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  • Writer's pictureHin Fah

Due Diligence on Thai Property Purchase

Due diligence serves to confirm all material facts and legal parameters in regard to a sale or acquisition by investigation and evaluation of a potential property investment.

Due diligence is the research and analysis of a company, organization, or individual which is done in preparation for a business transaction or investment. A reasonable person takes extra precaution before entering into an agreement or a transaction with another party to prevent unnecessary harm; the procedure helps identify potential risks and liabilities.

What is the importance of Due Diligence on Thai property purchase?

Investing in real estate certainly involves a huge amount of money. We cannot deny the fact that there are some fraudulent dealers and developers taking advantage of naïve investors who can easily be victimized in unscrupulous deals. Therefore, investors are advised to take extra precaution before finalizing any transactions. Due diligence is a useful tool for estimating the status of a prospective project and the developer. The failure to conduct the necessary safeguard in ensuring that the potential property to be purchased is what the seller claims or promised it to be usually results in severe consequences such as serious financial and legal distress on the part of the buyer. It must be remembered that almost always after the transfer has been completed, the seller will not be held responsible for any problems not discovered by the buyer.

What are the important factors to consider in carrying out Due Diligence?

  • You need to be guaranteed that the seller is holding the said property under a true title of ownership. Land descriptions contained in any title deed must match the records on file with the Land Department. It is necessary to establish whether or not the chanote or title deed has been correctly and legally issued.

  • You need to be aware of the burdens existing on the property. It is necessary to review the Register of Records stated at the back of the title document, which contains all encumbrances and liens currently levied upon the property.

  • You need to determine whether the seller is the one who holds title to the property and, therefore, has full legal rights to sell the property.

  • You need to be aware of any pending or potential legal action involving the property.

  • You need to make sure that the developer has all of the required permits and legal documents for a project that is not yet built.

  • You or your legal consultant may have some minor concerns with the sales contract, details that can be corrected before signing to purchase.

  • You need to be informed of the details and status of the developer. It is essential to know how long the developer has been developing properties in Thailand and the amount of their registered share capital.You must have a clear understanding of the rights and obligations of each party. This includes who pays which taxes and fees, when the deposit and balances gets paid, how long the project will take to completion, and what remedies there will be if the project is not completed on time.

  • It is recommended that you have a lawyer in Thailand to review the contract drafted by the seller to ensure it is prepared with proper terms and conditions that meet the standard terms as required by relevant laws and confirm that the contract does not contain terms of any hidden cost or drawbacks. Your lawyer will also negotiate and discuss with the seller on your behalf any changes until both parties mutually agree with the content of the final contract then set to meet for signing

When is Due Diligence conducted?

The need for thorough, detailed due diligence begins prior to the signing of a binding contract. The necessary title and background investigations provide the initial basis to confirm a safe purchase and ensure that both parties deal with each other fairly.

How long does Due Diligence procedure take?

Completion of a due diligence procedure varies with each situation. Due diligence is all about research; that is why a reasonable schedule should be allotted to ensure that all essential aspects are scrutinized. Your lawyer or consultant will evaluate and define the timeframes in which due diligence will be conducted.

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