The Edict, Land Reform And Ownership
I am not a lawyer, surveyor or accountant and therefore the content of this article is based wholly on my personal experience and observations, as I travel into the Banoch in search of opportunities for my Thai family and myself. If you are a farang and wish to buy real estate in Thailand it is essential that you use a good Thai lawyer.
I believe that although a foreigner cannot own land outright in Thailand he can gain secure control over land during the fullness of his lifetime and pass his control on to his heirs if he structures his business wisely. This is true even where the land that he acquires control over does not have a full ‘Title Deed’
My thanks to ‘Bobs’ for his Stickman article ‘Covering Your Ass(ets)’ on house purchase in his Thai Wife’s name with ‘USUFRUCT’ and yellow book. However I'm absolutely furious and here's why. When I planned to buy my house I retained two Thai Lawyers, one that specializes in property and family law, and another that specializes in Public Accounting and Company Law. I asked them both independently about the appropriate legal method of house purchase that would secure my purchase and would entitle me to the 'Yellow Book.' Both Lawyers stated that it would not be possible for a farang to acquire a Family Book, Blue or Yellow, in my own name.
This advice was all the more surprising because the family law / property law lawyer has impeccable credentials for his work as a Barrister both in Thailand and in America. Reluctantly I went ahead and purchased in the company name on their recommendation. So now I have a Blue Book (House and family registration book) though of coarse it is also in the company’s name. Therefore the company, being a juristic person, has all the legal rights. For example it can buy, sell, borrow lend or mortgage whereas I cannot do any of these things. My partner can do all of these things because, being Thai and in my company’s ‘Blue Book’ she can enter into any kind of transaction in Thailand that is within the law. I was very poorly advised. But that’s Thailand isn’t it? One can select a professional carefully only to find that even the best ‘quacks’ can be better than they. What’s that all about? However, that is not what this article is about.
The Toothless Dog’s Bark
With the recent edict that is intended to close the loop-hole of the of foreign operated ‘Private Company’ house purchases hundreds, perhaps thousands, of foreigners are expected to think that they are caught in a 'Catch 22'. This is because the ‘toothless dog’, that is the Thai caretaker government at the present, wants their electorate to think that individual foreigners cannot buy or sell houses legally to or from farang or Thai.
Foreigners that have used a private company to make a down payment on the construction of a new house may think that they are faced with possible cancellation of the contract and perhaps loosing their down payment plus any stage payments made. Accordingly many seem to have stopped making their monthly stage payments. Such a negative outcome would not be acceptable Thai tradition or Thai Law.
Another ‘spin off’ of this ridiculous edict that is intended to close the farang house purchase loop hole(s), and meant reinforce an existing Thai Law, which recent history has shown to be unenforceable. The edict is causing a virtual collapse in sales of new homes in Pattaya. Pattaya already has some partially completed estates that are decaying in the tropical sun. These unloved and unoccupied estates are so because some of Pattaya’s past developers overstretched themselves and were bankrupted. Are we to see more of these 'Ghost Villages'?
This whole debacle should give ‘Cassunudra’ some comfort, because if the new edict were to prevail, many Chinese Thai developers would suffer when their sales of new homes dry up. Perhaps when the dust settles house prices will have to fall too. It is too early to judge the financial consequences of the toothless dogs bark, though potentially if the ‘Land Office’ remains in a quandary for very long we can expect to see an increasing number of bankrupted property developers.
What is the May 2006 Edict really about?
One thing that we can say for certain is that the edict is not about improving the health of the Thai Economy or providing more land and homes to Thai citizens.
The Edict is intended to sensitize the Thai working class to land issues, particularly foreign ownership, and in that the TRT have succeeded. TRT are mindful of the fact that land and land reform issues have brought down past Thai governments and that it may be just as effective at blunting the voice of their opposition in waiting before the General Election in October. As one might have expected many smug Thai in the community are gleeful of the ‘wisdom’ of this new edict. These Thai tend to be the lower middle to working class and share their glee with anyone that will listen, many of whom eagerly await a hand out of Land from the Thai Welfare Authority or the Thai Agricultural Reform & Office (ARLO).
Some of TRT’s supporters are ostensibly well educated whilst being drunk on prejudice and money which makes them so cross-eyed because they can’t see further than the end of their noses. These are exactly the Thai citizens that the edict on the sale of property to foreigners is targeted at. And there you have it; the C, D and E socio-economic groups are the electoral ‘bread & butter of the TRT party’s quest to win the October election. So we see that the TRT through the Ministry of the Interior, though almost powerless in their ‘caretaker ship’ of the governance of Thailand are powerless to dish out new legislation (goodies) to their fading support. It also appears that TRT are so consumed with dreaming up tasty morsels for their electorate that they have failed to consider the economic and social consequences of what their caretaker government does. Maybe they just don’t care because caretaker governments are not credible to anybody. Why should they worry, since the consequences of their tinkering governance will be for the Thai people to bear? Caretaker governments cannot change existing law!
Thai land reform has always been a very difficult and contentious political hot potato. Modern Land Reform Programs in Thailand were initiated by King Chulalongkorn the Great (Rama V) in 1874. Rama V’s intention was to populate uninhabited parts of the Kingdom and perhaps to break-up some large grace and favor estates, which had been granted his forebears for services rendered to the Crown. The reforms were only partially successful because they culminated with widespread part owner/ part tenant farms with heavily indebted farmers. One could say that in some regions the situation is little changed. As Cassunundra points out in his article further attempts a land reform were made during the period of military governance in during the 1970’s. The latest attempts at landform in Thailand immerged during the 1980’s when, with the help of the World Bank, the Thai Government embarked on a four stage program to provide full legal title to all of the parcels of land in Thailand, with the exception of Crown land. This ambition is handicapped due to the absence of a comprehensive cadastral survey of the Kingdom. At best, and to the consternation of the World Bank, the Thai Government dragged its feet in the sense that the reforms focused on the existing cadastral register rather than expanding cadastral survey to the hinterlands of the North and the I-san. Lack of foresight and confusion over the Titling of forest and tribal lands led to an exacerbation of the already overheated property market and opened the door wider to the speculators pouring accelerant onto the looming of Thailand’s economic meltdown in 1997/98. Much of the agricultural land in some regions by then was in the hands of speculators. The worst of the speculators passed their illegally acquired land through as many of eight owners (companies), the price increasing with each captive transaction, before reselling back the fist acquirer. Identifying the Title holders are became increasingly difficult because such speculators held their ill gotten gains at arms length. Shameful! This is exactly what the World Bank had wanted to avoid. The fact is that when any agrarian nation arrives at a situation where the greater part of all of its land is in the hands of the Crown, Large estate holdings and land speculators, it is their farmers who remain impoverished, and deeply in debt. As a consequence the value of agricultural land in Thailand remained static.
The World Bank (WB) & the International Monetary Fund (IMF)
Post Thailand’s economic meltdown the WB made new proposals on the acceleration of Thailand’s land reform program with an undertaking to provide financial assistance in the form of loans for the completion of the program’s four stages. Today, stages one to three are complete with millions new title deeds issued to subsistence farmers occupying and/or utilizing land.
It is important for farang to note that although Thai citizens acquire land in many different ways some will offer untitled land for sale to the unsuspecting farang. Granted some such Thai may be genuine, though ignorant of the legal impediment to a farang acquiring ownership. This the farang often discovers after he has paid a deposit, which is seldom refundable. The land may be offered as a 30 plus 30 year lease or an outright sale. A credible looking document will likely be offered to prove that the seller has the right to sell. This document will be in the Thai language and may look like a Deed to the ill informed however often it will be a ‘Right of Occupation’ or a ‘Certificate of Use’.
In the Banoch all over Thailand because Land Reform has progressed ‘piece meal’ all over the country, there is great confusion for farang over the Title status of Thai Land occupiers or users. To a some extent the Thai are often confused too. There are many types of land use or occupation permits and certificates here are some of them.
A land ‘Title’ granted to the current holders ancestor for services to the King. This grace and favor ‘Title’ was often granted because the ancestor funded the construction of canals. (Quite common in the vicinity of Bangkok)
Literally, sak (power in the sense of resources); na (paddy land). A system of social ranking originally based on the king's allocation of specific quantities of rice land to persons according to their rank, each such rank being defined in terms of so-called quality points (or dignity marks).’ See here
A land exploitation testimonial giving the right of permanent occupation and the right to pass the property on to heirs, and in effect an assurance that a full title deed would be forthcoming, if applied for when all legal requirements have been met.
Nor Sor Nung (NS1)
Nor Sor Sawng (NS2) = A pre-emptive certificate which authorizes temporary occupation and utilization of the land to which it refers. The NS2 can only be transferred legally via inheritance.
Nor Sor Saam (NS3) = A Certificate for an area of land for agricultural use that that has been defined by taped survey and marked with the regulation 10 centimeter diameter cylinders placed a the each corner of each Rai surveyed. This certificate also confirms that the holder has make good use of the land for the prescribed number of years. The NS3 can be transferred by sale legally.
Nor Sor Saam Kor (NS3K) = A Certificate for an area of land that has been defined by aerial survey and granted a permit for exploitation by the holder. The NS3K can be transferred by sale legally.
Nor Sor Sii Kor (NS4K) = Cha Nod Teedin which is a full Title Deed. Provides the holder with the right to buy or sell his own land, to a qualified buyer, on the open market.
Sor Kor Nung (SK1) = A certificate acknowledging a formal land claim.
Sor Tor Kor (STK) = A five year ‘USUFRUCT’ License for the holder of agricultural land (usually a squatter) inside areas of natural forest (Crown Land). This license can be issued to a squatter or landless farmer though the maximum area of land that can be so licensed is 2.5 hectares. Thai law prohibited the conversion of an STK to full title. The STK program ended in 1993 so STK licenses are obsolete.
Bor Tor Haa (BT5) and other types Land Occupancy and or occupancy Certificate = Can take many forms and is often designed and issued locally to a squatter of forest lands or tribal areas. This class of document is not a ‘Title’ though it may well be on the Land Office Register. Land held with this type of permit or certificate can only be transferred from one Thai Farmer to another, through exchange for kind or via inheritance. Transfer is sometimes regulated by a local tribe using a procedure that insists that a holder must sell the land that he cultivates back to the co-operative, should he wish to vacate the land.
Reserve License – to cultivate unused land, if after tree years 75% of the subject land is under cultivation the licensee can apply for a Nor Sor granting him permanent occupation and exploitation of he land, though this is not a tile deed.
Sor Kor Nung (SK1) = A land claim certificate.
S58 trii and ss58bis-27 trii = Both of these documents are certified Thai land surveys though the first refers to a tape survey while the second refers to a survey conducted by aerial photography.
I believe that the World Bank’s paranoia over the remaining Thai agricultural land that does not have full title is unjustified. Many Politian’s and the IMF appear to agree with me. The fact is the That Thai land market is very active with upwards of four million transactions per year. Currently the market price for land is not depressed, as a consequence of the absence of full title deeds, which is what the WB seem to suggest. Neither do I believe in the Chinese land conspiracy theory. Those that speculated heavily before the melt down of the Thai economy lost their land and very often their money too. If one travels into the Banoch seeking to purchase land one quickly discovers that most Thai landowners are well aware of the value of their land and work hard at inflating its value further. My own view is that the current prices fetched in the sale of agricultural land are at the limit of what the market can bear.
Why then are some landed farmers so poor? Although it is true to say that many of them are mortgage poor, from my forays into the Banoch inspecting land that is for sale the poverty of the farmer is often his/her own poor management of the land that they farm. Take the Eucalyptus farmer as an example. Of those that have flaunted the environmentalist cries of foul and moved into Eucalyptus faming in recent years, have by and large have done very well. This is because Eucalyptus returns up nine times the revenue per Rai as traditional crops. A single planting of Eucalyptus can produce two harvests, one at five years and another at say eight years. The market for Eucalyptus is wide and varied ranging from fuel in the Banoch to charcoal burning, scaffold poles, pulping for paper, chipping for chip board, or as a feed stock for the pharmaceutical industry, to name a few. Each of these markets want Eucalyptus trees that meet the specification of the process for which they are purchased.
According to the purpose for which the Eucalyptus is cut the cut may be made at five years or more, with a second lower quality cut of re-growth from the stumps at say another three years. If the farmer cuts too early in his rush for cash return, his revenue will be reduced. Further, if he is lazy and does not exploit the potential for edible fungus production or the planting of crops between the standing timbers he again misses a chance to optimize his income. All too often one sees valuable eucalyptus plantation over-run with weed between the trees, a further laziness that reduces returns. A reassuring fact is that in Thailand there are millions of hardworking and efficient farmers producing good quality produce.
The basis of TRT’s ambivalence.
However, A particular fly in the ointment of Thai Land Reform is the fact that the IMF do not entirely agree with the WB’s policy of land reform, a fact that encourages the TRT government to vacillate and drag its feet on some Land Reform issues. In some ways it is not surprising because the of large number of different land permits and titles, that have existed in the past, and now obsolete, made resolution into a cohesive single type of ‘Title’ a complex and laborious business. Development land is a case in point, especially development land that was abandoned by the speculators that purchased it prior to the economic meltdown. Even though the Thai government are signed up to the WB’s program of land reform in exchange for the millions of dollars that the WB have lent for the purpose, TRT vacillation and interference with the land office continued to the point that the Land Office together with all of it’s nationwide regional offices, was split off from it’s former Ministry of the Interior supervision and is now an quasi independent Crown Office. The foregoing fact no doubt contributed to the Land Office Management being somewhat dismayed at the TRT edict through it’s Ministry. The writer’s view is that the edict is worthless because it is not a law and does not have any material effect on the law as it stood. At best it is an unwelcome reminder of what statute book states already. At worst it is a potentially damaging political gambit for the sake of future votes that may well be ruinous to some developers and seriously damaging to local economies where there is dependence on foreign economic activity.
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