How Escrow Law Works in Thailand
Putting money in escrow before actually taking hold of a property is so commonly observed around the globe that it is accepted as the norm. Such a practice is so prevalent that in the US, the final transfer of property is even called “to close escrow.” Probably one of the most ingenious protocols in real estate business, an escrow is designed primarily to protect the buyer. However, this practice is also beneficial to practically all the parties involved—whether seller, agent or developer.
The Need for Escrow
Because nearly everything in Thailand is attractive to foreigners, Thai property has consistently gained an almost universal appeal. Unfortunately, out of such a lucrative real property market arose unscrupulous tricksters cum developers who leave behind a trail of regretful buyers. For instance, there are tragic cases of buyers paying developers downpayment which just go to drain simply because the project was either cancelled or was deliberately designed to be aborted at the outset. In response to the needs of the consumers or buyers, Thailand law has stepped in by introducing more stringent regulations for developers and better protective measures for consumers.
History of Escrow in Thailand
Thai escrow system had its halting baby steps in the early stages of its development. Dubbed as pseudo-escrow, it was a system in which the buyer pays or entrusts his downpayment--no longer directly to the developers as was previously practiced--but to dual agents. This is in consonance of Section 805 of the Civil and Commercial Code. This particular section calls for dual agents to temporarily hold funds, such as installments paid by the buyer, until the condominium is completed and final transfer can be made. The disadvantage to this primitive system of escrow is that the role of the agent is not regulated—that is, neither the seller nor buyer has the assurance of the agent’s impartiality. In other words, a buyer can never be sure on which side the dual agent is on.
A more mature concept of the escrow system can be seen in 2007 when the National Legislative Assembly made the first draft of what can be called the real Thai escrow system. Not surprisingly, the developers were the first critics to this property transaction concept. Having been accustomed to receiving downpayments, developers suddenly have to let go of their major source of funds. Through the years, though, some developers have embraced this business practice for the reason that it is one of the best ways to gain the trust of consumers. One can readily observe the variety of ways in which the escrow system is carried out in Thailand. Some developers, true to Section 805 of the Civil and Commercial Code, still make use of dual agents as transient repositories of installments. Other developers, particularly the more established ones, go the extra mile by making use of offshore escrow accounts which carry a more convincing image of impartiality. An offshore escrow account typically comes in a jurisdiction where the escrow system has long been in place. In the final analysis, the buyer has much to gain and virtually nothing to lose from the escrow system in Thailand.