Off plan condominium purchase in Phuket means buying a condo in a planning stage or a condominium not yet fully constructed. The standard payment schedule found in an off-the-plan sale and purchase agreement of a condominium in Phuket Thailand is:
- a reservation agreement with a reservation fee of 100,000 baht (approx 3300 USD)
- a deposit of 10 to 20% of the purchase price on the execution of the condominium sale and purchase agreement
- periodical installments during the construction of the condominium with a final installment of 1/12th to 1/20th of the purchase price upon transfer of ownership of the condominium.
Payments are made to …?
Thailand has since 2008 an Escrow or Escrow Business Act regulating escrow arrangement in Thailand. Under the Thailand Escrow Act 2008 only licensed financial institutions are allowed to offer escrow services. Paying in escrow for a condo in Thailand means that payments are made to an Escrow Act licensed third party financial institution or bank that will hold the deposited monies till the conditions of the condominium sale and purchase agreement have been met (depending on the contract).
Generally developers in Phuket DO NOT offer escrow payment arrangements and they are under the Escrow Act or new Condominium Act NOT required to offer escrow agreements to consumers. Condo developers are free to require deposits and installments during the project from buyers without any protection for the purchaser. This part depends on the agreed and accepted terms and conditions of the sale and purchase between the seller and purchaser.
In 99% of the projects the purchasers make the payments directly to the condominium developer’s bank account, without security. Obviously payment to the developer, as opposed to payments made in escrow, carries some serious financial risks for buyers in case of default by the developer. In addition in a standard payment arrangement (prepaying the development by the buyers) the buyer looses all leverage in case of default, delay or poor workmanship. At the time of completion the buyer has paid up to 95% of the purchase price and the developer is in a much stronger position and can simply refuse transfer of ownership to the buyer.
The developer’s company
The standard payment schedule by which the purchase price is paid directly to the developer’s bank account during the construction or even before the start of a condominium project carries risks of losing your payments in case of default or bankruptcy of the developer.
An important part of this arrangement is the developer’s company. Is it a large SET listed (Thailand stock exchange) real estate developer or a under-capitalized limited liability company with a low share capital and a poor track record? Limited liability for the developer means limited liability and in case of default there is for the buyers little chance of getting any of the payments back.
The Condominium Act supposed to protect the interests of the buyers of condos in Phuket but does not require the establishment of escrow arrangements in an off-plan condominium development.
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