Due Diligence is a term used for a number of concepts involving either the performance of an investigation of a business or person, or the performance of an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations. When you buy a property, you probably want to secure your money by making an investigation. The type of title deed, the money involved and the use of the property will determine what kind of checking you should do. Due diligence can be very extensive and the process is to include as many of the following investigations as possible:
- Translation of land title deed into English . This will help you to understand what the property is about.
- Investigation of the land title deed (Is it a Por Bor Tor, Nor Sor 3, Nor Sor 3 Gor, Nor Sor 4 Jor, Chanotte, etc) and its history (chain of possession, on back of some title deeds)
- Are there any mortgages registered or any other incumbrances, lease, obligations, charges, claims, powers of attorney or any right registered against the land?
- A physical inspection to ascertain access to the land. (e.g. parts of the land can be inaccessible during the rainy season)
- Is there bankruptcy and/or Civil Court search about the owner? In one case, we found out that the son of the owner was in Court against his mother contesting the ownership regarding inheritance from his father...
- The previous use of the land and possible use of the land (e.g. what do you plan to do, are there any building restrictions in zoning? etc).
- Is there some people occupying or using the land?That is very important because a person using the land can also acquire "possession" by Law without being on the title deed.
- Any drainage problems on the land or subsidence?
- Is the land connected to the main utilities such as water and electricity? Do you pay directly or to someone else?
- Is there is a public or registered private road access to the land? What about servitudes?
- Are there any problems with the local residents, noise nuisance or other disturbances from surrounding land, or problems with access to the land?
- Any Trash disposal, sewage, telephone and cables?
- An investigation at the land department can give you information on:
- Land taxes
- Registered value or value paid at the last transfer
- If any powers of attorney are registered
- If any leases, superficies, usufruct or other rights are registered against the land
- Previous transfer dates
- A further investigation can be done into the owner’s family history (if possible). How long have the current owner(s) held title over the land?
Buying a property from a developer in a complex could seem somewhat safer. But remember that these businesses have more or less one goal: to make a profit. And to achieve it, some may not give you all the quality and warranties that you need.
The following should be checked by a professional familiar with real estate in Thailand: If the owner of the land is a developer, investigate:
- The company registration date
- Share capital registered
- Changes in the registered company name in the previous 3 years;
- Is there a building permit issued?
- Is there a Land Allocation permit?
- Type of title deeds
- How many plots are allocated on the land?
You should probably conduct a land survey by a reliable charted surveyor. It will confirm the size of the land and its location.
You will also have to check:
- Compliance with the requirements under the Land Allocation Act.
- The environmental Impact Assessment approval report (if applicable).
- Is there any building permits issued? If yes, under which name?
- Who owns the land, who do you hold the contract with? (Sometimes, companies can use a very complicated structure to avoid their liability. They will put the building permit under some of their employees, the company selling the land will not be the same company that is building the house and you won't have a contract with the construction company, for example.).
- Does the developer have a Housing Development License?
- Under what kind of sales structures is the project is sold?
- How long has the developer been developing properties in Thailand? What is the registered share capital?
- Which architectural company has been appointed to design the houses? Will the houses be built to a high standard?
- Are the neighbours satisfied with the houses already completed? That could be a very good indication of the reliability of the builder.
- Which construction company has been contracted to build the houses? Can you instruct an independent building surveyor to inspect the build upon completion?
- How many houses are being built in the project?
- Could a new construction in the neighbourhood change the value of your property? For example, you buy a condominium for its view on the sea and a future project comes to block it.
- Will the developer connect the land to public utilities? Will you have to pay for separate meters or connect all utilities yourself?
- Will the developer take care of the registration of the house in the foreigner's name and the house registration booklet (Tabian baan)? Will there be a lease agreement, usufruct, servitude or superficies added at the transfer of the property?
- If the property is sold under a leasehold structure, who will be responsible for paying the building and land taxes?
- Will the land be delivered free any encumbrances, mortgages other liens?
And when the time comes to make or sign a contract, other aspects will have to be agreed on. Like:
- When is the property to be completed?
- Who will be responsible for transfer or registration fees? It can be the buyer, the seller, 50-50% or otherwise.
- Don't wait until its already decided about all fees on a project... If any, what services will be provided? How much is the monthly or yearly maintenance / service fee in the project? How will this be calculated? Does this decision rest with the house / plot owners? Remember that this can have an impact for many years.
- What will happen if the completion of the property is late? Any penalties?
- Is there a warranty on the property?
- Is it possible to cancel the contract? If so, will the deposit be refunded?
- Is the type of material written in the contract or its addendum?
A property is normally a big investment for most people. It requires you to be careful and very diligent.