Property Due Diligence in Koh Samui | Horizon Homes Koh Samui

Luxury Villas & Property for Sale and Rent in Koh Samui, Thailand

Property Due Diligence in Koh Samui, Thailand

The Importance of Due Diligence

Investing in property on the beautiful island of Koh Samui can be an exciting venture, but it’s crucial to approach it with caution and thorough research. Recent events have highlighted the absolute necessity of conducting proper due diligence before making any property purchase in Thailand, with 2 local projects being halted for not abiding by the law.

What is Due Diligence?

Due diligence is a comprehensive research and investigation process conducted to gather information and assess the risks and benefits associated with a particular decision or transaction. In the context of property purchases, it involves verifying the accuracy of information provided and evaluating the potential consequences of the investment.

Recent cases in Koh Samui illustrate the potential consequences of inadequate due diligence.

The Due Diligence Process

Title Deed Verification

One of the most critical steps in due diligence is conducting a title deed search. This process will help you:

Verify the legal ownership of the property
Confirm if there are any liens or encumbrances
Ensure the seller has the right to own or lease the property

Property Document Review

You/Your agent/lawyer should thoroughly review all property documents to check for risks, including:

Land title documents
Land size, shape, and orientation
Legal right of access from a public road
Zoning regulations and permitted uses

Company Due Diligence (If Applicable)

If purchasing through a company, additional steps include:

Verifying company registration
Reviewing the company affidavit and shareholders list
Examining the balance sheet
Confirming asset ownership and valuation
Checking for loans or debts
Investigating any lawsuits against the company

Understanding Thai Title Deeds

It’s crucial to understand the different types of title deeds in Thailand:

Sor Kor Nung (S.K. 1) allows for land occupation and use with limited rights and cannot be upgraded.
Nor Sor Song (N.S. 2) grants temporary rights to use land, non-transferable except by inheritance.
Nor Sor Saam (N.S. 3) indicates possession rights with potential boundary disputes and requires public notice for transactions.
Nor Sor Saam Gor (N.S. 3 Gor) has confirmed boundaries and rights of use, allowing secure transactions without public notice.
Nor Sor Si Jor (N.S. 4 Jor) or Chanote offers full ownership with accurately surveyed boundaries and no usage restrictions.

Each type of deed confers different rights and has different implications for property ownership and use. For more details read our in depth article about title deeds in Thailand.

Additional Due Diligence Steps

To ensure a comprehensive due diligence process, consider the following steps:

Land Office: Conduct due diligence at the land office
Construction Permit: Check the construction permit at the municipal organization office
Property Tax: Verify property tax status at the district office
Court Cases: Check for any court cases against the property or owner
Bankruptcy: Investigate the owner’s bankruptcy status
Site Visit: Personally visit and inspect the property

Property Due Diligence Report

While we at Horizon Homes can guide you through the process, we strongly recommend engaging a qualified lawyer or legal firm to conduct a comprehensive Property Due Diligence Report. This report should cover:

Location
- Precise property location
- Accessibility and right to access
- Vicinity and environment analysis
Strata Title
- Verification of title deed
- Government assessed value
Building Details
- Improvement details
- Structure and improvement inspection
Law and Regulations
- Town planning compliance
- Building control regulations
- Potential expropriation risks
- Usage limitations
- Relevant government development plans
Property Analysis
- Advantages and disadvantages of the property
- Expert opinions and comments
Valuation
- Rationale and methodology
- Assumptions and conditions
- Assessed property value
Appendices
- Location plans, site maps, and building layouts
- Aerial photographs and DSIMAP
- City plan and property photographs
- Copy of the Strata Title

Due Diligence: Case Studies

The Anzhu Seamate Case

In July 2024, the Natural Resources and Environmental Crime Suppression Division (NED) halted construction on the Anzhu Seamate vacation home project in Maret sub-district. This case serves as a cautionary tale for potential investors, illustrating the risks of inadequate due diligence. Here are the issues to help you avoid them:

Building height violations: Structures exceeded the legal limit of 6 meters, reaching over 10 meters in some cases.
Deviation from approved plans: The project changed from individual houses to connected buildings without proper authorization.
Lack of proper permits: Construction proceeded without necessary approvals.

The Samui Green Cottages Project

The Samui Green Cottages project, located on Chaweng Noi Mountain, has come under scrutiny for several reasons:

Potential land encroachment: Concerns that the development might be encroaching on forest land or other restricted areas.
Discrepancies in reporting: The owner submitted plans for 40 villas but actually constructed 53, leaving 13 unreported.
Regulatory violations: Completed structures violate legal slope and height regulations.
Incomplete project: Only 6 out of 53 villas have been completed, with the project now on hold pending investigation.

This case has taken a troubling turn with reports of a journalist being threatened after investigating and reporting on these irregularities.

Key Takeaways from Recent Cases

These recent developments underscore several crucial points for potential property buyers in Koh Samui:

Thorough permit verification is essential: Both cases involve discrepancies between approved plans and actual construction. Always verify that all necessary permits are in place and that construction adheres to approved plans.
Environmental regulations must be respected: Violations of slope and height regulations can lead to serious legal consequences and potential project shutdowns.
Transparency is crucial: The undisclosed construction of additional villas in the Samui Green Cottages case highlights the importance of full disclosure from developers.
Legal expertise is invaluable: Given the complexities of these cases, engaging a qualified legal expert familiar with Thai property law is more important than ever.
Be wary of high-pressure sales tactics: The confrontational behavior reported in the Samui Green Cottages case serves as a reminder to be cautious of any undue pressure from property sellers or developers.

Protecting Your Investment: The Horizon Homes Approach

At Horizon Homes, we prioritize our clients’ interests and the integrity of their investments and have been constructing projects on Samui since 2007. We’ve also developed comprehensive resources to guide both buyers and renters through the complexities of the Koh Samui real estate market:

Buyers Guide: Essential information on the purchasing process, legal considerations, and key factors for investing in Koh Samui property.
Renters Guide: Valuable insights into the rental market, legal requirements, and what to look for in a rental property.

Why is Due Diligence Crucial in Thailand?

Conducting due diligence when buying real estate in Thailand is vital to avoid potential legal and financial risks. It helps identify issues that may seriously affect the investment’s value and profitability. In any country where ownership is complex you should always look to local professionals and do your own research.

How can I trust Horizon Homes?

We have over 50 years of combined real estate experience and have been in the Koh Samui Real Estate Market since 2007.
Constructed multiple projects on Samui, including Horizon Residence and Horizon Villas.
Won Best Koh Samui Developer 2017 and Won Best Real Estate Agency 2018

What specific checks should be performed during the due diligence process?

Key checks include:

Verifying Ownership: Confirm the seller’s legal right to sell the property by reviewing the title deed.
Title Deed Authenticity: Ensure the title deed is genuine and free from liens or encumbrances.
Zoning and Land Use Compliance: Check local regulations to confirm the property’s intended use aligns with zoning laws.
Permits and Approvals: Verify that all necessary building permits are in place and that the property complies with local construction codes.
Financial Obligations: Assess any outstanding taxes or utility bills associated with the property.

What are the common risks associated with not performing due diligence?

Risks include:

Purchasing property with undisclosed debts or liens.
Acquiring property involved in ongoing legal disputes.
Facing fines or legal issues due to non-compliance with zoning laws.
Discovering that the property was constructed without proper permits.
Potential financial losses from purchasing overvalued or encumbered properties.

The recent cases in Koh Samui serve as stark reminders of the risks involved in Thailand’s property market. Thorough due diligence is not just recommended—it’s essential for protecting your investment and ensuring a smooth property acquisition process.

At Horizon Homes, we understand the complexities of the Thai real estate market. While we can provide initial guidance and connect you with reputable professionals, we strongly recommend engaging a qualified lawyer or legal firm for comprehensive due diligence.

By staying informed, working with trusted professionals, and conducting thorough research, you can navigate these challenges and turn your Thai property dreams into a secure and enjoyable reality. Contact Horizon Homes today to start your journey towards safe and successful property ownership in Thailand.