Condominium Law
For anyone who has invested in a condominium project in Thailand, it is important to note that amendments to the Condominium Act will come into effect as of 4th of July 2008. The new regulations will strengthen the rights of a buyer, provide standard provisions for management of a condominium project and spell out the status of the Condominium Juristic Person (CJP).

More precisely than in the previous law regulating condominiums the term 'co-ownership' will be re-defined as 'co-owner', being an individual or juristic person, who is registered in a condominium title deed.

To facilitate management, the amended Condominium Act will provide standard rules and regulations, which will govern the role of the Condominium Juristic Person (CJP). These general provisions will relate to qualifications, appointment and removal of the manager of the CJP, general meetings and voting procedures. The extent to which these standard rules and regulations will be imperative or may be varied by agreement remains to be seen. Developers are also obliged to establish an office for the CJP, which in practice will most likely be the office of the manager of the CJP.

In the consumer protection spirit of the condominium law, developers will, under the new regulations, be accountable for what they have promised in their advertisements. Upon completion of the condominium project, advertising materials (brochures, plans, etc.) must be submitted to the CJP, and the legal body which manages the condominium will have to confirm that the delivered product meets the advertised specification. This consumer protection obligation is further strengthened by imposing fines of up to 100,000 Baht against developers found to be in breach. With regard to common area fees and costs, the developer will further be responsible for paying said fees for unsold units, which constitutes an obligation on the developer beyond completing construction and registration of the condominium.

The new regulations will further require developers to provide a specified access way from the project site to the public road and to create different entrances for any shops in a condominium building to protect residents from disturbance and nuisance.

Also the rights of the manager of the CJP are strengthened with regard to the collection of fees, by implementing higher interest rates for late payments. If a unit holder fails to pay his fees the CJP (through its manager) can charge a maximum interest of 12% per year for one month’s overdue fees and up to 20% for fees which are six months overdue.

The new regulations will challenge government officials and developers alike, for it is likely that there will be controversies as to how the new regulations will apply to an owner of a condominium project who has already obtained the relevant permits under current laws and now wishes to register the project under the new laws.

Civil and Commercial Code
For anyone who has invested or plans to invest in a Thai company, some of the changes to the Civil and Commercial Code which will come into effect as of 1st of July 2008, will be of interest. These new provisions will facilitate the set up of, and changes to, Thai companies.

The number of promoters and shareholders required to set up a limited Thai company limited will be reduced from seven to three and the setting up of such a company can henceforth be effected in one day, rather than in seven days as is the case under the current law.

Moreover, criteria for passing shareholder resolutions in a limited Thai company will be facilitated, e.g. a change in the Articles of Association of a company can be effected with a single meeting instead of two as is currently required. Also publication requirements will be facilitated and terms for objections by third parties shortened, e.g. a reduction in the share capital of the company will have to be published in newspapers only once instead of seven times and objections by third parties can be filed within thirty days of such announcement rather than three months as is the case under the present law.

These changes in relation to Thai companies with limited liability will be welcomed by people who already have, or wish to set up a business in Thailand. The reduction of the minimum number of shareholders to three will facilitate the way in which business may be conducted in Thailand.

Escrow Act
Parties doing business in Thailand, which involves large sums or assets of high value, will benefit from the introduction of a law regulating 'escrow', the Escrow Act, effective as of 20th of May 2008.

The intent of the new law is to protect the parties to commercial transactions [such as transfers in real estate, share acquisitions, or vendor financing transactions] from possible fraud and deceit by utilising the services of a neutral third party who will hold funds, property, or legal documents for disbursement once certain conditions have been met as instructed by the relevant parties. The law terms this office as the 'Escrow Agent'. It is important to note that the use of an Escrow Agent is optional not mandatory. When using their services, a contract between the parties to the commercial transaction and the Escrow Agent will be needed. This will regulate the conditions under which funds, documents or shares will be released.

As a protection under the new law, any Escrow Agent must be a neutral third party to the envisaged commercial transaction and must not be directly or indirectly connected with either party to that transaction. Any Escrow Agent must have received authorisation from the Ministry of Finance.

In practice, because the Act imposes restrictive eligibility requirements upon the institutions wishing to apply to be Escrow Agents, only commercial banks and finance companies will be able to qualify. Non-financial institutions will be required to provide security and will need to comply with specific financial status requirements. It is unlikely that smaller companies will be able to do this.

Taxation
Initially limited to a period of one year, but already effective as of 28th of March 2008 is a reduction in taxes relating to property. The purpose of this is to stimulate investment in the Thai real estate market which experienced a slow down in 2007.

Land transfer taxes and registration fees for mortgages have been reduced from 2% to 0.01% and Special Business Tax (payable by developers on profit from property sales) has been reduced from 3.3% to 0.1%. In spite of current concerns about the higher cost of construction materials, the aforesaid measures are expected to have a positive effect on the Thai property market.

Summary
The changes to Thai law set out in this article are samples of a positive change in the legal and economic environment in Thailand and they show the government’s ambition to stimulate the economy and encourage investment. Legal advisers should be aware of the opportunities and challenges which come along with these changes. They will need to advise their clients accordingly.

This article was co-written by Desmond Hughes (Partner) and Ingo Müller (Senior Associate) based in the Phuket office of Belmont Limcharoen International Law Firm (www.belmontlimcharoen.com).