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Phuket Property – Making a Hotel Acquisition in Thailand

By on Apr 27, 2014 in Hotel-Tourism, Property News

Thailand is a popular tourist destination and, to many of those with an entrepreneurial spirit, it is an attractive country in which to operate a hotel business. Phuket, for example, is a bustling tourist hotspot and sees some of the highest levels of foreign investment in the hotel industry.

Acquiring an already established hotel business can ease the process of governmental approval procedures, and it can provide an instant source of income through its existing client base and facilities.  There are, however, numerous factors to be considered in hotel acquisition transactions. Legal due diligence is one such consideration that will greatly assist you in clarifying any defects in the hotel. Other issues include licences and permits and validation of the legal ownership of lands and buildings.

Only leases of three or more years, are required to be registered with the Land Office. Therefore, a title search will not show a lease with a period of less than three years, but the hotel’s owner should disclose an unregistered lease agreement during the due diligence process.  In Thailand, land use is regulated under the City Planning Act for residential, industrial, agricultural, environmental and cultural protection, or other purposes. Additionally, the construction of a building must comply with the relevant rules, regulations and notifications issued under the laws governing building control and the environment as well as other relevant laws. The construction of a hotel building must also abide by these rules.

We have encountered cases in which the construction of a hotel has not complied with zoning regulations, and this can lead to major problems. For example, in the case of a hotel being constructed in a prohibited zone, it may be ordered demolished.  If the hotel was constructed in a prohibited zone before the relevant law was enacted, the hotel is prohibited from being renovated or altered in the future, and the owner cannot construct any new buildings.

In terms of operating licences, a hotel licence is required, which will indicate the type and number of rooms. This is valid for five years and it can be renewed for another five years each time. The applicant is required to prepare an environmental impact assessment report (if the hotel will have 80 or more rooms) as well as other permits for buildings to be used as a hotel.

It is also important to check who owns the intellectual property rights in the hotel, such as the hotel’s name, internet domain name, or other businesses in the hotel, and to ensure that all rights and ownership to those rights can be transferred to the buyer.

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