Sales Contract Review in Thailand
A sales contract is a legally binding agreement that outlines the terms and conditions of a property transaction between a buyer and a seller. In Thailand, reviewing a Sales and Purchase Agreement (SPA) is essential to ensure that the terms are fair, legally compliant, and protect both parties from potential risks.
This guide covers the key components of a sales contract, legal considerations, common risks, and best practices for reviewing sales agreements in Thailand.
1. Importance of Sales Contract Review
A sales contract is one of the most critical documents in a property transaction. Without proper review, buyers and sellers risk legal disputes, hidden costs, and contract breaches.
Why Reviewing a Sales Contract is Important?
✔ Protects the Buyer and Seller – Ensures fair terms and obligations.
✔ Prevents Fraud and Misrepresentation – Verifies the property’s legal status.
✔ Clarifies Payment and Handover Terms – Avoids delays and misunderstandings.
✔ Ensures Compliance with Thai Law – Protects against unenforceable clauses.
✔ Identifies Hidden Costs and Penalties – Helps avoid unexpected financial burdens.
A thorough contract review helps both parties negotiate better terms and avoid future conflicts.
2. Key Elements of a Sales Contract in Thailand
A well-drafted sales contract should include the following essential clauses:
1. Parties Involved
- Full names, addresses, and identification details of the buyer and seller.
- If a company is involved, include the business registration number and authorized signatories.
2. Property Details
- Type of property (land, house, condo, commercial building, etc.).
- Title deed number and details from the Land Department.
- Exact location, size, and boundaries of the property.
3. Purchase Price and Payment Terms
- Total purchase price in Thai Baht (THB).
- Deposit amount and due date (typically 10-30% of the total price).
- Payment schedule and final settlement date.
- Currency exchange terms (for foreign buyers).
- Escrow arrangements (if applicable).
4. Transfer of Ownership
- Date and conditions for the official title deed transfer at the Land Office.
- Who is responsible for the transfer fees and taxes.
- Seller’s obligation to provide original title deed and legal documents.
5. Taxes and Fees
- Breakdown of taxes and fees (e.g., transfer fee, stamp duty, withholding tax, specific business tax).
- Who pays what? (buyer, seller, or shared).
6. Penalties for Breach of Contract
- Late payment penalties for the buyer.
- Compensation for delays in property handover by the seller.
- Cancellation and refund policies.
7. Warranties and Representations
- Seller confirms that the property has a clear title and is free from encumbrances.
- No outstanding debts, mortgages, or liens on the property.
- The seller guarantees that the property meets zoning and building regulations.
8. Due Diligence and Inspection Clause
- Allows the buyer to conduct legal and physical due diligence before finalizing the deal.
- Includes the right to cancel the contract if serious legal issues arise.
9. Dispute Resolution
- Specifies the governing law (Thai law) and jurisdiction.
- Includes options for arbitration or mediation in case of disputes.
3. Reviewing the Sales Contract: Key Steps
Step 1: Check the Seller’s Legal Authority
✔ Verify the seller’s identity (passport, Thai ID card, or company registration).
✔ Confirm the seller legally owns the property (title deed verification at the Land Department).
✔ If a representative is involved, ensure they have valid Power of Attorney.
Step 2: Verify the Property’s Legal Status
✔ Confirm the type of land title deed (Chanote is the best option).
✔ Check for existing mortgages, debts, or legal disputes.
✔ Ensure the property complies with zoning and building regulations.
Step 3: Analyze the Payment Structure
✔ Ensure the payment schedule is fair and realistic.
✔ Confirm that deposits and installments are secured in an escrow account (if applicable).
✔ Check for penalty clauses related to late payments or default.
Step 4: Review Tax and Fee Responsibilities
✔ Verify the total amount of transfer taxes and fees.
✔ Ensure the contract clearly states who is responsible for which costs.
Step 5: Look for Unfair Terms or Hidden Clauses
🚨 Vague or ambiguous clauses – Ensure all terms are clearly defined.
🚨 One-sided penalties – Ensure penalties apply to both parties, not just the buyer.
🚨 Unrealistic handover dates – Avoid contracts that allow sellers to delay handover indefinitely.
🚨 Restrictions on resale – Check if there are limitations on reselling the property.
Step 6: Hire a Lawyer for Contract Review
✔ A real estate lawyer can help identify risks and negotiate better terms.
✔ Ensure the contract complies with Thai Civil and Commercial Code.
4. Common Risks in Sales Contracts
🚨 Fake or Forged Title Deeds – Always verify title ownership at the Land Department.
🚨 Unclear Land Use Restrictions – Ensure the property meets zoning laws.
🚨 Foreign Ownership Restrictions – Foreigners can’t own land, only condos (up to 49% of a project).
🚨 Unregistered Sales Agreements – Transactions must be legally registered to be enforceable.
🚨 Hidden Costs – Some sellers try to pass extra costs to buyers.
5. Special Considerations for Foreign Buyers
Foreigners face unique legal restrictions when buying property in Thailand.
✔ Buying a Condominium (Best Option for Foreigners)
- Foreigners can own up to 49% of a condo building.
✔ Leasehold Agreements for Land
- Foreigners can lease land for up to 30 years (renewable).
- The lease must be registered at the Land Office to be legally binding.
✔ Thai Company Ownership (For Business Investors)
- A foreigner can own land through a Thai company, but nominee structures are illegal.
✔ Spousal Ownership (For Foreigners Married to Thais)
- If a foreigner buys land under a Thai spouse’s name, they must waive ownership rights.
6. Taxes and Fees in Property Transactions
| Tax/Fee | Rate | Who Pays? |
|---|---|---|
| Transfer Fee | 2% of property value | Buyer |
| Stamp Duty | 0.5% (if exempt from SBT) | Seller |
| Withholding Tax | 1% (company) or progressive tax rate | Seller |
| Specific Business Tax (SBT) | 3.3% (if sold within 5 years) | Seller |
| Lease Registration Fee | 1% (for leasehold properties) | Buyer |
✔ Ensure all taxes and fees are settled at the Land Office before finalizing the transaction.
7. Conclusion: Best Practices for a Secure Property Purchase
✔ Always review the sales contract before signing.
✔ Verify title deeds and land ownership at the Land Office.
✔ Ensure all terms are clear and fair for both parties.
✔ Hire a real estate lawyer for legal contract review.
✔ Negotiate better terms if the contract is unfair.
By conducting a thorough contract review, buyers can protect their rights, avoid legal risks, and secure a successful property transaction in Thailand.