| Legal Issues: |  |
|||
|
||||
Beyond due diligence |
||||
Story : Marie Moon |
||||
|
Due diligence is the first step toward owning a piece of the Thai property market and every website, magazine and consultant strongly advises buyers and developers to invest in a good lawyer to determine the land title prior to committing to any purchase. But occasionally no matter how much caution the lawyer exercised, problems can still arise. With the Thai government’s system of deeds registration in provincial land offices, there is no state guarantee of title. As such there are frequent title disputes in less developed rural areas and Koh Samui’s land scandal last year brought the issue to the attention of the international market. The highest standard for land ownership is a Chanote, which includes all the legal rights to that land. The deed is evidence of ownership and proof that the land has clearly defined boundaries. Lesser title deeds of Nor Sor 3 Gor and Nor Sor Gor, do not have official markers designated by the Land Department and boundaries are recorded in relation to the neighbouring plots. As a result, errors in length of boundary or area are not uncommon. Typically title disputes fall under one of four categories; physical problems such as encroachments of the building onto adjoining land; financial problems like undischarged mortgages or liens on the land; legal problems including incorrect conversion of title upgrades, discrepancies in land description, incorrectly stamped documents or missing signatures; and what accounts for a majority of title insurance claims, fraud and forgery. The major title problems in Thailand include unclear ownership, poorly defined land boundaries and incorrect records of land. Alison Cooke, CEO of First American Title Insurance Company, Hong Kong described, “One of the best known title problems in Thailand was in Phuket where a local land official for years corruptly issued land titles in the Kamala Bay area. If title has been obtained by corrupt dealings in Thailand, then the title is “void ab initio” - which means that the Government will undo the transaction and take the land back.” Many landowners in the area are still awaiting court decisions. “Elsewhere in resort areas such as Samui and Hua Hin there have been overlapping jurisdictions (or perhaps lack of understanding) between title offices and forestry officials which has resulted in people buying land thinking they could develop on it, and then finding out it was forestry or beachfront land which is not permitted to be developed.” Title insurance was only introduced to Asia by First American some five years ago, and many investors and their lawyers are not yet familiar with the product and its benefits. The insurance policy protects against all of the risks associated with land title and claims are on a no-fault basis. Alison explained, “Title insurance protects the insured by providing a full financial indemnity for any losses suffered because of the title problem. As soon as you hear of any challenge to your title, you notify us and we take it from there. We appoint legal advisors to provide an assessment of the situation and pay all of the legal costs and, if necessary, court fees to defend the title. In the event of a loss (either of the whole title, or part of it) we pay up to the insured amount - usually the value of the property. This is in addition to any expenses to defend.” Even where the lawyer has exercised utmost due diligence, there is still the possibility of fraudulent documents or inaccurate recordings at the land office that could result in a dispute. Alison clarified, “A lawyer’s opinion on title is just that - an opinion based on the facts as discoverable at that time and based on the professional judgment of the lawyer. It is not uncommon for courts to take a different view based on additional information presented in a claim. In addition, there are risks, such as fraud, forgery or corruption that may not be discoverable from the title investigation and documentation review. “In the event that you do have a claim on your title, you would have to prove that your lawyer had been negligent in advising you in order to make any claim against him. This would most probably involve suing him in negligence in court, at your own expense and time. Even if you are successful in such a claim, you would likely only be paid if the lawyer had sufficient professional indemnity insurance to cover your claim.
Typically the title insurer conducts due diligence working with the clients’ appointed lawyers to avoid double costs. Alison explained, “The scope of cover will depend upon the results of our due diligence exercise, as will the final premium amount. Pricing depends on a combination of country and deal-level risks, but as a general guide, we’re pricing Thailand in the region of 0.35% of property value.” Some foreign banks are now looking at the possibility of providing finance to foreign purchasers of Thai real estate. It is very likely that this finance will be subject to title insurance. Alison said, “Financiers are generally much more willing to grant loans on title-insured purchases or investments as it mitigates a major risk of both investment and lending. In the United States, it is not possible to get a mortgage without title insurance and bankers across Asia are increasingly looking to the comfort such policies provide as they become more widely available here.”
|
“Title insurance provides a “belt and braces” coverage for those items which the solicitor has reviewed and additional coverage over other unknown defects, fraud and forgery. It provides “No Fault” recovery in that it doesn’t matter how the problem happened, the fact of the problem is enough to make the claim. This provides far superior protection than having to litigate to prove fault. It is much quicker, easier and cheaper to make a title insurance claim than to sue your solicitors in negligence.” |
Tropical Living: July 2007, Volume 7 Issue 2 |
|
|
|
|
