New Regulations for Condominium Reservations

The real estate landscape in Thailand is set to undergo a significant transformation with the recent issuance of the Notification Prescribing the Business of Selling Condominium Units Through Reservations as a Contract-Controlled Business B.E. 2567 (2024) by the Contract Committee of Thailand’s Office of the Consumer Protection Board (OCPB). Published in the Government Gazette on October 3, 2024, this groundbreaking regulation aims to safeguard consumers from potential exploitation by condominium developers and business operators. The new rules are slated to take effect on January 31, 2025, providing a 120-day window for compliance. Thailand’s booming condominium market has long attracted both local and foreign investors seeking lucrative opportunities in urban centers like Bangkok, Pattaya, and Phuket. However, rapid growth often brings challenges, including instances where consumers might face unfair practices during the reservation and purchase process. Recognizing these concerns, the OCPB’s latest notification seeks to establish a more transparent and equitable framework for condominium reservations, ensuring that consumer rights are rigorously protected.

Defining the Reservation Business

Under the new notification, the business of selling condominium units through reservations is specifically defined as any business where a consumer enters into a reservation contract with a developer or business operator to secure a condominium unit by paying a reservation fee (or a similar benefit). Importantly, this fee cannot be classified as a security deposit or down payment and must obligate the consumer to enter into a subsequent sales contract to purchase the unit. This definition extends to reservations made through electronic channels, reflecting the growing trend of digital transactions in real estate.

Key Requirements for Reservation Contracts

To ensure consistency and fairness, the OCPB has outlined stringent requirements for reservation contracts:

1. Language and Format

• Language: All reservation contracts must be written in Thai to ensure clarity and prevent misunderstandings.

• Standard Form: Contracts must adhere to the Standard Reservation Contract form as specified in the notification. This standardized approach helps maintain uniformity across the industry.

2. Prohibited Clauses

The notification explicitly prohibits the inclusion of certain terms and conditions that could disadvantage consumers, including:

• Liability Limitations: Developers cannot exempt or limit their liability for breaches of contract.

• Unilateral Changes: No rights for developers to alter contract terms or impose additional burdens on consumers beyond the original agreement.

• Termination Rights: Developers cannot terminate contracts without written notice or without the consumer’s material breach.

• Payment Confiscation: Prohibition against confiscating reservation fees unless the consumer breaches the contract.

• Misclassification of Fees: Reservation fees cannot be treated as deposits or down payments.

• Assignment Fees: Developers cannot charge for reservation assignments.

• Common Property Usage: Restrictions on developers’ rights to use common property in the project.

• Personal Data Protection: Strict adherence to personal data protection laws, preventing misuse of consumer data.

3. Mandatory Contract Terms

The Standard Reservation Contract must encompass the following essential terms:

• Project Details: Name, location, reservation number, unit type, material specifications, and premium equipment lists.

• Timeline: Dates for contract signing, construction permit applications, permit issuance, and notification of the condominium unit.

• Financials: Unit price, reservation fee amount, any discounts, and accepted payment methods (e.g., cash, wire transfer, credit card).

• Consumer Rights: Clear stipulations allowing consumers to terminate the contract under specific conditions, such as:

  • Failure to obtain necessary environmental approvals.

  • Delays in entering into a sales contract within the stipulated timeframe.

  • Inability to secure construction permits.

  • Unauthorized changes to project details or construction materials.

  • Non-compliance with notification and contract terms.

  • Improper use of materials and equipment as per the contract.

Termination and Refund Policies

The notification delineates the circumstances under which either party can terminate the reservation contract:

• Consumer-Initiated Termination: Consumers can terminate the contract if the developer fails to meet key obligations, such as obtaining permits or adhering to agreed-upon materials and construction timelines.

• Developer-Initiated Termination: Developers can only terminate the contract if the consumer fails to enter into the subsequent sales contract within the agreed timeframe. In such cases, developers are permitted to confiscate the reservation fee.

Additionally, if a consumer’s loan application from a financial institution is not approved within the agreed timeframe, both parties retain the right to terminate the contract.

Refund Timelines:

• Cash or Wire Transfer: Reservation fees must be refunded within 15 days.

• Credit Card: Refunds should be processed within 45 days.

For developers terminating the contract due to consumer breaches, written notices must be issued at least 7 days prior to termination, allowing consumers time to rectify any breaches.

Embracing Digital Transactions

With the rise of digital platforms in real estate, the notification also addresses reservations made through electronic channels. Such contracts must comply with laws governing electronic transactions, ensuring that digital reservations uphold the same standards of transparency and fairness as traditional methods.

Compliance and Penalties

Non-compliance with the Standard Reservation Contract requirements is taken seriously. Developers failing to adhere to these regulations may face:

• Imprisonment: Up to one year.

• Fines: Up to THB 200,000.

• Both: A combination of imprisonment and fines.

These stringent penalties underscore the OCPB’s commitment to enforcing fair practices and protecting consumer interests in the condominium market.

Implications For Buyers

• Greater Protection: Consumers benefit from clear, standardized contracts that prevent exploitative practices and provide avenues for termination and refunds under specified conditions.

• Informed Decisions: With standardized terms, buyers can more easily compare different condominium projects and make informed investment decisions.

• Legal Recourse: The ability to terminate contracts under defined circumstances offers consumers legal recourse if developers fail to meet their obligations.

Looking Ahead

As the January 31, 2025 implementation date approaches, both developers and consumers in Thailand’s condominium market must familiarize themselves with the new regulations to ensure smooth transactions. Developers should proactively update their contract templates and reservation processes, while consumers are encouraged to thoroughly review reservation contracts and understand their rights under the new notification.

RealSiam.com will continue to monitor the rollout of these regulations and provide updates to keep our readers informed. For further details, consumers and developers can refer to the OCPB’s official notification and consult with legal experts to navigate the new regulatory landscape effectively.

Stay informed, stay protected, and make confident real estate decisions in Thailand’s vibrant property market!