Any real estate professional who markets Thailand property to overseas investors will know that a considerable amount of time is spent explaining the legal structures, restrictions, and limitations around foreign ownership of land, and consequently, freehold ownership of villas and houses. In this article, we will explore the special case of a villa being sold within a freehold condominium project, which uniquely offers direct perpetual ownership rights to the land under Thai law, in the same way a condominium unit does. This unique type of villa is something you will increasingly notice if you keep a close eye on the Phuket villa market.
In this sense, although the property is physically a villa, it is legally treated as a condominium, which is what makes this ownership model possible.
It’s important to understand that in Thailand, a freehold condominium is not just a type of apartment, it refers to a development with a specific condominium licence, which allows foreign buyers to legally own the unit and a share of the common property on a freehold basis.
We will also consider to what extent developers may begin designing projects specifically to offer this unique type of property.
It should be noted that this is not a freehold villa in the purest legal sense, as the foreign buyer does not in fact own the land. However, it offers a similar benefit: the buyer has full ownership of the unit (their villa) and, crucially, legal rights to use and occupy the land beneath it indefinitely. This is achieved through their co-ownership of the condominium development’s common property, which is managed by the registered juristic person.
Understanding Legal Ownership Structures for Foreign Buyers of Villas in Thailand
Under Thai law, foreign nationals are not permitted to directly own land. This includes the land beneath the villa or house. However, foreigners can legally own buildings, meaning they can own the villa structure itself, and register it directly in their own name, but not the land it sits on.
This restriction has resulted in two ownership options for foreign buyers of villas in Thailand – excluding the special case of a villa within a freehold condominium project, which we will return to shortly.
1. Thai Company Ownership (Freehold via Company)
One common approach is to hold the freehold of the land in a Thai limited company. In this structure:
- The land is owned by the company, not the individual.
- The foreign buyer can be a director and shareholder, but:
- Total foreign ownership must not exceed 49%.
- At least two Thai shareholders are required.
- More than one director is allowed, but the ratio between Thai shareholders and foreign directors must be 2 to 1.
- The company must operate as a genuine, income-generating business, with annual financial statements submitted to the authorities and full legal compliance. It must not be established purely as a holding vehicle for land. Any Thai shareholders must have a genuine interest in the company and must not act solely as nominees. They are also required to receive financial compensation in the form of dividends if the company has generated a profit to be distributed.
To ensure the foreign investor retains control, the company should be structured with protections such as only giving the foreign director(s) signing authority.
If set up correctly, this structure allows the buyer to sell, lease, or transfer the land and villa, including passing ownership to next of kin. However, administering a company requires ongoing costs, including:
- Annual auditing
- Corporate tax reporting
- General company maintenance and compliance obligations
We must note that in 2024, the Thai government began publicly stricter enforcement of the law against foreigners using illegal corporate holding structures to acquire freehold villas incorporating Thai nominee shareholders. Bearing this in mind, it is more important than ever that any company is set up and operated in full compliance with the laws of Thailand.
2. Leasehold Land Ownership
An alternative way to acquire the land is via a lease. In this case:
- A 30-year lease is registered on the land in the name of the buyer.
- Separate agreements with the developer can include lease renewal options of one or more further 30-year periods, resulting in a potential total lease term of up to 60, 90 years or more. These renewal rights are often included in the original sales price, though in some cases, additional fees may be charged when the lease renewals become due.
- In some contracts, the lease may include a fixed option to purchase the freehold title later.
Thai law only enforces the initial 30-year lease term, and whether future landowners will honour renewal agreements remains a legal grey area. However, the risk is typically lower when buying from a well-established developer, as their track record provides reassurance. Additionally, being part of a branded development, such as one affiliated with an international hotel or resort brand, can further mitigate the risk of lease renewals not being honoured.
Villas Within Freehold Condominium Projects (The Special Case)
A third, lesser-known option is the purchase of a villa within a freehold condominium project. In this case:
- The villa is legally registered as a condominium unit.
- The land the villa sits on is owned collectively by all unit owners as part of the condominium’s common property, managed by a registered juristic person.
- The foreign buyer can register the villa freehold in their own name and hold a perpetual ownership right to use and occupy the land.
While the buyer does not hold an individual land title, they do hold shared co-ownership of the land and common areas, which includes the ground their villa sits on. However, this does not mean other co-owners have any right to access or use the land beneath another owner’s villa – exclusive use remains with the villa owner. This model avoids the complexity of lease agreements or corporate ownership and provides a clean, fully legal path to foreign freehold ownership.
Within these developments, only up to 49% of the total saleable floor space of the units can be sold to foreigners as freehold villas or condos. This is known as the foreign quota. The remaining 51% – referred to as the Thai quota – must be owned by Thai nationals or entities and is subject to the standard ownership restrictions under Thai law.
Lower Costs and Easier Resale
The acquisition costs of a freehold villa condominium are often significantly lower than those of a villa held via a company. With no need to set up a corporate structure or transfer land ownership, the buyer simply registers the villa directly in their name. In contrast, buying via a company involves:
- Unless the seller’s company can be taken over, the buyer will face initial legal and administrative costs to set up a new company. This includes the need to appoint a minimum of two Thai shareholders and structure the company to comply with Thailand’s legal requirements.
- Because the authorities are now strictly monitoring company setups, particularly to prevent the use of nominee shareholders, the process has become more complicated. As a result, only certain law firms with the right expertise can now handle these structures reliably, and the process is no longer as straightforward as it once was.
- Government transfer fees and taxes to transfer land (and possibly the villa structure itself) into the company’s name
- Ongoing company maintenance, including accounting, audits, and taxes
From a resale perspective, freehold villa condominiums are generally easier to sell. Many buyers are wary of company structures due to their complexity, cost, and perceived legal risk. The transparency and simplicity of villas for sale in Phuket, which benefit from being freehold condo units, appeals to a wider buyer pool.
Not Always the Right Fit for Every Investor
For high-net-worth investors seeking standalone luxury villas on private land, or those wanting complete privacy without communal elements, a company ownership model may be preferable.
Likewise, buyers planning to develop or operate a rental business may find the company structure more appropriate, especially when owning multiple properties or running a fully commercial operation.
Why Phuket Is Ideal for these Freehold Villas
Phuket lends itself particularly well to freehold villa condominiums. Unlike Koh Samui, where land zoned for condominium development is in short supply, Phuket has more land qualifying under the necessary zoning laws to obtain a condominium licence.
Phuket’s tropical climate and lifestyle are far better suited to villas than apartment-style condominiums. Villas typically offer more space, larger outdoor living areas, gardens, and the opportunity for a private pool, ideal for the tropical island lifestyle. For the same reason, villas are also better suited to families, expats, and those seeking long-term residence.
Limited Supply and Potential Legal Reforms
Currently, only a Limited number of projects in Phuket offer this ownership model. Whether it becomes more common will depend on how developers respond to buyer demand and how Thailand’s regulatory landscape evolves.
In mid-2024, the Thai government proposed two major changes to property law:
- Extending lease terms from 30 years to up to 99 years
- Increasing the foreign freehold quota in condominiums from 49% to 75%
While promising, these proposals have not yet become law, and similar reforms have been proposed before without being enacted. For now, villas within freehold condominium projects remain one of the few secure, perpetual ownership solutions available to foreign buyers of landed property in Thailand.
Looking ahead, it remains to be seen to what extent Phuket developers will begin designing projects specifically to accommodate freehold condo villas. Creating low-density villa developments that qualify for a condominium permit requires careful planning, zoning compliance and strict adherence to the specific requirements for a condominium licence. Any changes in the foreign ownership laws will, of course, also dramatically influence this dynamic market.
