Contract Protection for Buyers of New Condo Units
There is a crucial difference between buying a condominium unit that you can see and buying the condominium dream appearing on a glossy brochure or poster. Buying a physical thing that you can see allows you to inspect the thing before you decide to purchase.
However, when purchasing a new condominium unit, our common sense is clouded by the ability to purchase the condominium unit at the cheaper price available before it is built. We pay a deposit (Plus subsequent installment payments) to a developer for a condominium unit that appears only on a brochure or poster. Such a bargain purchase, however, exposes the buyer to several risks: The condominium unit, when completed, may not match how it appears on the glossy brochure or poster
- The condominium unit, when completed, may not match how it appears on
the glossy brochure or poster; or
- The materials used to built the condominium or other specifications may
not be as promised by the developer; or
- The completion of the condominium unit may be delayed and ownership title transfer of the unit cannot take place at the time anticipated.
At the initial stage, the condominium project developer usually get the buyer to sign a to sell and to buy condominium unit contract or, in some cases, incorrectly called a sale contract or reservation contract. In this contract, the developer promises to sell a condominium unit to the buyer at a future time and the buyer promises to purchase the unit at the future time.
If any of (a), (b) or (c) above occurs, the buyer certainly has the right to sue the developer in court for breaching the to sell and to buy contract. However, unless there are clear stipulations in the contract on the materials, specifications or ownership title transfer date of the condominium unit, it may be difficult for the buyer to substantiate a breach of contract claim.
In addition, even when the breach of contract can be substantiated to the court, few buyers will want to go through the litigation process hoping to claim back the money that they had paid to the developer.
A new law, paragraph 3 of Section 6/1 of the Condominium Act B.E. 2522 (1979) (As amended by Condominium Act No. 4 B.E. 2551 (2008) provides contract protection to buyers. Paragraph 3 of Section 6/1 provides:
“It is regarded that all advertising materials, text, photos, sale letters are part of the to sell and to buy contract or sale contract of condominium unit, as the case may be. If the advertising material, text or photos differs from the to sell and to buy contract or sale contract of condominium unit, it shall be interpreted for the benefit of the buyer”.
In practice, “part of the to sell and to buy contract” means that all advertising materials i.e. brochures, posters, text, photographs, sale letters must be attached to the to sell and to buy contract and it is stipulated in the contract that all these are considered part of the contract. As a result of paragraph 3 of Section 6/1, a to sell and to buy contract must now protect buyers against developers who lure buyers’ money with empty promises or cannot fulfill their promises due to whatever reasons. Developers will now have to think twice about the information that they provide to potential buyers of their condominium units. They cannot promise something that they cannot deliver and/or cannot deliver promptly.
Buyers, the next time you enter into a contract to purchase a condominium unit with a developer, make sure that the glossy brochure and other related sale documents are attached to and formed part of the to sell and to buy contract.
Written by David Tan. David is a Lecturer of Business Law at Asian University and author of the book - A Primer of Thai Business Law (Second Edition), available online at www.chulabook.com . In Bangkok, the book is available at all Kinokuniya and Asiabooks bookstores. Any questions to David regarding condominium unit sales and purchases should be sent to email@example.com
David Tan Articles:
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Property Purchase Deposits - If you pay a deposit or reservation fee to a property developer, does that mean you have a sale contract?
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Employee Failing Probation - David Tan's series of legal articles move on to employment law. He starts with a look at the requirements for terminating employees who are on a probationary period.
Fixed Employment Contracts - Fixed period employment contracts are a technique employers can use to avoid having to pay severance and provide prior notice of employment termination to employees.
Sacking an Employee - What are the legal implications for an employer to sack an employee in Thailand?
Selecting Outsource Company - If you outsource in Thailand, what rights do the outsource company's employees have from your company?
Contract Protection for Buyers of Condos - How can you be sure your new condo will turn out like the pictures in the glossy brochure?