Phuket Freehold Property Explained
There are couple of different forms of ownership that are available to Phuket property investors which tend to vary depending on the type of building that is being purchased. Today we’re going to go in depth about Freehold Property with the aim to give you a clear explanation of exactly what Freehold means in Thailand.
There are various legal structures in place when it comes to acquiring and owning property on the island such as “Leasehold”, which will will cover in the coming weeks. In short though, a leasehold is essentially just a long-term rental contract in regards to Thailand property laws. You essentially own the right to lease that property for a maximum term of 30 years, which potential but not guaranteed options to extend.
Let’s just in to what Freehold is though as by design, it is a truer form of property ownership. In turn, it makes far more sense for any potential property investor in Phuket, or Thailand, to buy a Freehold property. Regardless of which kind of property interests you, be it Villas, Houses, Bungalows or Condominiums, real estate buyers in Phuket should aim their efforts into obtaining property with a Freehold ownership.
A freehold, on the other hand, is a truer form of ownership. So we will explain here why it makes far more sense to buy a freehold property than to take out a lease. Whether that property is a villa, house, bungalow or condominium, buyers of Phuket real estate should aim for freehold ownership.
Where Did Freehold Originate?
“Freehold” itself comes from the Middle English period, circa 14th – 15th century, and is taken from the Anglo-French phrase of “Fraunc Tenement”, with “Fraunc” meaning Free (or Free Man) and the word “Tenement” referring to an immovable property. To simplify it further, the ‘Freeholders’ had the right to pass on their property to their heirs and owned it Lock, Stock and Barrel.
Back in the days o Feudal England, ‘serfs’ would frequently pay the Freeholder of the land for the privilege to set up homesteads on the land plot. Payment for said privilege was often in the form of livestock or crops. Failure to pay the agreed upon amount would sadly lead to the whole family being evicted.
While a Serf was not technically a slave, they also did not have complete freedom. They were essentially part of the land and in turn when the land was sold or traded, the Serfs in question would be a part of that deal and would be required to continue working the land.
The owner of the land was a “Freeman” however, meaning that the land or estate was his “hold”. If we apply the later use of the word Hold, in this scenario being a limit or restriction, it should make the understanding of the concept of Freehold a little easier to digest.
In short, a Freehold means that the rights of the land owner are not limited and that includes the rights of their heirs to inherit the land.
Freehold vs. Leasehold Ownership (in Phuket, Thailand and Elsewhere)
Probably the most common form of ownership in the world currently is Freehold, making it the easiest to understand. Buying property under a Freehold agreement, you will have a much clearer idea of what you will own and your rights.
The owner of the Freehold title will have the full and exclusive rights to the property in perpetuity (i.e forever). This tends to be the same in most places over the world, and certainly in Phuket, Thailand. This means that the bricks, mortar, toilets, windows, patios, fixtures, and certainly most importantly – the land, will be owned by the Freeholder, forever.
As such, if you are the Freeholder, you get to make all decisions regarding your property. This includes how you choose to use your property, the state of repair you decide to leave it in, whether its rented out, vacant or you choose to occupy it, or if you decide that you want to sell it. You can take a sledgehammer to the walls and windows, you can even paint it bright pink and purple and make it an eye sore to those around, local zoning laws permitting (We don’t encourage this though!). As the Freeholder, you are able to do all of the above because you own it outright and no one else can dictate how you look after your property.
The Confusion for Leasehold Condo Owners in Phuket
As a Foreigner owning a Freehold in Phuket, the rules are equally straight forward. Owners of Leaseholds of Villas and Condos in Thailand (especially Phuket) often are unaware of exactly what they own, or even if they own anything at all.
There are still some variations of Leasehold ownership that are commonplace in some countries. These tend to be either a lot more extreme in terms of duration, some as much as up to 999 years in the UK, or there will be an understanding in place that said Leasehold will be able to renewed easily upon expiration. This usually incurs a small re-registration fee be paid, commonly found in China as well as other countries.
The owners of the Leasehold, for the most part, will maintain their right to live in the property indefinitely, also being able to sell the property at anytime for the current market price. A Leasehold in this form as far more accepted by most as you have a greater sense of permanence in the residence with essentially the same regulations as Freehold owner.
Unfortunately this is not the case in Thailand. After your 30 year lease has come to an end in Thailand, you are required to vacate the property. Sadly enough, many Leasehold condo owners in Phuket and other parts of Thailand fall foul to terrible advice and are made to believe that they have purchased property that is under the same laws and regulations as a Freehold unit.
It’s often not explained to the new property owners that what they have in fact bought is an exclusive 30 year occupation of that property (Condo, House, Villa), and there is also the possibility that they may not receive an extension beyond those 30 years.
The Main Advantages of a Freehold Phuket Property
The ambiguities that are associated with the Leaseholds in Phuket are not an issue for Foreign, or any other form of, Freehold owners. The home is yours to own as long as the building is still standing and their is no time constraint. The advantages of Freehold property ownership are easy to see. Simply put, if you own something 100% then you have 100% complete control over how it is used.
A Freehold Phuket Property is an Appreciating Asset
As an owner of a Freehold property, you have an asset that will constantly appreciate. You will be able to witness that value of your Freehold property in Phuket increase as time goes on, even doubling or trebling in value during your period of ownership.
When compared to a Leasehold, especially one without a renewable lease clause, the value of the Leasehold will decrease each time the countdown gets closer to the 30 year period. The less time you have on the lease, the less a potential buyer will be motivated to buy your Phuket property.
Forever Means Forever – Freehold means perpetual ownership
There is no escaping the fact that a Leasehold property in Thailand will inevitably revert back to it’s Freehold owner at some point in the future. It’s simply a law that will unlikely change anytime soon. The home you are living in today and all the memories it holds may not be yours once the Leasehold expires. As a Freeholder though, you do have the option to offer the lease to someone else and earn profits on doing so.
Freehold Condos in Phuket Can Be Inherited
A Freehold condominium may be inherited and although the Civil and Commercial Code and Condominium Act seem to have differing opinions on this subject, if due diligence is done correctly you can pass your condo on to your heirs without issue.
One of the main criteria for this is that the buyer of the property must have legally transferred their funds into a Thai bank of choice and only for the express purpose of buying said property. The originally buyer must ensure that any beneficiary names are clearly listed on the Bank Instruction Letter – and therefor listed on the FETF that is provided by the bank – when it comes for the time for the condo to be inherited, it should be a relatively simple procedure.
If a Last Will and Testament is also draw up in Thailand by the originally owner of the Freehold property, it will further solidify the right of inheritance for the aforementioned heirs.
The Main Disadvantages of Freehold Property
At this point you may be tempted to ask whether or not their are any major disadvantages or negatives in general to owning a Freehold vs owning a Leasehold. The answer is simple – Probably not.
Perhaps the biggest perceived downside of being the outright owner of a Freehold Villa, House or Condominium is that you are 100% responsible for all upkeep on that property. This is not exclusive for property ownership though, the same could be said for the upkeep on your car for example, or any expensive appliances you may own. All repairs and replacements come out of your pocket.
For condominium ownership in Thailand, any replacements and repairs to the outside and common areas of your actual unit (provided that you are not the cause of the damage itself) will lie with the management. This will come out of the CAM fees or a Sinking Fund that is jointly paid by the owners of the condo units.
Freehold owners and Leaseholders will be paying exactly the same amount per square meter when it comes to the common area frees, so as a Freeholder you will not be at a disadvantage here either.
It’s important to remember that all Leaseholders will eventually have to hand their unit back over to the Freehold owner or Developer while at the same time paying the same amount in monthly fees for the unit. These fees, to the Leaseholder, will represent a depreciating asset for every day that they do not own the lease.
Our Final Thoughts On Freehold
Please make sure that you ask for and purchase a Freehold Phuket Condo and NOT a Leasehold. You will be 100% certain of what you’re getting when you choose to buy Freehold and it is important to not being coerced into buying a Leasehold.
While hunting for your forever home in Phuket, There’s always a chance of coming across unscrupulous agents and/or developers that will perhaps try to convince you and others that Leaseholds are a perfectly good options and that there is very little difference between owning a Leasehold and a Freehold.
Getting the right legal advice can be paramount to making the right decisions when it comes to purchasing a property in Thailand. Do not allow yourself to be fooled as the difference between Freehold and Leasehold is very clear. You can own one of them outright 100%, the other you are simply renting for an extended period of time. If you feel the difference is not clear enough for both options, please read this again in 30 years.
In Summary: The Benefits Of Owning A Freehold Property Are
– The safest and most secure for Foreign owned real estate in Thailand is Freehold
– You will own it in perpetuity, forever
– You can do with your property whatever you like, within reason
– There is no ambiguity about Freehold ownership, it is what it is
– The Freehold Chanote will be registered in your name at the Land Department
– You pay the same common fees as Leasehold owners
– Freehold Condominiums can be inherited by your heirs when you pass on
– A Freehold Condo appreciates in value, a Leasehold Condo does not