Investing in a condo in Pattaya is appealing for many, whether you’re looking to enjoy a leisurely beach lifestyle or add an income property to your portfolio. However, before making a purchase, it’s important to understand the differences between leasehold and freehold purchase arrangements, as well as the laws that apply to each, as these can significantly impact your decision.
Foreign Ownership of Condos
In Thailand, the only way a foreigner can legally own property is through a freehold arrangement. According to the Condominium Act B.E. 2522 (1979), foreign freehold ownership is permitted for up to 49% of the total condo units and common property co-ownership. Therefore, it’s essential to check if a condo complex has met its foreign investment quota before proceeding with a purchase.
Leasehold vs. Freehold: The Key Differences
The differences between leasehold and freehold arrangements are akin to those between leasing and buying a car. With a freehold purchase, you own the property outright. In contrast, a leasehold arrangement provides occupancy and certain other rights for a specified number of years, which may be advantageous for the leaseholder. Here are the benefits of both types:
Benefits of Freehold Purchases
Freehold ownership offers the greatest freedom in terms of property modifications, rule-making within the condo complex, and potential income generation. The key benefits include:
- Making Your Repairs: As a freehold owner, you are responsible for the upkeep and repairs of your condo, similar to owning a standalone home.
- Voting Rights in the Condo Complex: Freehold ownership grants you voting rights on managing and maintaining the condo complex.
- Property Transfer and Sale: A freehold condo can be transferred to family members or anyone of your choosing. You can sell your condo anytime, setting any conditions you see fit.
- Limit on Required Fees: Freehold owners are not required to pay certain maintenance fees that leaseholders must pay. Maintenance of your condo will be managed independently, and common area issues will be voted on by the community.
Benefits of a Leasehold Arrangement
A leasehold arrangement is different from a rental agreement; it’s a long-term arrangement offering specific privileges in exchange for long-term occupancy and guaranteed income for the property owner. The benefits for leaseholders include:
- Ability to Re-rent the Property: As a long-term leaseholder, you generally have the right to re-rent the property when it’s unoccupied.
- Low Transfer Fees When Selling Your Leasehold: Leaseholders enjoy rights similar to property owners, including the ability to sell the leasehold. Transfer fees for selling a leasehold are only 1% of the remaining lease value.
- Control Over Changes to Property: Leasehold agreements can include terms that allow certain modifications to the property without incurring fines or penalties.
- May Be Preferable for Single People: Leasehold arrangements can be ideal for singles who don’t have family members to pass the property onto. When the leasehold term expires, the leaseholder can simply walk away or negotiate a new deal.
Author: Mr. KC Cuijpers
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