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Legal Matters: Article #5 (December - February 2006)
Issues for the Buyer – Are the seller and the developer ready?
“What does a buyer expect to be presented with upon indicating interest to purchase in a particular development?”
A well prepared developer’s sales and legal team should present a seller with a verified title report showing clear, legal and fully transferable title. This should be reviewed by the buyer’s own legal team. Additionally, buyers will be asked to sign a reservation agreement which can vary in detail and fairness. If a developer is well prepared then it will be able to supply all contracts, details of either proposed or secured estate management company and a complete schedule of costs including not only the construction payments but also rent payment (where leases are used); registration fees and taxes; sinking fund fees and management fees and comprehensively all related fees and expenses.
(Desmond Hughes, Partner)
“How long should I need and will a seller give me before all contracts must be signed and agreed?”
A full title search of the land plot can take up to two weeks. Contracts can be reviewed by the lawyers at the same time or after title has been declared clear and if the seller is prepared to accept changes to the documents, the contract negotiation could take between three to four weeks. Developers often give buyers 30 days until their deposit is technically forfeit but practical developers will provide an extension where necessary bearing in mind that at this stage the buyer hasn’t fully committed. During the negotiation of the contracts no further monies should be paid.
(Kris Limcharoen, Partner)
“Should I expect the property management facilities to be in place?”
In a development which hasn’t been built, not necessarily. A developer should of course, before marketing the development for sale, have planned this element of the project as accurately as possible and be able to project costs and expenses often calculated in proportion to per square metre of space purchased. Developers may prefer to wait and assess the ongoing performance of property management companies in other developments before making the step of formalising an appointment. However, this will not prevent the developer from being able to offer a good standard of commitment to the seller in relation to procuring or arranging property management. Fees for the first buyer of properties in an estate who might have to occupy a quasi construction site area should be reduced where appropriate and possible until the estate is complete.
(Desmond Hughes, Partner)
“What level of construction plans and drawings should I expect to see and be included in the contracts?”
If there is an element of construction in any contract then it should be made clear what is being constructed and how. Reasonable deviations from the plans may be necessary and substitute materials may be used provided they are of similar quality. If a developer doesn’t have plans then it is at the stage of selling a concept as opposed to a viable product. Where plans are supplied buyers should make arrangements proportionate to the value of the property for an independent project manager to examine the quality of the implementation of the designs and plans by the construction entity. Variations should be submitted to the developer as early as possible and placed in the contract to protect the buyer in the event that the end product is not as per the buyer’s expectations. This should also pre-empt any attempts by the construction entity to attribute delays to variations. A final long stop completion date with penalty and eventual refund for failure to complete will also discourage deviation from and non-completion of the construction work.
(Kris Limcharoen, Partner)
This article is the fifth in a series of articles for Exclusive Homes and was co-written by Desmond Hughes (Partner) and Kris Limcharoen (Partner) based in the Phuket, and Bangkok offices of Belmont Limcharoen respectively and now with a new office in Koh Samui.
Information supplied by:
Belmont Limcharoen (Phuket)
4/1 Prabaramee Rd., Patong, Kathu, Phuket 83150
Tel: +66 (0) 7634 2882-4 Fax: +66 (0) 7634 2885
Email: desmond@belmontlimcharoen.com
Belmont Limcharoen Company Limited
39 th Fl., 3904 A United Center Building.
323 Silom Rd., Bangrak, Bangkok 10500
Tel: +66 (0) 2635 5071-3 Fax: +66 (0) 2635 5074
Email: kris@belmontlimcharoen.com
Belmont Limcharoen (Samui) Co., Ltd
23/30 Moo4 Bophut, Koh Samui, Suratthani 84320
Tel: +66 (0) 7724 6185-7 Fax: +66 (0) 7724 6188
Email: samui@belmontlimcharoen.com
www.belmontlimcharoen.com
