Buying Property: The Rene Philippe Developer Test
May 15 2013 Categories: Property General Issues, Thailand Real Estate No comments yet
[There was a formating problem in our Sunday post. I reposted it again]. People purchasing real estate in Thailand are often fulfilling the goal of a lifetime. In the pursuit of their life dream they will often toss caution to the wind, lose all common sense and ignore some simple precautions.Truth is that the actual formalities to transfer a real estate property are fairly straight, simple and may be completed in a few hours which leads many buyers to believe that purchasing a property in Thailand will be a simple transaction when it is not always the case. [ this post was published earlier as a page. We updated it and republished it as a post].
What are the most important things you need to know before purchasing real estate?
The most important things when purchasing real estate off plan in Thailand whether a condominium, house or a land is to identify whom you are buying from and what you are buying. Whom you are buying from, meaning that there are two types of developers in Thailand. Those I call Thai Top Developers and the others which I call the First Time Developers.
What you are buying from, meaning that it is not only necessary to identify the asset you are purchasing (for example a condominium, land or house) but also the legal title that represent said assets. For example, Thailand titling system recognize several type of titles (Chanot, Nor Sor 3 Kor, Nor Sor 3) which titles do not grant the same rights to their owners. In addition there are also real estate assets on the market that are not represented by titles but by so called squatter rights. Those kind of lesser rights are more often encountered in Thailand provinces such as for example Koh Samui, Koh Chang, Koh Tao.
My first advice to prospective buyers of real estate in Thailand would be to take your time, surround you with all the help and advice you may find.
Over the next weeks I will post on this blog many posts to teach potential buyers how to purchase real estate in Thailand safely. In the meantime I invite you to use the Rene Philippe Developer Test an easy method to check the reliability of a developer that is very useful if you intend to purchase offplan.
The Rene Philippe Developer Test
The Rene Philippe Developer Test is a unique and easy “do it yourself test” that allows buyers of real estate to check the reliability of the developer they are purchasing from.
The test uses five criteria to evaluate the reliability of a developer which criteria are explained in detailed below the table:
| THE RENE PHILIPPE DEVELOPER TEST TEST YOUR DEVELOPER IN 5 QUESTIONS | Points | DVLP1 | DVLP2 | DVLP3 | DVLP4 |
| The Developer: |
|
|
|
|
|
| 1.a Is a Public Company quoted on the SET (15p) | 15 |
15 |
|
|
|
| 1.b Is a Public Company not quoted (10p) | 10 |
|
10 |
|
|
| 1.c Is a Private Company (5p) | 5 |
|
|
5 |
|
| 1.d Is an Individual (0p) | 0 |
|
|
|
0 |
| 2.a Has a Capital of 1 Billion THB or more (15p) | 15 |
15 |
|
|
|
| 2.b Has a Capital of 100 million THB or more (10p) | 10 |
|
10 |
|
|
| 2.c Has a Capital of less than 50 million THB (5p) | 5 |
|
|
|
|
| 2.d Has a Capital of less than 10 million THB (0p) | 0 |
|
|
0 |
0 |
| 3.a Has been registered for 10 years or more (15p) | 15 |
15 |
|
|
|
| 3.b Has been registered for 5 years or more (10p) | 10 |
|
10 |
|
|
| 3.c Has been registered for 3 years or more (5p) | 5 |
|
|
5 |
|
| 3.d Has been registered less than 2 years ago (0p) | 0 |
|
|
|
0 |
| 4.a Has completed more than 10 projects (15p) | 15 |
15 |
|
|
|
| 4.b Has completed more than 3 projects (10p) | 10 |
|
10 |
|
|
| 4.c Has completed 1 project only (5p) | 5 |
|
|
5 |
|
| 4.d Has never completed a project in Thailand (0p) | 0 |
|
|
|
0 |
| 5.a Conditions of Payment are 30% or 40% prior and 60 to 70% upon completion and transfer of the property at the land department (15p) | 15 |
15 |
15 |
|
|
| 5.b Conditions of Payment are 80% prior and 20% upon completion and transfer of the property at the land department (5p) | 5 |
|
|
5 |
5 |
|
|
|
|
|
|
|
| TOTAL |
|
75 |
55 |
20 |
5 |
| © Rene Philippe & Partners Ltd |
www.renephilippe.com |
||||
Results
- 40 to 75 – you can buy.
- Less than 40 – ask a lawyer do to a full due diligence (including corporate documents and balance sheets) and take additional precautions if you still want to buy.
* Type of company
Is the developer a public or a private company and if the developer is a public company it is listed on the Stock Exchange? To incorporate a public company is more difficult than establishing a private company. A listed public company indicates better financial resources as well as better transparency when compared with a non listed company.
** Capitalization
The paid-Up capital is a major gauge of the financial status of a development company’s. It is an important criterion because many first time developers lack the capital to build their projects and tend to rely on their clients payments to fund ongoing construction. Buyers should examine a company’s capital strength along with the schedule of payments for the property (see 5 below).
*** Longevity
For how long has the developer company been incorporated? Note that buyers should always examine this criterion along the experience (see 4 below). Indeed a company that has been incorporated 20 years ago but has been idle for 20 years is not better that a newly incorporate company.
**** Experience
Related to longevity, buyers should also examine the developer’s previous projects. The number of projects completed indicates the experience of the developer in the business.
***** Terms of Payments
If a developer asks for buyers to pay up 80-90% of the purchase price during the period of construction, it is likely the project relies on customer money for completion, making it riskier. Reliable developers only use a table of payments indicating several installments totaling a maximum of 30-40% of the purchase price during the period of construction. The balance of the payment, which is 60-70% of the price, is paid upon the completion and handover of the property to buyers.
Note: This post is an excerpt of Rene Philippe Dubout: “How to Safely Buy Real Estate In Thailand” second edition to be published in November 2009 (the first edition was published under the name “How to Safely Purchase Real Estate Offshore: The Case of Thailand”.
About the Author:
The author Rene-Philippe DUBOUT is a lawyer since 1990 when he was admitted to Geneva bar (Switzerland). He practiced as a litigator there for 10 years until he moved to Thailand in 1999. In 2002 he founded with a group of Thai lawyers Rene Philippe & Partners Ltd a local law firm that specialized in Cross Borders Investments and Real Estate. He has been lecturing in several Thai Universities and a speaker to numerous conferences and seminars. He is the author of a must read book:”How to Purchase Real Estate Offshore Safely: The Case of Thailand”.
http//:www.renephilippe.com
© Copyrights 2009 – Rene Philippe Dubout – This article may be reprinted if information about the author, the websites, and the URLs remain intact
Originally posted 2009-10-19 03:05:09.
