Q: Isn't it against the law for a foreigner to own a house in Thailand?

A: A foreign person or entity cannot directly own land in Thailand per Thai law.  That means a foreigner can directly own a condo for example, since owning a condo doesn't imply land ownership.  Recently I've heard that all condo developments (again) have to be 51% owned by Thais, so this means you may or may not be able to by a condo in your name, depending on the percentage makeup of the other owners.  As far as a house, it is possible for the foreigner to own the house itself, but not the land it sits on.

Q: So if a foreigner cannot own land how would buy and register the land to allow him to build a house?

A: There are a number of ways to control the land that the house is built on.  One is to put the house in your Thai spouse or partner's name, although this can for obvious reasons be problematic.  Another way is allow your Thai partner to own the land and give you a thirty year lease on the land.  This is a common technique use.  The most common (and recommended) method used is to form a Thai company and have the company hold the land (and house).

Q: But doesn't the company need to be majority owned by Thai nationals?

A: There is a special category of company allowed for American citizens (under the Treaty of Amity and Economic Relations Between the Kingdom of Thailand and the United States of America), but these cannot own land.  Therefore, a regular Thai limited company is used.  This must be 51% owned by Thai nationals, or in the case of land ownership the Thai percentage must be greater, depending on the land office where the deed is to be recorded.  In and around Pattaya, 61% is used as the percentage which must be owned by Thai nationals (no more than 39% by a foreign entity).  Seven shareholders are the minimum number of shareholders required for a limited company.  There need be only one director, who can be a foreigner.  Normally in this type of setup the foreigner will be the sole director with signatory ability for the limited company.

Q: Then the foreigner can really only own 39%?

A: In effect the way it is normally done is that the foreigner owns 39% of the shares and then has proxies for the other shareholders.  These proxies in effect allow the foreigner control over the remainder of the shares.

Q: Can there be problems with this setup?

A: Normally not, but sometimes.  What can happen is that if the foreigner is out of the country, the remaining shareholders can call a meeting.  Since the proxies are not legally filed anywhere, as to everything filed and officially known about the company these remaining shareholders jointly hold and control majority of the shares.  At the meeting they can declare that director (with signatory powers) has gone missing and elect a new slate of directors with signatory powers.

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Q: Are there ways around this problem?

A: Two classes of stock can be issued, preference and normal shares.  Normally the preference shares have one vote per share and the ordinary shares have 10 votes per share (seems backwards, doesn't it?).  The 39% shareholder would hold only ordinary shares and the remaining 61% of the stock would be in preference shares.  Therefore the 39% shareholder will have voting control over the company and cannot be replaced.

Q: How are the lawyers in setting this up?

A: Normally, for some reason, the normal lawyers don't know about preference shares and how to set up this form of company.  You need to hunt around.  In any event, the form that most Thai lawyers recommend is the company with proxy setup, which should be fine unless you are talking about 20 or more million Baht or for some other reason want to bullet proof the setup.

Q: Any other info?

A: Since I can't get the link to work, I'm posting the company setup which is promoted by a developer of 30+ million Baht houses.  To me this research shows a very well thought out way to protect a large investment.  You can read it here.  Note; I have no affiliation with this project and am only sharing it here since I can recognize that a lot of legal analysis went into determining the best legal setup possible as a proxy for land ownership.  After reviewing it my analysis is that for most of us I think this type of setup with the additional offshore company is overkill, but you can see it does show as a part of the strategy the use of a limited company with preference shares.  I think any time you get large foreign investment doing business in Thailand you end up with a limited company and preference shares as the method of protecting the foreign interests.

Q: But in that document it says a Thai limited company set up to hold property as commonly structured isn't legal, anything to this?

A: As always, caution is the best path here.  Check with your lawyer on the best way to set it up.  I have heard this a lot, that is that a Thai Limited company set up only for the purpose of holding land is invalid and can be invalidated by the land office.  This being said, the company is the most widely used method for a foreigner controlling land, it is the way it is normally done in and around Pattaya, and many thousands of people are using companies to hold land.  I haven't heard of one case where anyone has had any trouble with this method.  IF YOU HAVE heard of a case or have any information about people having trouble with Thai limited companies and land ownership, please feedback me.