Land Leasing with Landowner: The Pros and Cons

For those new to real estate transactions, leasing land from the owner can raise several questions. What factors need consideration? What are the benefits and potential pitfalls? Which legal regulations are relevant, and is installment an option? Most importantly, who should be contacted for various expenses? PropertyScout has compiled a comprehensive guide addressing these inquiries on leasing land from owners.

Finding the right Plot of Land

When choosing the right land and owner, it's essential to prioritize several aspects for a seamless investment and a greater likelihood of future success. The following points should be carefully considered:

Define your Purpose

Whether you would like to buy the land to build a house, a townhouse, or a commercial building, it's important to clearly define your true purpose in the land purchase.

Do your research on the market prices of the plot of land you're interested in

Analyzing the land market and determining suitable prices in the desired area requires assessing current land prices as well as future price trends. This analysis aids in comprehending the overall market value of the land and evaluating the investment's potential profitability for future sales, leasing, or any business endeavors on the property.

Do your research on the landowner

Reaching out and gathering information from the landowner directly or through local contacts aids in comprehending the seller's background and offers insights into the condition of the desired property. Moreover, it facilitates the discovery of undisclosed details and potentially uncovers additional background information from community members.

Examine whether you're financially ready or not

Before making any decisions, check your financial readiness and living situation. Devise a practical land leasing plan that corresponds to your current circumstances and income, accounting for potential future changes. This proactive approach helps prepare for and prevent potential issues.

The Pros and Cons

Opting for self-financed land purchase from the landowner presents both advantages and precautions. Engaging in these steps without intermediaries or banks can cause confusion, particularly for newcomers striving to comprehend the intricacies and manage these procedures . So, it is crucial to thoroughly understand the necessary knowledge and precautions in this scenario.

Pros

• More flexibility in case of future financial constraints.
• Easier agreement process with less complicated procedures.
• Immediate agreement and occupancy possible.
• No need to verify income sources.
• No credit checks required.
• Sufficient funds are the only prerequisite for the purchase transaction.

Cons

• Possibility of contract termination.
• Excessive interest rates beyond the set limits.
• Short installment period of 3-10 years.
• High down payment.
• The property owner may use the property as collateral and allow it to be mortgaged to others.

Failure to make payments on time or facing future unmanageable payments could lead to immediate repossession of the property. This situation arises from the absence of comprehensive laws safeguarding property owners involved in property transactions or land transfers. Consequently, land officials continue with the transactions assuming mutual consent from both parties.

Is Land Subdivision Possible?

You can subdivide land for nine plots or more, with prior authorization. After obtaining approval, individuals can invest in public utilities. The land allocation process must adhere to the Land Allocation Act of 2000. Applicants must request to the provincial land officer or the local branch officer of the province, along with the following documentation:

• Land title deed or certificate of permission with the applicant's name.
• Map showing the approximate area and number of plots.
• Various encumbrances with individuals involved in land allocation.
• Method of land allocation sales and compensation payment.
• Contract forms used in land allocation sales.
• Location of the land allocation permission office.
• In case the committee disapproves, there is a provision for the applicant to appeal within 30 days of receiving the order.
• Issuance of land allocation permission within 7 days from the committee's approval.
• Fee rates for land allocation permission issuance are as follows: 100 baht for agricultural land allocation and 250 baht for other types of land allocation.
• Transfer of land allocation permission incurs a fee of 3,000 baht.

What to watch out for in a Land Sale and Purchase Contract

When engaging in high-value real estate transactions, the law mandates the establishment of a fair and substantiated contract. Crucial elements in the contract involve holding both parties accountable in the event of a breach, necessitating strict adherence as outlined by the law. So, carefully examine the legal implications when formulating a contract. Let's explore the precautions to be taken into consideration.

• Ensure that the individual entering into the contract is the rightful owner or has a valid power of attorney.
• Having a purchase agreement in place before proceeding is advisable. While not a legally needed, buyers and sellers can directly proceed with the transaction at the land department. But, for large purchases involving credit applications and home inspections, it is advisable to have a purchase agreement, confirming the occurrence of the property transaction.
• Before signing any documents, read all the details. Confirm the existence of the property and its satisfactory condition. It is crucial that the agreed-upon conditions between the seller and the buyer stipulate that upon the transfer of ownership, the property becomes the complete responsibility of the buyer, with no possibility of returning it in case of future issues.
• A deposit should be paid, the specific amount of which is contingent upon the agreement between the buyer and the seller.
• Establish a payment timeline. It is generally recommended to designate a period for settling the remaining deposit after signing the purchase agreement, typically within 1-3 months. This timeframe allows ample time for communication with financial institutions for credit applications.
• Thoroughly inspect the land before making any purchase to ensure it is in good condition and aligns with the discussed terms with the seller. This includes both its size and location. Conduct the inspection jointly with the seller, facilitating the resolution of any uncertainties during the same visit.
• Under what circumstances can the contract get terminated. It is advisable to discuss and reach a formal agreement on the specific conditions allowing both the buyer and the seller to terminate the contract immediately in case of any violations of the agreed terms.

Bottom Line

Opting for direct land installment without intermediaries or banks can be more complex than expected. This is because it demands a comprehensive grasp of legal regulations and documentation to prevent fraudulent activities from either party. If uncertain about handling these aspects independently, seeking guidance from experts in real estate transactions and legal measures is recommended for the benefit of both the buyer and the seller.

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