I. Introduction
Sunrise Ocean Resort consists of 15 houses, using a common access road, a common well, common drainage systems, common water leads and discharges. The electricity and water supply for the individual homes are partly on the private lot of the different owners, partly in the common access road.
As long as these infrastructures are situated on the common access road or the common ground, they are considered as « Common Utility Infrastructure ». The rights to use the « common « land for these purposes is protected through Registered Servitudes to the benefit of the sold or leased individual land plots.
But : The land lot, serving the Public Utility Infrastructure is not common property of the different owners or lessees of individual lots, but belongs to an individual person. Although protected through the registered servitudes the owner of the public infrastructure land will not make any investments in maintaining or developing the public infrastructure. So the individual land owner has to do it together with the other owners. That leads to the question, how the legal organisation has to be constructed to manage the „public infrastructure » in the interest of the individual owners. At the same time, some basic cohabitation rules have to guarantee a living together in the resort.
Thai law, when it comes to land ownership and common property is quite complicated. Probably annoying experiences have lead to some regulation, that try to protect the buyer of condominiums ( condominium act ) and owners of houses in a resort ( land development act ) .
But : Sunrise Ocean Resort is not a so called « developed-estate juristic entity ». It was originally built as a resort of 5 homes, then after a certain elapsed time extended with 6 more and in a third phase with the last 4 ones. Since less than 10 houses were constructed in a certain time frame, the Land Development Act of 2000 is not applicable. This Act was especially drafted to protect the buyers of land plots in a resort and the law even prescribes the so called public utility land as common property and the entity, owning it is by law a juristic entity ( Section 44 ) . This juristic entity is registered and also by law the comittee is considered to be the representative of this legal entity. All purchasers are member and the entity has the power and the duty to prescribe regulations on behalf of the use of the public facilities, the cohabitation and traffic within the developed land. Even the fees for maintenance and management of the public facilities are mentioned in the law ( Section 49 ) and the consequences, if someone fails to pay his contribution. In case of a sale of one house the new owner is automatically submitted to the regulations of this registered legal entity.
According to the Thai lawyer, I contacted, it is not possible, to retroactivly submit Sunrise Ocean Resort under the Land Development Act.
So in fact we have to deal with the following problems :
- What kind of juristic person would fit best for managing and providing public utility land and public services ?
- How can the individual owner or lessee of the land be bound by public service regulations ?
- How can the individual made liable for payements of fees, payment into the sinking fund and pay his part to some developments of the public infrastructure ?
- How can the individual made liable for transferring the duties and obligations on behalf of maintaining, developing of the public infrastructure and the cohabitation rules ?
II. Thai company owning the Public Utility Land
A Thai company, owning the public infrastructure land, has to be owned at least by 51% by Thai people. Foreigners are only allowed to own a maximum of 49% . Usually nowadays the provisions of all these Thai companies stipulate, that immediatly after the creation of the company the Thai person has to transfer his shares back to the other 49%-owners of the company. There are big doubts, if these provisions are legal and I wouldn’t dare to go to court as Farang on this behalf.
Then there are other concerns: the land register officer should control, if the Thai person, holding these shares, is financially fit, to pay for the shares or if he has to be considered as a so called nominee, that means only acting in favor of a foreigner, that has bought in. If this is the case, the company is considered to be illegal and it could be a criminal act.
Since ownership in Sunrise Ocean Resort is manifold - individual Thai ownership of land and house, Thai ownership of land and lease contract , Thai company as owner and ev. others more, we would have to cope with the problem of shareholding : is it the owner alone, is it the lessee or are both shareholders, lets say representing 10 shares per house and lot in a general assembly ? Not to forget, that assuming 150 shares in total for 15 houses 77 shares have to be represented by Thai people.
Then who is managing the company ? who signs checks and makes payment ? If we elect a comittee of lets say 5 owners, if they are not Thai, they have to have a working permit. A part from the fees and the necessary base capital for the company ( probably at least 2 Mio THB ) there is the problem, that the farang with the working permit is not allowed to have or even keep his retired visa.
Even creating a Thai company wouldn’t solve the problem, that according to the consulted Thai lawyer we probably cannot register the rules of the maintenance agreement and the cohabitation rules in the land register as covenant, a special form of servitude. It would facilitate the transfer to all the obligation arising out of the « public utility land « .
In consideration of all these uncertainties the following solution seems to be the most uncritical one
III. A foreign company leasing the public infrastructure land
Ownership of the public infrastructure land should stay with Kun Montha, ev including her kids as co-owner. A foreign company ( Singapore ), involving all the owners and lessees of a lot or house in Sunrise Ocean ( again ev. 10 shares per house ) , run by an elected management or board, could do all the necessary work for Sunrise Ocean Resort. No need to bother with working permits or questions about nominees ore other ones.
Ev. this company could be registered in the land register as lessee, so the rights of the lease contract are publicly protected at least for the first 30 years. In case of death the heirs of the landowner will automatically inherit also the obligations out of these contract. And an extension after these first 30 years shouldn’t be a problem, since the land, burdened with servitudes, won’t have any resale value. It would just mean problems for an ev. buyer. According to the lawyer within these 30 years there will be major changes in the land law system of Thailand, so we will be able to switch to an easy solution later on.
How do we cope with the resting questions ?
- How can the individual owner or lessee of the land be bound by public service regulations ?
- How can the individual made liable for payements of fees, payment into the sinking fund and pay his part to some developments of the public infrastructure ?
- How can the individual made liable for transferring the duties and obligations on behalf of maintaining, developing of the public infrastructure and the cohabitation rules ?
1. The Resort Utility Infrastructure and the Cohabitation Contract
Since registering a servitude or covenant in the land register won’t be possible, we have to oblige the individual owner and lessee through a signed written contract including the duty, to transfer this contract and the resulting obligations in case of a sale to the purchaser.
To facilitate the approach, we could include this provision in the basic agreement.
Not to forget :
Besides this individually signed contract ( contract on behalf of Managing and Maintaining the Resort Infrastructure, Organisation of the Association with voting rights, duties of the members and Cohabitation Rules ) we will have to have the Statutes of the Association and a founding act according to the law of the seat of this company.
2. Liability for payments
It has to be regulated in this contract, ev. even in hard cases with the eviction of an individual owner in a law suite.
3. Draft of a Resort Infrastructure and Cohabitation Contract
See attachment