and selling it to a Thai and recording a mortgage then now is the time. Fees should remain the same low rate until now later than March 26  this year, but after then they may be substantially higher, according to a recent government report.

“The Foreign Business Act revisions may raise their ugly head again causing foreigners with Thai companies formed solely to own property, which is illegal, to panic sell. Now may be a good time to close that company and sell the property and lease it back or secure a mortgage against the title deed in your name,” said Thailand business expert Drew Noyes.

The head of the Chonburi Land Office, Director Vaiyavuth Surapruik, said, “In 2008 the fees were lowered to help the economy. This has stimulated the sale of properties. Since the fees were lowered almost two years ago there has been no slow-down in the number of transactions at the land office in Banglamung which services Pattaya. However, most of the transactions, about 95% are among Thai people, not foreigners. Fees will go back up at some point in order to increase government revenues.”

When the fees were lowered by the central government implementation was not immediate. Each land office implemented the lower fees on their own timetable so it is hoped that if the fees rise they may not rise immediately in Pattaya. Pattaya was one of the first land offices to lower the fees in 2008.

“Currently the fees for transferring ownership are an exceptionally low percentage of property valuation plus smaller fees paid to revenue, personal tax, business tax and land office fees and duty stamp,” said Drew Noyes.

“The fees for recording leases on property and recording mortgages on property are now and have always been about one percent of valuation plus some smaller fees. These fees are the best insurance any foreigner can have in Thailand as most of the money we bring in is used to buy property for residential or business use. With a 30-year lease you decide who lives or uses the property. No “relatives” or unwanted guests can move in even if you or your Thai mate are incapacitated,” stated Drew Noyes.

“With the mortgage recorded in the foreigner’s name on the title deed the property can not be sold without repayment and notice of sale,” added noted speaker on the subject American real estate developer Drew Noyes, who has been helping foreigners record leases, mortgages and transfer property for 12 years in Pattaya.

Land and condo transfers by buyers and sellers are very low now, but if the new legislation takes effect when a decision is made at the end of March fees could revert back to the much higher charges for property transfers.

For example, a recent transaction overseen by Drew’s firm PAPPA Co., Ltd. Legal Services Division involving the sale of a house on the East
side of Sukhumvit Highway in Pattaya to a Thai - which was owned by a Thai company with a foreigner as the Managing Director - was given the valuation of 949,000 baht by the Banglamung Land Office. The application fee, land office fee, personal tax, duty stamp, business tax and local fee all added up to only 11,245 baht, or 1.1 percent of value.

If the fees revert back to the fees charges up until 2008 then this same transaction would be much more expensive. The company limited sales fee was 6.5% of Land Office valuation plus all the other fees so the house valued at 949,000 baht would cost about 75,000 baht to transfer ownership. However, if it is sold before the March deadline the fee is about 11,000 baht.

In another example of a recent transaction conducted by PAPPA Co., Ltd. the buyer and seller were both foreigners transferring ownership of a condo on the 27th floor of Northshore on the ocean side. The Banglamung Land Office valuation was 5,185,425 baht. The application fee, land office fee, personal tax, duty stamp, business tax and local fee all added up to 140,844 baht, or 2.7 percent of value.

If the fees revert back to the fees charges up until 2008 then this same transaction would be a bit more expensive if the property was owned for at least two years. The personal sales fee on property owned for more than two years was 3% of Land Office valuation plus all the other fees so the condo in the foreigners name valued at 5,185,425 baht would cost about 75,000 baht.

If the property is owned by an individual for less than two years, under the old fee structure which may come back into effect, the fees would be much higher at 6.5 percent plus fees. Therefore the same condo with a valuation of 5,185,425 baht would be about 350,000 baht.

Property valuations at the land office are typically much lower than the actual sales price.