Foreign ownership of condominiums in Thailand is on the rise, as it is by far the easiest way for foreigners to acquire real estate. While purchasing such a property may be relatively straightforward, complications can arise when selling it later. The associated problems are similar to those encountered when selling real estate worldwide, but some expertise in contract law can help avoid financial losses or at least further disappointment. A lot can go wrong when selling real estate in Thailand; the worst-case scenario is when the buyer fails to fulfill the purchase agreement.

Unlike in some other countries, there are no standardized terms and conditions for real estate purchase agreements. Contracts can vary widely, from a one-page document to a comprehensive Boston-style agreement. Nevertheless, every real estate purchase agreement should include some general safeguards. Furthermore, mechanisms should be in place to prepare for unexpected developments.

Hiring a real estate agent

As a first step, you should consider whether hiring a real estate agent makes sense for you. A reputable agent can make finding a buyer—whether local or international—easier. They have better access to the market and can pre-screen potential buyers, saving you time you would otherwise spend responding to non-binding inquiries. Furthermore, they will support you during negotiations, provide comprehensive advice, and achieve the best possible price for your property. In Thailand, agents typically charge up to 3% of the purchase price as a commission for this service. You should also take this into account.

The price is right

Setting your asking price is crucial. You can use recent sales of apartments in your or similar complex as a guide. Alternatively, you can have your property appraised by several appraisers in the city. A real estate agent can also assist you in determining the price. Be sure to set a minimum price. This is the lowest price you are willing to accept for the property.

Other pre-contractual considerations

Create a list of all defects of the property that should be disclosed to your potential buyer. Include any existing encumbrances or debts on the property, as these must be listed in the contract. It is advisable to fully and transparently describe all structural features of your property and clearly document this in the purchase agreement. While there is no legal obligation to do so in Thailand, this prevents potential problems with your buyer, especially if they are accustomed to this practice in their home country. Furthermore, it creates a positive impression on potential buyers and significantly simplifies the transfer of ownership.

Thai law also upholds the principle of freedom of contract. This means that the parties are free to make any agreements they wish, as long as these do not violate applicable law or public policy. The principles of contract law are codified in the Thai Civil and Commercial Code, which is largely based on continental European civil law concepts. However, you have the option of choosing a different jurisdiction for your contractual obligations. This is advantageous if you or your buyer are more familiar with the respective legal systems.

Seller's rights in the event of a failed sale

There are several important points to consider when drawing up a purchase agreement for your property. First, it's crucial to protect yourself in case the purchase agreement isn't fulfilled. Signing the contract creates a legally binding obligation between the parties. Generally, you should include some or all of the following clauses in your contract to limit your potential losses if the buyer is unable to complete the purchase. For example, you can stipulate that if the contract is terminated, the seller is permitted to do the following:

  • retain or receive back the deposit;
  • Retention of certain contractually paid funds as security;
  • sue the buyer for damages due to breach of contract.

    • To prevent a claim for breach of contract, it is advisable to include an additional clause that addresses the resale loss as well as the reasonable costs and expenses incurred by the buyer due to the breach of contract. This "resale loss" refers to the difference between the contract price and the market value of the property, as well as any other damages resulting from the breach. Therefore, if a resale loss is found, the difference between the contract price and the resale price is calculated and adjusted accordingly.

    Alternatively, you can use the following calculation method in your contract: Determine the difference between the contract price and the value of the property at the time of the breach of contract and add any consequential damages plus interest. Consequential damages could include, for example, advertising costs, legal fees, rental costs, and moving expenses.

    This concept is not explicitly regulated in Thai law or jurisprudence, but the use of such a clause is not uncommon in many other legal systems. If it is included in the contract, it clarifies what claims for damages can be asserted in such a case.

    Summary

    We all hope for a smooth property sale, and most sellers are happy to limit their losses and look for a new buyer if something goes wrong. This is due to the high fees and significant time commitment involved in court proceedings in Thailand. It is therefore advisable to include an alternative dispute resolution clause in your contracts, as arbitration or mediation is certainly a cheaper and faster alternative to pursuing compensation should you encounter difficulties. There are a few other minor issues that can arise during a property sale, but this article is too short to cover them all. If in doubt, your real estate agent can help, or you should seek advice from a qualified Thai real estate lawyer.