Due Diligence for Property Purchase

Whether you are a foreigner or a Thai, buying a property is an important decision as it involves a significant amount of investment. Phuket offers a variety of stunning properties from standalone houses, and pool villas to a condominium with exquisite ocean views. For many people, owning a property in Phuket is a dream come true. But, how do you know if the property you are buying is legitimate and will not cause you unnecessary troubles in the future? This is where “Due Diligence” comes into play. Many times, buyers rush into purchasing the property that they fancy. When this happens, they may ignore crucial details that can prevent them from legal risks or the chances of being scammed.

Due diligence by an experienced lawyer is an essential process before buying any property in Phuket or elsewhere. This is to ensure that you will be able to enjoy your stay at the property of your choice without any worries or concerns.

What is Due Diligence?

Due diligence is a process that is generally conducted by legal experts before a property is purchased or a contract is signed. It is a series of research and analysis on different aspects of certain property to confirm the credibility of the owner and whether the building has appropriate permits and is clear of any legal issues.

The lawyer providing the service usually performs on-site investigations as well as documents verification with relevant government authorities. The due diligence report will then be drafted to provide the buyer will all the details necessary to make a properly informed decision.

The process is to help save the prospective buyer from unforeseen liabilities and consequences.

Why Do You Need Property Due Diligence?

Many things can go wrong when buying a property. No matter where you are in the world including the beautiful island of Phuket, property fraud can easily occur without thorough scrutiny.

It is a possibility that the person who tries to sell the property may not be a legitimate owner and cannot provide the buyer with a title deed. Or, if the buyer engages with a real owner, he/she may have an issue with bankruptcy which prohibits him/her from entering into any transactions.

In case the buyer intends to invest and sell off the property in the future, it is important to check the restrictions of the land use and if the property is located in the residential zone, for instance.

Whether the purpose of the property acquisition is for investment, residential, or lease, the due diligence process can uncover both minor and major hidden issues regarding the property itself, the owner, and the laws involved.

These are just a few of the many reasons why conducting due diligence instead of making an impulsive decision is undoubtedly a wise course of action.

What is Included in the Due Diligence Process?

Before any steps of due diligence are carried out, the potential buyer shall request important and relevant documents from the property seller. These encompass documents related to the property itself, such as the complete title deed, floor plan, and the permits involved in constructing the property. There should also be documents concerning the owner or the developer of the property. These may consist of an identification document of an individual or company registration document in the case of a juristic person developer.

Once all essential evidence is compiled, the trusted legal expert can initiate the due diligence procedures.

1. Title search: This is the most critical investigation process that must be executed before any deposit for the property is made. Aside from verifying the seller’s right over the property, the lawyer will thoroughly examine and analyze legal documents that are directly related to the land and the property. This process can be done at the local Land Office in Phuket. As there are many types of title deeds and some may be attached with the lien, it is vital to carefully inspect these land documents to make certain that any impediments are revealed.

   The title search can also verify the zoning and environmental code pertaining to the area. In addition, the mortgages, leases, and any other encumbrances created over the land or the property can be found in writing at the Land Office.

2. Relevant Permits Inspection: Due diligence process also involves reviewing the filings at the Land Office and Municipal Office to ensure the developer or the seller possesses appropriate construction and land permits. In Thailand, land use and construction of any buildings are regulated by specific sets of law. The report provided by a competent lawyer can inform the buyer in regard to the zoning, environmental, and construction regulations applicable to the land as well as whether the necessary permits have been granted. This will help advise the buyer on what can or cannot be done with the land or the property.

3. Property Tax Examination: In Thailand, the property owner is entitled to pay annual property tax. The tax rate depends on the objective of the property if it is for residential or commercial use as well as the valuation assessed by the government. For this part of the process, the lawyer will check with the District Office for any outstanding tax tied to the property.

4. Owner/Seller Background Check: Like elsewhere in the world, it is important to make sure that the person whom you are about to engage in a large transaction with is reliable and has a clean record. Particularly when the buyer is a foreigner, it is difficult to judge a character when communication is an obstacle. Whether the seller is an individual or a company, the civil and criminal records must be meticulously reviewed. The lawyer will also check for any court cases that may relate to the property or the seller. Furthermore, the background check uncovers the bankruptcy status of the seller.

5. Physical Inspection: The physical survey of the land and the property is as vital as the documentation review. The inspection includes checking the access to the land and if it is connected to the public road without having to pass through the neighbor’s property. The surveyor will examine the accuracy of the land boundaries as shown in the title deed and the enforcement of the zoning regulation in the area.

Many people are entranced by the lavish presentation made by professional sales agents and tend to overlook the importance of due diligence when purchasing a property. To avoid the risks that follow the misleading claims, buyers must assign an experienced lawyer in Phuket to carry out the property due diligence process. The report drafted will be of great value to the buyers in order to make their final decision without pitfalls. Reach out to us for a consultation with our qualified lawyers in Phuket.

Siam Legal (Phuket)

123 / 27-28 Moo 5, Bangtao Place, Cherngtalay, Thalang, Phuket, 83110, Thailand
Phone: +66 76 326 322

Siam Legal Phuket