Legal due diligence when buying off-plan

Buying a property directly from the Developer doesn’t necessarily mean that you should skip the legal due diligence process. There is certainly less risk if the Developer is a publicly listed company with a history of completing and delivering projects on time (reference Developer Profiles on FazWaz.com to find out this information). Other areas where a legal due diligence can add additional safeguards are:

Title Search - A lawyer will be able to conduct a physical inspection of the land and title to ascertain if the boundaries are clear in accordance to the deed. Does the project observe the relevant zoning restrictions? Are there any servitude issues (connect roads or land plots) that would impact physically accessing the development once completed?

Permits - Any new project requires approval from the government. These vary depending on the size and type (condo/houses) of the project. Has the project been issued a construction permit and does it reflect the accurate plans of the project? Has an Initial Environmental Examination (IEE) been completed? A yes or no answer to these questions doesn’t necessarily make the project more or less investable, however, it will impact the overall timeline and likelihood that the project will progress as scheduled. More or less risk should be reflected in the overall value offering depending on what point in build cycle you are investing. 

Developer Credentials - A due diligence can reveal if a developer has been involved in any court cases or declared bankruptcy. It can also reveal if the developer is new to building in Thailand and if this is a first time project for them. 

Contract Review - Having a lawyer review the Sales and Purchase agreement can ensure that the document is weighted equally between the buyer and seller. Are the construction payments linked to build milestones versus calendar months? What contractual assurances are there for renewal of registered leases? What voting rights do you have in the project? What liabilities and warranties does the developer have?

Access to Capital - What funding does the Developer have in place to complete the project. Is the project backed with financing from a bank or will the fate of the project lie in the hands of the success of the sales cycle?

Prior research of the points above can make the difference between a good and poor investment. To assist in determining if a due diligence is required ask yourself how experienced are you in reviewing contracts and investing in Thailand real estate, and how many projects has the developer delivered on time in the past?