Conducting due diligence on real estate

When acquiring real estate, one should always be aware of the associated legal risks. Whether through a merger, acquisition, or simply purchasing land, legal issues can arise in any case. In Thailand, there are several common legal difficulties that many property buyers encounter. Therefore, it is extremely important to conduct due diligence before purchasing to ensure that the seller is the legal owner and authorized to sell. Furthermore, it should be verified that the property is free of encumbrances. Buyers typically engage lawyers or real estate professionals to conduct a legal background check by reviewing the documents and conducting a land registry search in Thailand. So, if you are planning to buy property in Thailand, you should definitely have a due diligence report prepared to avoid potential liability risks or losses later on.

What is meant by due diligence in the context of real estate?

Due diligence on a property can be defined as the research and analysis a company or individual conducts in preparation for an investment. It represents the additional precautionary measure any reasonable person would take before entering into a contract with another party. Therefore, conducting due diligence on a transaction with another company can protect you from risks and potential liabilities. As part of due diligence, you must ensure that all details of the contract or transaction do not violate Thai law and that all information contained in the contract is truthful.

The importance of due diligence when buying real estate

When buying property in Thailand, it is extremely important to proceed carefully to avoid negative consequences. Since real estate investments involve large sums of money, you should not risk your entire capital by not exercising due diligence when signing the contract. It is important to be aware that there are many fraudulent dealers today who illegally defraud investors who do not carefully review their contracts. A thorough contract review when buying property can protect you from psychological, legal, and financial burdens.

What to consider during a due diligence review of a Thai property

Various aspects must be considered when conducting due diligence on an agreement with another person regarding the sale or purchase of real estate in Thailand.

  • It is important to note that the construction of the building must comply with building regulations and environmental requirements. You should therefore check whether building permits exist for the buildings erected on the property.
  • You should also check whether any legal proceedings are pending against the owner of the property that is in any way connected to the property you intend to purchase. If the owner has debts and their property is encumbered with a mortgage, it is advisable to refrain from buying it.
  • Under Thai law, land can be leased for more than three years, provided the contract is in writing and registered. When purchasing land, it is crucial to ensure that it is not currently leased and that no leasehold rights exist. This is important because a lease agreement does not automatically terminate upon transfer of ownership.
  • It is important to verify that the seller of the property is authorized to do so. You must be certain that they are indeed the owner and are not trying to defraud you. Therefore, the property descriptions in the title deed must match the information in the land register.
  • Be sure to include a map with your due diligence report. This map should show the property and its surroundings.
  • You should also check the ownership history of the property in question. Make sure that the transfer of ownership to the current owner was legal.
  • Make sure the property you want to buy has access to a public road, otherwise you could run into significant problems. If access is via someone else's property, a right of way must be registered to avoid difficulties later on.
  • It is extremely important to know the official appraised value of the property you wish to purchase from the seller. It frequently happens that sellers quote a higher price than the property is actually worth, and the buyer pays this amount without conducting their own research. In such cases, it is crucial to proceed carefully to prevent fraud. You can contact the relevant authority to confirm the officially determined value of the property, as this must be recorded in the land registry.
  • You also need to be aware of the rights and obligations of all the objects involved.
  • In addition to the points mentioned above, it is important to inspect the property and include the relevant information in your due diligence report. Verify the property's location to ensure it is indeed the agreed-upon property and that the seller is not deceiving you. The location must match the details in the property documents.

    • Hire a Thai real estate lawyer

    Siam Legal International is a leading law firm in Thailand, offering a range of services to protect the rights and interests of foreigners wishing to purchase real estate in Thailand. Our firm provides a comprehensive suite of real estate services tailored to the specific needs of both our foreign and Thai clients. Should you have any questions or concerns regarding real estate, our team of Thai real estate lawyers invites you to contact us via the link below: