Buying an Off-Plan Condominium in Thailand and Escrow: How to Protect Your Money

What Is an Off-Plan Purchase

Off-plan means a contract under which you pay the developer long before the condominium has been built and titled in your name - sometimes even before construction has begun on site. This is fundamentally different from buying a completed unit on the secondary market, where the principal amount is paid to the seller on the day the transfer of title is registered at the Land Office, with only a small deposit paid before that point.

With an under-construction property the sequence is reversed: a substantial portion of the price goes to the developer upfront, and you receive ownership only at the very end. It is precisely this sequence that creates the primary legal risk, which must be understood in advance.

Typical Payment Schedule

In most projects the payment structure looks as follows:

• Reservation fee - usually around THB 100,000 (approximately USD 3,300). Reserves the unit while the main contract is being prepared.
• Down payment - typically 10-20% of the price, payable on the day the sale and purchase agreement is signed.
• Instalment payments - paid in equal portions during construction, tied either to a calendar schedule or to construction milestones.
• Final payment - the balance due upon handover and registration of the transfer of title.

The specific amounts and due dates are set out in the contract itself (often in a separate annex, the payment schedule). Importantly: the larger the share paid before handover, the greater your risk.

The Core Problem: Escrow Is Almost Never Used in Thailand

In most countries a buyer's funds are held in an escrow account at an independent bank and are released to the developer only once the contractual conditions have been satisfied. In Thailand this is legally possible, but in practice it is rare.

The Escrow Act B.E. 2551 (2008) introduced the institution of escrow. However, neither that Act nor the Condominium Act B.E. 2522 (as amended in 2008) requires a developer to use escrow in sales transactions. Developers generally decline to use it because buyers' instalment payments are themselves the source of construction financing.

As a result, money is typically transferred directly to the developer's bank account, with no guarantee of repayment other than contractual obligations. What this means for you:

• In the event of the developer's insolvency or default, you may lose everything you have paid - your claims will rank alongside those of general creditors.
• In any dispute the developer's position is stronger: it has already received a significant portion of the funds. If you refuse to make the final payment because of a delay or poor workmanship, the developer will assert that you are the party in default, retain what has been paid and sell the unit to someone else. An escrow account would make such a manoeuvre impossible.
• Recovering money through the Thai courts is a lengthy, expensive process with an unpredictable outcome.

Escrow vs. Direct Payment to the Developer

If a developer is willing to discuss escrow at all, bear in mind that the account must be opened at a licensed bank or financial institution, not with a lawyer or agent.

Reliability of the Developer

Since payment guarantees are almost non-existent, the developer's profile is of paramount importance. The risk is lower when dealing with:

• a large developer, ideally a public company listed on the exchange (SET);
• a company with substantial registered capital and a verifiable track record of completed projects.

Particular caution is warranted with a local limited liability company that is undercapitalised - for example, a company with registered capital of THB 5 million running a THB 100 million project, with no proven track record. If problems arise, there will be nothing to recover from such a company.

The 49% Quota and Foreign Currency Transfer (FET)

A foreigner may hold a condominium unit on a freehold basis, but only within the limit of 49% of the total residential floor area of the building (Condominium Act). Before making any payment, confirm that the foreign ownership quota in your building has not yet been exhausted and that the unit is being sold on a freehold basis rather than as a disguised leasehold arrangement.

To register foreign ownership it is necessary to demonstrate that funds arrived from abroad in a foreign currency and were converted into Thai baht in Thailand. This is evidenced by a FET (Foreign Exchange Transaction form), formerly known as Tor.Tor.3, which is issued by the receiving bank when a transfer of USD 50,000 or more is received. When payments are made directly to the developer, the developer is responsible for obtaining and providing the FET required for title registration.

The Most Common Problems Faced by Buyers

• the developer became insolvent and the project was only partially completed;
• the unit is in practice titled as a leasehold rather than freehold;
• poor construction quality;
• delayed handover;
• breach of other contractual terms.

What to Check and What to Pay Attention To

• To whom and where you are paying - the developer entity's bank details, and whether or not escrow is used.
• The developer's capital and track record - registered capital, completed projects, stock exchange listing status.
• Payment schedule - what proportion is paid before handover; the smaller that proportion, the safer the transaction.
• The 49% foreign ownership quota - confirmation that it has not been exhausted and that the ownership type is specifically freehold.
• Obligation to provide the FET - include this requirement in the contract, and transfer foreign currency from abroad with the correct payment reference.
• Termination and refund terms - what will be refunded in the event of developer delay or a material departure from the agreed specifications.
• Quality warranties and timelines - a fixed handover date, penalties for delay, and a warranty period.