It is typically the scope of a property due diligence to provide a factual report and professional opinion concerning

1. history, including the details, location and legal status of the property,
2. records of liens, encumbrances, easements, including other natural or artificial encumbrances, burdening or benefiting the property
3. any disputes relating to the property
4. basic utilities and available utility infrastructure and
5. applicable law and rules and regulations restricting the use of the property.

The due diligence investigation can clarify legal matters in depth or just scratch the surface of property issues. The buyer has to decide, whether he needs to know the full truth before signing and sealing the property deal – or some times after this. He might restrict his legal counsel on a phase 1 investigation, which is merely a desktop search. He can ask for a phase 2 investigation which presumes that there is no corruption and no illegality in Thailand. Or he requires a full due diligence investigation including phase 3.

Under the label “due diligence” the legal industry offers a broad scope of different tasks. PUGNATORIUS carries out a phase three property due diligence for investors in real estate in Thailand. This is not comparable with the much lower market standard in Thailand, but gives the investor the utmost assurance and confidence in his venture. 

Phase 1 property due diligence
The first phase of a real estate due diligence covers mainly three aspects. It examines the copies of the title deeds and other documents issued to the local land office as well as private documents which do not need a registration. This identifies whether land ownership (freehold) is possible, a leasehold structure is intended and wether the seller is registered in the official documents. On the backside of the title deed encumbrances, leases, a usufruct, superficies or other real right is mentioned and copies of these contractual arrangements have to be reviewed as well. When registering the acquisition at the land office, the authenticity of the provided copies with the land office documents can be confirmed.

There is no guarantee that the land office registration is correct. Neither the local land office, nor the Thai government, nor the seller or former owner guarantee the correctness of a land office registration. If a land title deed is incorrect or inaccurate, it can and will be adjusted or nullified by the local land office. Therefore, this phase of the due diligence does not provide any solid protection. If the due diligence is restricted to this first phase, the buyer accepts a very aggressive risk profile for his acquisition. 

Phase 2 property due diligence

The second phase of the real estate due diligence adds three elements to the examination:

1. A visit at the local land office and an intensive discussion with the authorities regarding the current status, legislation and policy and foreseeable law and policy changes. 
2. A walk-through on the property land and the surroundings for legal and factual issues. This might include the examination of land connection to public road – adjacent to a public road or servitude through another landowner’s property or other ways and means for the owner to legally force adjacent property owners to provide access, drainage, electrical grid connection, fresh water and used water connection Drainage, electrical grid connection, fresh water and used water connection. 
3. A database search for litigations, environmental, tax and other issues which might have an impact on the property.

In residential areas there are typically use restrictions in place under a ministerial regulation in accordance with the Town and Country Planning Act / Urban Planning Act for the aggregated urban planning for a province, in order to promote and support the tourism, communication, transportation, facilities, public service and environment.

Land details, pictures of the land, map, surrounding land will not give the full overview of the legal implication. This requires a walk-through and on-site survey for a physical inspection. It is common naive thinking that the buyer already saw the land and, therefore, the lawyers does not need to do this again by himself. Whether the boundaries of the land are clear and the title deed accurately reflects the actual boundaries is not something for a do-it-yourself test.

An advisable further step is a litigation search – pending litigation cases against the owner which may affect the property (taxes, environmental, ownership – pending legal and/or government action). If the project land already covers buildings and other improvements, the due diligence will focus on the legality of these constructions. Important documents might be the development license, the building permits and, as the case may be, the factory license. Additional aspects are zoning regulations, building control regulations and environmental regulations. 

Phase 3 property due diligence 
The land transfer has to be registered at the local land office. This does not mean that all and any land transfer registrations are valid and effective and all and any legal deficits are healed by the registration. As a result, the due diligence investigation has to carefully follow the chain of ownership transfers. The chronology of ownership might include the acquisition of rights by purchase, inheritance, donation, partition, and finally the upgrade from a lower level in the real estate hierarchy. Thailands title system operates on the principle of “registration of title” rather than “title by registration”.

As a consequence, the serious due diligence investigation has to monitor the title history in each single step. The title search has to trace the land to its first possession. The upgrade of the title deed up to the Chanote qualification requires certain legal and factual requirements which might not be fulfilled in the past. Whether the upgrade has been done in good faith or not, may be relevant for any compensation claim of the “owner”, but not for his legal status.

An incorrect land office registration can be corrected at any time. There is no prescription or limitation period. The legal defects might be identified and highlighted in a later sales process by other, more careful acting lawyers and block the investor from de-investing “his place in paradise”. A comprehensive due diligence is therefore a long-lasting safeguarding of a Thailand investment.

It is a weird experience in Thailand that some buyers are so much obsessed to get their hands on a place in paradise, that they deliberately close their eyes even to serious problems and do not want their legal counsel to research, identify and highlight legal issues, that could jeopardize their acquisition.