Anyone purchasing a property in Thailand that has not yet been completed faces different risks from a buyer acquiring an existing house, completed villa or registered condominium unit. In an off-plan purchase, the buyer relies on a developer or building contractor to plan, obtain approval for, construct, complete and transfer the project as promised.

A standard property review is therefore not sufficient. In addition to the title, owner and agreement, the buyer must examine the developer, building contractor, project land, building permits, zoning, Environmental Impact Assessment, payment schedule, construction progress, liability for defects and termination rights.

What is included in an off-plan or construction project?

This article concerns all cases in which the property has not yet been fully completed or cannot yet be legally transferred.

These include:

• off-plan condominiums,
• villas that have not yet been completed,
• planned houses within a villa development,
• individual construction projects on selected land,
• construction on leased land,
• construction on land owned by a spouse or Thai company,
• the conversion, extension or reconstruction of an existing building,
• projects involving a developer, contractor, architect or general contractor.

The central question is whether the buyer is acquiring an existing property or being promised a future project.

Difference between an off-plan project and an individual construction project

In an off-plan project, the buyer usually purchases a unit or villa within a development planned, marketed and constructed by the developer. The buyer often has only limited influence over the design, materials, construction method and project structure.

In an individual construction project, the buyer appoints a contractor, architect or developer to construct a particular house or villa. The construction agreement is especially important because the buyer will often need to monitor construction progress, material quality, additional costs, site supervision and acceptance directly.

In both cases, the earlier the legal and technical review takes place, the better. Once a substantial reservation fee, deposit or construction instalment has been paid, the buyer’s negotiating position becomes considerably weaker.

Due diligence checklist for off-plan purchases and construction projects

1. examine the developer or building contractor

For off-plan purchases and construction projects, the person or company behind the project is central. Attractive renderings, showrooms, brochures and sales promises are not substitutes for due diligence.

For Thai companies, at least the company name, address and registration details should be known. Corporate information and registered documents can be reviewed through the Department of Business Development, or DBD.

The following should be checked:

• the company affidavit or commercial registration extract,
• the company’s full legal name,
• the registered address,
• authorised directors,
• signing authority,
• registered capital,
• shareholder structure,
• financial statements, where available,
• previous projects,
• references,
• current or previous court proceedings,
• insolvency or liquidation risks,
• complaints from previous buyers,
• actual experience with comparable projects.

For smaller contractors or sole traders, buyers should also examine whether sufficient personnel, subcontractors, liquidity, insurance, project management systems and technical expertise are available.

2. examine dbd documents and signing authority

If the developer or building contractor is a Thai company, it is necessary to determine who can legally sign on behalf of the company. An agreement will only bind the company if it is signed by a person with valid authority.

The DBD also provides English-language Business Registration Certificates that may be downloaded electronically or delivered by post. Their authenticity can be checked using a reference number or digital signature.

The following should be checked:

• Does the company name in the agreement match the DBD documents?
• Is the company still active?
• Who are the directors?
• Can one director sign alone, or must directors sign jointly?
• Is a company seal required?
• Do the address and registered business objectives match?
• Has the company filed financial statements?
• Are there indications of financial difficulties?

Where substantial deposits are involved, it is risky to negotiate only with a salesperson, agency or project company without examining the legal entity behind the transaction.

3. examine the project land

The review of an off-plan project also begins with the land. A developer can only sell a project reliably if it has sufficient legal control over the project land.

The following should be checked:

• the land title,
• the owner of the project land,
• the front and back of the title,
• the plot number,
• the area,
• the boundaries,
• encumbrances,
• mortgages,
• registered leasehold rights,
• usufruct rights,
• rights of superficies,
• rights of way,
• court orders preventing transfer,
• the developer’s legal control over the land,
• whether the project plans correspond to the actual site.

Particular caution is required if the developer does not yet own the land, has only an option to purchase it or if the project land is subject to mortgages or third-party rights.

4. check access and infrastructure

A project can only be used effectively if access and infrastructure are secured. This applies to condominium developments, villa developments and individual construction projects.

The following should be checked:

• legal access to a public road,
• a registered right of way if access crosses another person’s land,
• access during the construction phase and for subsequent use,
• water supply,
• electricity supply,
• wastewater arrangements,
• internet and telecommunications,
• drainage,
• parking,
• fire safety and emergency access,
• maintenance of private roads and common areas.

A road used in practice is not necessarily legally secured. Access should be examined at an early stage, particularly for projects on slopes, islands, beachfront sites or within villa developments.

5. check zoning, building regulations and the intended use

Before purchasing, the buyer should determine whether the planned project is legally permitted at the specific location. Not every site may be developed, extended or used for tourist or commercial purposes without restriction.

The following should be checked:

• the applicable zoning classification,
• permitted use,
• building height,
• setback requirements,
• Floor Area Ratio,
• Open Space Ratio,
• environmental requirements,
• coastal protection rules,
• slope restrictions,
• national parks or protected areas,
• local regulations,
• restrictions on hotels, resorts or short-term rentals.

Under Thai building control law, construction, alteration or demolition may require approval from the local authority. Before substantial payments are made, buyers should therefore verify whether the required permits have already been issued or can legally be obtained.

6. examine the building permit

For off-plan projects, a clear distinction should be made between plans that are merely proposed, permit applications that have been submitted and permits that have already been approved.

The following should be checked:

• Has a building permit been issued?
• Has the permit merely been applied for, or has it already been approved?
• In whose name was it issued?
• Does it cover the project being marketed?
• Do the plans, number of units, building height and floor area correspond to the sales materials?
• Are there conditions imposed by the authority?
• Have amendments or additional approvals been issued?
• What happens if the permit is refused?

A project marketed solely through renderings and sales plans, without a secure permitting basis, carries significantly higher risk.

7. check the environmental impact assessment

Larger projects may require an Environmental Impact Assessment, commonly referred to as an EIA.

According to published EIA information issued by the Thai authorities, hotels or resorts with at least 80 units or 4,000 square metres of usable space, as well as residential buildings with at least 80 units or 4,000 square metres of usable space, may be subject to an EIA requirement in connection with an application for a building permit or the relevant notification to the local authority.

Certain high-rise buildings, large buildings, developments in environmentally sensitive locations and land development projects may also require an EIA. The applicable EIA rules provide specific thresholds for high-rise buildings, large buildings and certain land developments.

An EIA review is especially important for condominiums, hotels, resorts, villa developments, coastal sites, sloping land, islands and environmentally sensitive locations.

8. check the foreign quota for off-plan condominiums

If the project is an off-plan condominium, the Foreign Quota must also be reviewed. Foreigners may generally own up to 49% of the total unit floor area in a condominium project.

For an off-plan purchase, it is not enough to ask whether the project is intended to be registered as a condominium in the future. The buyer must also determine whether the specific unit is genuinely allocated for foreign freehold ownership and how this is protected in the agreement.

The following should be checked:

• Will the project be legally registered as a condominium?
• Is the selected unit reserved within the Foreign Quota?
• Is this expressly confirmed in the agreement?
• What happens if the Foreign Quota is unavailable later?
• Which banking and transfer documents will be required for registration?
• When will registration at the Land Office take place?

A sales promise alone is insufficient if the legal registration cannot subsequently be completed.

Contractual protection for an off-plan purchase

9. review the reservation agreement carefully

Many buyers first sign a reservation agreement and pay a reservation fee. This document is important because it often forms the basis for later payments.

The following should be checked:

• Is the reservation fee refundable?
• Is there a due diligence period?
• Can the buyer withdraw if there are problems with the title, permits or EIA?
• What happens if the building permit is not granted?
• What happens if the Foreign Quota is unavailable?
• When will the main agreement be signed?
• Is the buyer already required to make additional payments?
• Have verbal promises been included in writing?

A reservation fee should not be paid while it remains unclear whether the developer, project land, permits and legal structure are viable.

10. review the purchase agreement or sale and purchase agreement

The main agreement should regulate in detail what will be constructed, delivered and transferred.

Important provisions include:

• a precise description of the unit or villa,
• its location within the project,
• the plot or unit details,
• the area,
• construction plans attached to the agreement,
• technical specifications,
• materials,
• furniture,
• fixtures and equipment,
• the payment schedule,
• the completion date,
• handover conditions,
• consequences of delay,
• termination rights,
• repayment obligations,
• liability for defects,
• deviations in floor area,
• allocation of taxes and fees,
• registration at the Land Office,
• dispute resolution and jurisdiction.

The agreement should not merely refer generally to marketing materials. The decisive issue is which plans, materials and specifications form a legally binding part of the contract.

11. link the payment schedule to construction progress

One of the central risks of an off-plan purchase is that the buyer pays too much too early. The payment schedule should therefore be linked as closely as possible to objectively verifiable construction milestones.

The following should be checked:

• How much is the reservation fee?
• How much is the deposit?
• When are further instalments due?
• Are instalments linked to genuine construction milestones?
• Who certifies the construction progress?
• Is there independent verification?
• What happens in the event of construction delays?
• May the buyer withhold payments?
• Is an escrow, trust or other security mechanism available?
• What happens if the project is cancelled?

The less construction progress that has been achieved, the more cautious the buyer should be about making substantial advance payments.

12. protection in the event of delay or project cancellation

Off-plan projects may be delayed or, in the worst case, may fail entirely. The agreement should therefore clearly regulate the consequences.

The following should be checked:

• a binding completion date,
• permitted reasons for extension,
• contractual penalties or compensation for delay,
• a termination right after a specified delay,
• repayment obligations if the project is cancelled,
• security or guarantees,
• the treatment of force majeure,
• the developer’s duty to provide information,
• evidence of project financing,
• the buyer’s rights in the event of material changes to the plans.

Agreements are particularly problematic where the developer has broad rights to extend the completion date while the buyer has very limited termination or repayment rights.

Individual construction projects: additional review of the construction agreement

13. treat the construction agreement as a separate area of risk

For an individual construction project, a simple purchase agreement is not sufficient. The construction agreement must regulate in detail what the contractor must deliver, when payments are due and how quality, defects and variations will be controlled.

Under the Thai Civil and Commercial Code, a hire-of-work agreement is a contract under which a contractor agrees to produce a specified result in return for remuneration from the employer. The law includes rules concerning the quality of materials, inspection during performance, delays, defects and the contractor’s liability.

The following should be checked:

• Who is the contractor?
• Is the contractor an individual or a company?
• Is there a general contractor?
• Who are the architect, engineer and site manager?
• Who will apply for the building permit?
• In whose name will the permit be issued?
• Are complete construction plans available?
• Are structural calculations available?
• Is there a Bill of Quantities or detailed schedule of works?
• Are the materials, brands and quality standards defined?
• Are alternatives regulated if materials are changed?
• Who will supervise the construction site?
• How will construction progress be documented?

14. construction progress, inspections and acceptance

The employer should have the right to inspect the work, or have it inspected, during construction.

The Thai Civil and Commercial Code provides that the contractor must permit inspection of the work while it is being carried out. Under certain conditions, the employer may also have rights where the work is delayed or is likely to be performed defectively.

The agreement should regulate:

• regular site inspections,
• photographic documentation,
• construction progress reports,
• independent site supervision,
• construction milestones,
• acceptance of individual stages,
• final acceptance,
• a snagging list or defects list,
• deadlines for correcting defects,
• retention of part of the payment until defects are corrected.

Without clear acceptance and defects procedures, it can become difficult to enforce claims in practice.

15. liability for defects and retention

A construction agreement should regulate not only when the buyer must make payments, but also what happens when defects are discovered.

The Civil and Commercial Code contains rules on the contractor’s liability for defects. Unless otherwise agreed, liability may be subject to different time limits depending on the type of work, with longer periods generally applying to structures erected on land than to ordinary works.

The following should be checked:

• Is there a Defects Liability Period?
• How long will the contractor remain liable?
• Which defects are covered?
• Are there warranties for the structure, roof, electrical system, plumbing and materials?
• Will part of the price be retained?
• When will the retained amount be released?
• Who bears the cost of correcting defects?
• What happens if the contractor does not respond?
• Are insurance policies in place?

A low construction price offers little value if liability for defects, site supervision and the acceptance procedure are inadequately regulated.

16. subcontractors and responsibility

Many contractors use subcontractors. This is common, but it should be regulated in the agreement. The Civil and Commercial Code allows a contractor to appoint subcontractors under certain circumstances, but the contractor generally remains responsible for their work.

The following should be checked:

• May the contractor appoint subcontractors?
• Must subcontractors be approved in advance?
• Who is liable for errors made by subcontractors?
• Is evidence of qualifications and insurance available?
• Who is responsible for workplace safety?
• Who coordinates the construction site?

Clear responsibility is particularly important for villas, swimming pools, electrical installations, air-conditioning systems, structural engineering and construction on sloping land.

Documents required for an initial review

The following documents are typically useful for an initial due diligence review of an off-plan purchase or individual construction project.

Documents concerning the developer or building contractor

• company affidavit or DBD documents,
• the company name and registered address,
• names of the directors,
• signing authority,
• shareholder structure,
• financial statements, where available,
• project list and references,
• information regarding subcontractors,
• evidence of insurance, where available.

Documents concerning the project land

• a copy of the front and back of the land title,
• the plot number and responsible Land Office,
• a site plan or Google Maps link,
• information regarding access and rights of way,
• details of mortgages or other encumbrances,
• existing lease, usufruct or superficies documents.

Documents concerning the project

• the project brochure,
• the master plan,
• the site plan,
• construction plans,
• technical specifications,
• the building permit or permit application,
• EIA documents or confirmation that no EIA is required,
• zoning information,
• the infrastructure plan,
• the construction schedule,
• the payment schedule,
• details of current construction progress.

Documents concerning the agreement

• the reservation agreement,
• the purchase agreement,
• the construction agreement,
• the payment schedule,
• termination rights,
• provisions on liability for defects,
• warranty terms,
• provisions relating to delays,
• provisions relating to project cancellation,
• the acceptance procedure,
• powers of attorney if a party will not attend in person.

Common mistakes made by foreign buyers

Foreign buyers frequently make similar mistakes in off-plan purchases and construction projects. These include:

• relying on renderings, showrooms or sales brochures,
• paying substantial deposits before examining the project land,
• failing to investigate the developer or contractor,
• failing to review DBD documents for a Thai company,
• signing a reservation agreement without termination rights,
• having no termination right if the building permit or EIA is unavailable,
• linking payments to calendar dates rather than construction progress,
• failing to appoint independent construction supervision,
• accepting unclear technical specifications,
• accepting unclear provisions on liability for defects,
• having no protection in the event of project cancellation,
• building a house on another person’s land without clear legal rights,
• assuming that future registration will automatically be possible,
• failing to check the Foreign Quota for an off-plan condominium.

Many of these mistakes can be avoided by carrying out legal and technical due diligence before making the first substantial payment.

Warning signs

Particular caution is required if:

• the developer does not provide DBD documents,
• the developer does not clearly own or control the project land,
• only renderings are available and no approved plans have been issued,
• the building permit is still missing,
• questions concerning the EIA are not answered,
• substantial deposits are demanded immediately,
• the reservation fee or deposit is stated to be non-refundable,
• the payment schedule is not linked to construction progress,
• the agreement contains no clear termination rights,
• materials and fixtures are described only in general terms,
• delay provisions are drafted entirely in favour of the developer,
• liability for defects is missing or extremely limited,
• the contractor and subcontractors are not clearly identified,
• the buyer is asked to rely on verbal promises.

Distinction from completed houses, villas and condominiums

This article concerns off-plan purchases and individual construction projects. If a completed villa or existing house is being purchased or leased, the due diligence checklist for completed houses and villas is relevant.

If an already completed condominium unit is being purchased, the condominium due diligence checklist should be used.

Conclusion

An off-plan purchase or individual construction project in Thailand can be attractive, but it involves particular risks. The buyer will often make payments before the property exists, before all construction stages have been completed or before the future registration can be guaranteed.

Due diligence should therefore examine not only the title and agreement, but also the developer, building contractor, project land, building permit, zoning, Environmental Impact Assessment, payment schedule, construction quality, liability for defects and termination rights.

The more money that must be paid before completion, the more important clear legal and technical protection becomes. Before making any substantial payment, the buyer should verify that the project is genuinely viable, that the promised rights can be registered and that the buyer will be adequately protected in the event of delays, defects or project cancellation.

Note: This article provides a general overview and does not replace legal advice based on the individual circumstances of a particular case.