Escrow in Thailand
In recent times a further safeguard not only but also for property investors was implemented in Thailand through the enactment of the Escrow Act BE 2551.
Generally, escrow can be described as an arrangement between three parties, namely seller, buyer and escrow agent, whereby the agent would have to be a neutral third party with no connection to either seller or buyer. Such escrow agent can be authorized to hold funds, important documents (such as title deeds) or other legal documentation to be distributed and released subject to certains terms and conditions, particurarly the seller´s and the buyer´s instruction.
Typically, such esrow services are performed in relation to property transactions and are primarly designed to protect buyer´s interests until title transfer. However, it also needs to be understood that such escrow arrangement may also protect the seller´s or agent´s interests. Nevertheless property developer´s may argue that such escrow arrangements may cause additional problems in order to secure project financing which is often arranged through collection of buyers deposit payments, particurarly in these days of economical downturn where banks are extremely reluctant with providing funds required for payment of construction expense. However, ultimately developer´s would surely benefit from a widely acceped escrow system as it helps to strengthen buyer´s confidence in the Thai property market.
It also needs to be understood that a well and clearly drafted esrow agreement may ease and simplify a transaction significantly. It allows the parties to authorize an escrow agent to conduct certain instructions relating to a transaction such as release of funds, documents etc. on the parties behalf. At the same time both parties can perform simultaneously as agreed with peace of mind and the assurance that neither party will perform without the other party doing same.
An agent who intends to offer escrow services in Thailand is required by law to obtain a license from the relevant government body. Furthermore, such agent must be a financial instution or other juristic person as described in the relavant regulations. Unfortuanately, uncertainity seems to exist under what conditions such license can be obtained. Therefore, it remains to be seen to what extent such escrow arrangements will become a widely used and additional instrument to secure consumer protection in Thailand. This may also be the reason why off-shore escrow services subject to other legal jurisdiction providing clear escrow laws are still of high interest for property buyers.
In regard to escrow property agreements it is important to mention that the licensed escrow agent shall inform the relevant land department of such agreement, upon which the responsible offical records that this specific immovable property is subject to escrow. Once recorded, basically no registration of ownership transfer to any person other than the one designated under the escrow agreement subject to notification through the escrow agents, can be made. Further, no other right such as lease or mortgage, can be registered against such land, unless the escrow agreement allows to do so or the escrow agent gives its consent.
This article is written by International Law Office Patong Beach Co., Ltd., a Phuket based law firm. In case of enquiries, please contact Michael Greth, Consulant, by email (michael@ilo-phuket.com) or phone (+66-(0) 76-222 191-5).
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