Terms and Conditions of the Pre-construction Standard Purchase Agreement
The robust real estate business in Thailand is attributable to the country’s bias in favor of condominium purchasers. Time was when condominium developers would treacherously set up contracts which are disadvantageous to the purchaser. The Thai government has ensured that condominium developers are held accountable so that the rights of the purchaser may be protected.
In 2008, the Interior Ministry of Thailand has mandated all condominium developers to follow a specified format for the Sale and Purchase Agreement. Such a format is clearly outlined under Section 6/2 of the amended Condominium Act No. 4 B.E. 2551 (2008). The provision clearly states that any contract which is not in favor of the purchaser will not be considered valid. Failure to follow the specified Standard Purchase Agreement would mean a fine of up to 100,000 Baht. For the prospective condominium buyer, this is very good news.
How does a buyer determine whether the agreement presented to him is valid?-- by comparing it to the Standard Purchase Agreement. The letter may vary somewhat but what is important is that the spirit or essence of the standard contract is present. In general, the following terms and conditions should be existent in a purchase agreement for it to be considered as in conformity with the Standard Purchase Agreement:
- The developer should claim ownership of the land and should further specify whether the land is under mortgage or any obligation.
- The developer should state that construction permit has been granted.
- It should be specified that the building will be registered as a condominium upon completion.
- The developer should guarantee the provision of common properties and certain facilities and amenities.
- The unit price and payment terms should be clearly described.
- There should be specific dates for completion of construction and transfer of registration.
- There should be a statement regarding the right of the purchaser to transfer his rights to the agreement to another party free of charge.
- The developer should ensure compliance to the approved construction plan and specifications, including materials used.
- The developer should hold accountability for installing utility meters such as for water and electricity lines.
- The developer should shoulder the responsibility of paying for the income tax, specific business tax and 50% of the registration fee.
- The penalty charge for default of payment must not go beyond 15% per year and the cumulative sum of penalties should not exceed 10% of the purchase price.
- It should be stated that should the developer fail to transfer ownership of the unit to the purchaser at the agreed date, there would be repercussions such as a daily fine or refund.
- In the unfortunate event of a force majeure, or when the developer cannot complete the project, he should be legally bound to return all the money paid by the purchaser thus far along with interest which is equivalent to the highest fixed-deposit rate of the involved bank.
- The developer should hold himself liable for any damage or defect in condominium unit. A warranty period of up to 5 years shall be in effect for the structure while a warranty of up to 2 years shall be given for condominium component parts.
Aside from these terms, the purchaser should carefully read all the other terms in the contract and see whether these, too, are to his advantage.