July 16, 2024

Signing a reservation agreement when buying a property in Phuket.?

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when buying a property
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Reservation agreements are relatively simple, often a single page, but they should cover the most salient points of the real estate transaction. It is important that a reservation agreement “checks all the boxes” to ensure that the buyer is protected so that any deposit is refundable.

Essentially, this means that if your solicitor finds anything untoward about the property that would cause due diligence to fail, the buyer is entitled to receive the full security deposit from the seller or developer.

The reservation agreement is normally provided by the seller or the seller’s lawyer, and often signed before the buyer engages a lawyer. In fact, many people decide to go through the entire purchase property without the help of a competent attorney, but in some cases this may turn out to be a mistake.

To secure your purchase, you should ideally consult a lawyer before (or at the latest immediately after) signing the reservation contract. If you can, you should try to hire a lawyer before paying a deposit.

An experienced solicitor can ensure the deposit is paid with certain return guarantees if due diligence raises issues with the property. Your solicitor will also ensure that future monies are only paid subject to the developer having satisfactorily completed the construction or development milestones detailed in the agreement.

It’s also worth pointing out that many of the island’s lawyers will already be aware of the problems certain developers or projects have faced in the past, and can advise you on what to avoid. By employing a lawyer before signing the reservation contract, you can save time, hassle and potential costs of filing a reservation deposit on a project that the lawyer already knows will not stand up when it is subject to due diligence.

Some lawyers will insist on a “cooling off period”, in which the buyer can withdraw from the transaction within a certain period – without any penalty and with a full refund of the deposit.

For this reason, the lawyers or agents representing the seller may try to confuse you and may even suggest that your own independent legal representation is not necessary. In such cases, any deposit made may not be refundable, and you should be wary of any seller’s representative attempting to exert such pressure on you.

Disputes in Thailand can take time to resolve, and buyers should consider legal fees when trying to recover a deposit from a developer or seller. Paying a lawyer to make sure you have a solid booking agreement is much cheaper than trying to get your deposit back if you don’t.

It pays to use a lawyer, but sometimes the developer can recommend a lawyer for you. If you decide to engage the services of a developer attorney, you should at least be armed with the knowledge of what a reservation agreement should include.

Besides having all the buyer and seller details, here are the other key points that a reservation agreement should contain:

1: It must confirm exactly what is being sold. For example, is the property a villa, condominium or apartment? The reservation contract must also confirm the area (in rai or square meters) of the property. It should describe the legal structure. For example, is it freehold or leasehold? And if it is a freehold property, is there a Chanote freehold title and what is the land title number? Does the property include furniture or is it being sold as is? In some cases, it may be necessary to also list all fixtures and fittings included in the sale.

2: It should state that the deposit is part of the total sale price and will be applied as an advance payment when the due diligence is complete and the sale looks likely to proceed. It should also indicate the payment schedule for full payment.

3: Buyers should ensure they have enough time to perform due diligence (between 7 and 30 days) and should also include exactly what the lawyer will need to perform the necessary due diligence on your behalf. A well-designed reservation agreement should give the lawyer enough time to do their due diligence. It must also indicate the time required before the signing of the most important sale and purchase contract.

4: If the property is being sold off plan, it should also state the time frame for completion of the property. However, it should also state that if more time is required, a revised schedule for completion may be established by mutual agreement (in writing) of Seller and Buyer.

5: It should clarify what happens with the deposit if the buyer or seller withdraws from the transaction. If the seller does not respect the agreement, the deposit must be refunded in full. If the buyer fails to honor the agreement, the deposit is normally forfeited.

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