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Real Estate Disputes
Thailand’s dynamic real estate market continues to attract both local and foreign investors. However, the complexity of transactions and the associated legal framework can lead to unforeseen disputes. This article provides an essential guide to the common types of real estate disputes, the legal avenues for resolution, and critical considerations for investors, helping you to effectively protect your rights and interests.
Common Types of Real Estate Disputes
Real estate disputes can arise from various issues. Understanding the nature of each problem is the first step toward finding an appropriate solution.
Ownership is the cornerstone of property rights, making disputes related to title documents particularly serious and complex. Common issues include overlapping title deeds, which may result from historical surveying errors, fraudulent transfers or forged documents, and adverse possession, which can lead to a loss of ownership if neglected over a long period.
Under the Land Code B.E. 2497, the Chanote (Title Deed, form Nor Sor 4 Jor) is the strongest evidence of ownership. Resolving these disputes often requires court proceedings to establish the true ownership rights, which can result in the revocation of an unlawfully issued title deed or the correction of boundary lines. Thorough due diligence on a title deed before any transaction is crucial to prevent these problems
Title Deed Disputes
Breach of Sale and Purchase Agreements
Breach of a sale and purchase agreement is one of the most frequent disputes, occurring when a seller fails to transfer the property as scheduled or a buyer fails to make the remaining payment. According to the Civil and Commercial Code (CCC), the non-breaching party has the right to terminate the contract and claim damages.
The primary remedies are:
- Specific Performance: A lawsuit to compel the other party to fulfill the terms of the contract, such as forcing the seller to complete the ownership transfer.
- Rescission and Damages: The cancellation of the contract to restore both parties to their original positions, combined with a claim for damages resulting from the breach.
If the buyer is the defaulting party, the seller generally has the right to forfeit the earnest money (deposit) paid on the contract signing date. However, down payments made in installments after the contract date are not legally considered earnest money and cannot be fully forfeited by the seller, a point which will be detailed later.
Lease and Eviction Issues
Disputes between landlords and tenants often revolve around non-payment of rent, misuse of the property, or the failure to return the security deposit. For leases of immovable property exceeding three years, the law requires the agreement to be in writing and registered with the competent official; otherwise, it is only enforceable for a period of three years.
In cases of non-payment, a landlord cannot resort to self-help measures like changing locks or cutting off utilities, as this could constitute criminal trespass. The landlord must follow the legal process, which involves sending a formal notice demanding payment within a specified period (not less than 15 days for monthly rent) as per Section 560 of the CCC. Only if the tenant fails to comply can the landlord terminate the lease and file a lawsuit for eviction.
Construction and Development Project Disputes
Construction delays and defects in the delivered property are common disputes between buyers and developers. The relevant laws are the provisions on “Hire of Work” in the CCC and the Condominium Act B.E. 2522.
If a developer delays completion beyond the contractual deadline, the buyer is entitled to a daily penalty at a rate prescribed by law or as specified in the contract. If defects are discovered after handover, the buyer must promptly notify the seller in writing to request rectification. The law mandates minimum warranty periods for condominiums: five years for major structural components and two years for other components or equipment.
Easement and Right of Way Disputes
An easement (ทางภาระจำยอม) is a right that the owner of one property (the dominant property) has over another property (the servient property) for the benefit of their own, such as a right of way to access a public road. This right can be established by a legal agreement (registered at the Land Department) or by prescription, which involves using the access way peacefully and openly with the intent to claim the right for a continuous period of 10 years.
Disputes typically arise when the owner of the servient property blocks the access, or when the owner of the dominant property uses the right of way excessively, creating an additional burden. Resolution often requires negotiation or court action to affirm the existence of the easement and enforce the right of access.
Delayed Projects & Refund Claims: Your Legal Options
One of the most significant concerns for buyers of off-plan properties is the developer’s failure to complete construction and deliver the property by the contractual deadline. This situation leaves buyers with a financial burden and the loss of opportunity to use or invest in the property. Fortunately, Thai law provides clear protections for buyers when the seller is in breach of contract.
The primary legal basis for such claims is found in the Civil and Commercial Code, Sections 386 to 391, concerning contract rescission. When the seller (developer) defaults by failing to deliver the property on time, the buyer, as the non-breaching party, is entitled to rescind the contract. The effect of rescission is that both parties must be restored to their original positions (status quo ante) under Section 391. This means the seller is obligated to refund all payments received from the buyer, including the reservation fee, contract signing fee, and all down payment installments. Furthermore, the buyer is entitled to claim interest at 7.5% per annum (or another legally stipulated rate) on the refunded amount, calculated from the date each payment was received by the seller.
To successfully pursue a claim, the buyer must gather essential evidence to prove the developer’s breach, including:
- The complete Sale and Purchase Agreement: To establish the agreed-upon completion and delivery date.
- All payment receipts: For the reservation fee, contract fee, and every down payment installment to prove the total amount paid.
- Notice of Rescission: A copy of the formal letter sent to the developer to terminate the contract and demand a refund.
- Promotional Materials: Brochures or advertisements from the project that state the expected completion date.
- Photographs of the Project Site: To visually demonstrate that construction was not completed by the contractual deadline.
While court proceedings for consumer cases can take time, having complete and clear evidence will streamline the process. Engaging a lawyer with experience in this type of litigation can significantly increase the chances of recovering the full amount paid, plus interest, as entitled by law.
Claiming Deposits and Down Payments When Not in Breach
Many people may not be aware that even if a condominium project is not in breach of contract, a buyer who no longer wants the unit may, in certain circumstances, be able to sue to cancel the contract and recover their money. This applies particularly to the down payment installments paid, even if the buyer is the one at fault—for instance, if their bank loan application is rejected, they face financial hardship and can no longer make payments, or they simply change their mind.
The key legal principle protecting buyers in this scenario lies in the distinction between “earnest money” and “down payment,” and the court’s power to review a “penalty” under the Civil and Commercial Code. The principles are as follows:
- Earnest Money (มัดจำ): This refers to the sum given by the buyer to the seller “on the day the contract is signed” as a guarantee of performance (per CCC Section 377). If the buyer defaults, the seller has the right to forfeit this earnest money.
- Down Payment (เงินดาวน์): These are installment payments made “after the contract signing date.” According to Supreme Court Decision No. 3301/2547, these payments are considered “partial payment of the property’s price” and are not legally defined as earnest money. Therefore, as a general rule, the seller has no right to forfeit the down payment upon contract termination and must return it under the principle of restitution (CCC Section 391).
- Forfeiture Clause as a “Penalty” (เบี้ยปรับ): Most developers include a clause stating that “if the buyer defaults, the seller is entitled to forfeit all payments made.” This contractual term effectively transforms the down payment into a “penalty” under CCC Section 379.
- Court’s Power to Reduce an Excessive Penalty: This is the most critical point. CCC Section 383, paragraph one, grants the court the authority to determine if a stipulated penalty is “disproportionately high.” If the court finds it to be excessive, it has the power to reduce the penalty to a reasonable amount. Furthermore, the Unfair Contract Terms Act B.E. 2540 also empowers the court to review and reduce agreements that allow for the forfeiture of an unreasonably high deposit.
In practice, courts will often consider the actual damages incurred by the seller, such as the lost opportunity to sell to another buyer, and will typically allow the seller to retain only a portion of the payments, ordering the remainder of the down payment to be refunded to the buyer. Even though a full refund may not be awarded, in many cases, a buyer can recover a significant portion, which is a far better outcome than losing the entire down payment. Analyzing the chances of success in each case requires a deep understanding of these legal principles and experience in this type of litigation to effectively argue for the court’s intervention to reduce the penalty.
Legal Process for Dispute Resolution
When a dispute arises, there are several channels for seeking a resolution.
- Negotiation and Mediation: This is the recommended first step to find a mutually agreeable solution without resorting to court, saving time and expense.
- Arbitration: An alternative if specified in the contract, arbitration is often faster than court litigation and is common in large-scale construction disputes.
- Litigation: If an agreement cannot be reached, filing a lawsuit is the final step to enforce legal rights. This process involves evidence presentation and court hearings, and it can take several years if there are appeals to the Court of Appeals or the Supreme Court.
The Importance of Due Diligence to Prevent Disputes
The most effective way to avoid real estate disputes is through prevention. Conducting thorough legal due diligence before investing is paramount. This process should include:
- Title Search at the Land Department: To verify the seller’s legal ownership, review the property’s transaction history, and check for any encumbrances, such as mortgages or liens.
- Verification of Boundaries and Physical Condition: Comparing the information on the title deed with the actual property to prevent boundary disputes or encroachments.
- Review of Applicable Regulations: Checking zoning laws and building regulations to ensure the property can be used for its intended purpose.
You can learn more about our Real Estate Service (https://jirawatlawoffice.co.th/our-services/real-estate-legal/) to ensure your investment is fully protected.
Considerations for Foreigners in Real Estate Transactions
Thai law imposes significant restrictions on foreign property ownership that every international investor must understand.
- Restrictions on Land Ownership: As a general rule, the Land Code B.E. 2497 prohibits aliens from owning land in Thailand. Using a Thai “nominee” to hold land on behalf of a foreigner is illegal and carries severe risks, including criminal penalties and forced sale of the property.
- Ownership of Condominiums: Foreigners can legally own condominium units freehold under the Condominium Act B.E. 2522. This is subject to the “foreign quota,” which limits total foreign ownership to 49% of the total floor area of all units in a condominium building.
- Leasehold: A long-term lease is another option for foreigners to secure rights to use land and buildings. A lease can be registered for a maximum term of 30 years. However, recent Supreme Court precedent has confirmed that pre-agreed renewal clauses (e.g., in “30+30+30” year contracts) are unenforceable.
- Recent Regulatory Changes: The Thai government periodically considers regulatory updates to attract foreign investment, such as expanding land ownership rights for BOI-promoted companies and a proposal to extend lease terms to 99 years. Investors should stay informed about these potential changes.
Conclusion
Real estate disputes in Thailand are diverse and complex, ranging from breaches of sale and purchase agreements and construction delays to title deed conflicts, lease issues, and foreign ownership restrictions. Understanding your legal rights and obligations is the best defense, but when problems arise, seeking expert legal advice early is key to resolving disputes efficiently and minimizing potential losses.
JIRAWAT & ASSOCIATES has experience in advising and litigating real estate disputes for both Thai and international clients. If you are facing a property-related issue or require guidance to mitigate investment risks, please contact us for an initial assessment of your case.
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