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Daryl Davies at Chom Tawan: a great buy gone wrong

Eviction Looms Over Expat Residents

Wednesday, November 26, 2014
PHUKET: Daryl Davies knew when he saw the luxurious homes set amid eight tropical acres with stunning sea views that this is where he wanted to spend his retirement years.

''They are absolutely delightful,'' says 70-year-old Mr Davies from Melbourne, referring to a $30 million development on the pristine west coast of the Thai resort island of Phuket.

Mr Davies, a retired commercial pilot, paid the equivalent of about $500,000 in Thai baht for his dream three-bedroom home in Chom Tawan, one of the most prestigious residential developments on Phuket.

But a Thai court has authorised an auction of the homes of Mr Davies and more than 40 other buyers to the highest bidder if millions of dollars owed to the Industrial Commercial Bank of China (ICBC) by the project developer are not repaid by a December 17 deadline.

The plight of the buyers, many of whom have been living in the homes since they were completed seven years ago, illustrates the risks foreigners face buying real estate in Thailand, one of the most popular destinations for retiring Australians.

Mr Davies and other buyers, including five Australian families, believed they were covering all bases before paying for what were promised to be effectively 90-year leasehold titles for the homes, including hiring lawyers to do due diligence on the property.

Napawan Asia Limited, the developer of the Chom Tawan residential estate, owes millions to the Industrial Commercial Bank of China.
''We never for one moment thought there would be a problem,'' says Mr Davies, who is married to a Thai.

Two years ago buyers awoke to find notices pinned to their doors declaring that a Thai manufacturer had not been paid for supplying appliances to the development.

''We were shocked. We started investigating what had happened but it only got worse, much worse,'' Mr Davies told Fairfax Media.

The developer, Napawan Asia Limited, had promised that buyers who paid upfront for their houses would receive titles reflecting their freehold/leasehold ownership once the development was registered with Phuket's land department.

''The company kept telling us everything is going nicely. It's happening, don't worry. But it went on and on,'' Mr Davies said.

Catherine Gathani, a buyer from Hong Kong, said she was aware when finalising the contract for her home there was a mortgage on the land but Napawan Asia told her ''this would be paid down as the buyers' stage payments were made, so that by the time the project was complete the mortgage would be fully paid''.

She said buyers only discovered several years later the company had not repaid the original mortgage and that it had given the titles of the buildings to the bank as part of a debt restructuring or remortgaging arrangement.

Andrew Street, the British developer behind Napawan Asia, admits the company was ''over-extended commercially at the commencement of the global financial crisis,'' which he says had a significant impact on Phuket.

Mr Street, who has returned to live in Britain, told Fairfax Media ''I have remained and still intend to deliver all that the buyers require''.

''Within weeks of this date there will be firm plans to bring this debt restructuring to a conclusion,'' he said.

''All parties are involved in producing an agreement to achieve the buyers' requirements relating to ownership . . . we are at the final negotiations of all matters with the bank, buyers and suppliers to conclude this matter.''

But Mr Davies said attempts over recent months for a settlement between ICBC, the buyers and Napawan Asia have collapsed in acrimony.

Under one proposal discussed by ICBC in October, the buyers would be forced to pay almost $200,000 more than their original purchase price in exchange for the bank releasing the mortgage.

The development builder is also owed several million dollars, complicating any settlement.

Mr Davies described the proposal as a ''bridge too far'' for the buyers.

''Many of the investors are retirees who face losing most or all of their life's savings. It is an appalling situation to be in,'' he said.

''We fear that one day soon we will all gets knocks our doors and be told to leave our homes.''

Mr Street, who bought a $1 million house in the English Midlands in August 2013 after leaving Phuket, said ''certain people'' have tried to personalise the issue and derail any settlement amid a myriad of legal claims and counter-claims.

''It is not in the interest of all parties concerned for me to return to Thailand whilst in the final steps of the debt workout,'' he said.

As the auction deadline nears, buyers desperate to keep their houses have asked Thailand's military rulers to intervene in the case and have taken urgent legal action to try to head off the sale of their houses.

Mr Davies said the buyers he is speaking for have not given up hope of keeping their homes ''but our position looks dire''.

He said the buyers decided to speak publicly about their plight to warn others who may be considering investing in Thai real estate.

Comments

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A nightmare for the residents involved and the end result looks like a galaxy black hole and all created by an expat. By the way he's "I'm alright Jack".

Posted by seht1912 on November 26, 2014 12:44

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Do the buyers have the initial 30 year lease hold registered properly.

If not, then they didnt do due diligence worth a damn.. IF they have how are the being evicted.

Posted by LivinLOS on November 26, 2014 13:08

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You would have to be brave to buy one of those at the auction by the sounds of it. What a terrible situation for the poor owners :-(

Posted by Amazing Thailand on November 26, 2014 13:21

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Never buy, only rent. TIT.

Posted by Smithy on November 26, 2014 13:42

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What an appalling situation.
Just don't buy in Thailand. Everything you have is at risk.

Posted by jimbo34 on November 26, 2014 13:50

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One of the reasons why buyers should be careful when buying property from foreign developers, who rely on sales and loans to complete the projects.

Better to buy from Thai developers.

Posted by Sean on November 26, 2014 13:52

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The term 90 year lease is at best a joke. Unless your name is on the back of the chanote covering your lease then other agreements are not enforceable except through long drawn out court cases. Recovering any money under these conditions is next to impossible. Time for the lawyers and developers in Phuket to stop screwing the public.

Posted by Don Battles on November 26, 2014 14:41

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When are people going to learn? There is no such thing legally as a 90 year lease.

How long are people going to blame the 'global financial crisis' for their deviousness?

Posted by Arun Muruga on November 26, 2014 15:15

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people ask why I rent after all these years, the above article goes a good way of explaining it

Posted by Michael on November 26, 2014 16:22

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Punishment should be based on recovering all financial damage and extremely lengthy jail time.

Posted by phuketgreed on November 26, 2014 16:38

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Mr.Davis apparently has got legal legal only in regard of viability of promises of developers, but apparently there was no thorough legal advise that would include workflow of transaction and supervision of execution of it.

Transfer of title, keeping/acquiring on the was some associated rights, getting rid off of incumberances is the most tricky and risky part of the transaction, and require proper design and thorough drafting in contract, as well as supervision how on every point upon it unfolds, until full completion of absolutely all steps.

If these parts of the transaction are left to its own devices, then the result often is as described in the article, especially in consumer transactions.

Posted by Sue on November 26, 2014 16:44

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People should always be aware that the 90 year lease is also a scam.
After the 30 years is up, you get a renewed 30 years, unless the company that originally sold you the lease has disappeared. Meaning after 30 years, you own nothing and will have to vacate.

Just another scam in Paradise. Good intentions don't pay debts. I am sure Mr Street has all the best intentions in the world in his $1m house.

Posted by Tbs on November 26, 2014 18:39

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How to avoid this? I suppose:
A. Go with a developer and development that is thoroughly well funded and fully paid up
B. Don't buy anything that has a chance of not being built, or of being re-possessed
C. Certainly do not trust anyone, local or foreign who does not show you all the facts and give you proof / peace of mind (right now).

Lets hope it works out for everyone!

Posted by J on November 26, 2014 19:20

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[quote]
...90-year leasehold titles for the homes
[/quote]

Rich people, expensive houses. And not one of them managed to spot that a 90 year leasehold agreement is totally 'fake' under Thai law....

Posted by Simon Luttrell on November 26, 2014 20:16

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Promises in Thailand don't mean much life savings and assets wiped out based on his promises.

Posted by slickmelb on November 26, 2014 21:02

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The buyers knew or should have known that the land is mortgaged at the time they signed the leases since there is a mortgage entry on the backside of the land title of the development. Land titles are public and can be inspected at the responsible land department office. Furthermore, the leases may not be registrable before the mortgage has been released unless the bank consents to the registration(s). Furthermore, the leases must be registered within three years upon signing otherwise they may not be enforcable. These are all basics most of the property buyers in Thailand know or should know; loads of literature (in English) available about this topic and plenty of law firms on the island which can explain in detail. The truth is that most of buyers do not want to know respectively ignore these (potential) issues, they just wanna buy no matter what. Most of them actually received legal advise but ignore the risks they are told about. The dream of a property in a tropical paradise seems to make people blind...and it is so much more comforting to listen to the mates in the pub next door while having a beer how a transaction should be structured rather to all this complicated and boring stuff the lawyers are talking about. The issue here has nothing to do with Thai or farang developer. Ultimately, it has something to do with a non-existent legal frame work providing for a (more or less) riskfree property investment (i.e. if you are buying off-plan in Thailand): no development license, (normally) no payment into an escrow account + release in accordance with construction progress (but direct payment to the developer), no guaranteed title transfer (respectively lease registration) affected by a government agency upon completion, no performance bond...etc., etc., etc. All this together plus too many hobby developers running around not knowing what they are doing can be a dangerous mix. Why people invest their life savings with these cowboys in such an insecure environment and, in addition, ignore all the alarm bells is beyond me. It is also true that there are actually many decent developers with solid track records who have completed various projects. It is simply not true to say that buying property here is always a scam. Not excusing incompetent or crooky developers, if things go wrong, first ask yourself did you really not know...and would you have given all your life savings to a guy with no track record to build a resort or condo project...before you point the finger...last but not least...why writing a letter to the government...???...there is a legal process to be followed...and there are courts or arbitration panels to resolve eventual disputes...what is the government supposed to do here now...talk to the bank and ask them to forgo the loan....?????

Posted by James on November 26, 2014 23:06

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Never purchase property here unless you receive the chanote/freehold title on settlement, Thailand is full of conmen working in real estate ready to lie to you and rip you off then return to their home country to avoid prosecution
buyer beware

Posted by Peter Allen on November 27, 2014 11:26

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As noted below there are good developers in Phuket, both foreign & local.The keys to successful property purchase for foreigners are: 1) go with someone with a track record 2) ensure Land title has no mortgage 3) ensure developer owns the land 100% 4) buy when the roads & electricity/water supply/drainage are complete.

Then you will know the money you pay the developer will go to building your house, as the developer has sufficient funds & is too committed to disappear.

Posted by Overseas_Scot on November 27, 2014 13:28

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@peter: your post makes no sense. chanote is a land title category representing full ownership of the land and foreigners cannot own land in Thailand (except very few exceptions).

Posted by Pit on November 27, 2014 14:59

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ICBC and Mr Street should hang their heads in shame. Disgusting.

Posted by Sad girl on November 27, 2014 17:53

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@Sad Girl: why should the bank hang its head in shame? what do you suggest for the bank to do? Forgo the loan (partially)?

Posted by Jimmy on November 27, 2014 19:08

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" ..and Mr Street should hang their heads in shame. Disgusting."

Andy talked a great game and was the life and soul of Catch & the Supper Club for many years. Ah...the good old days...we thought they would never end. I notice his 2 falang henchmen (sorry salesmen) are still around Phuket and have moved on as best they can...

Posted by phonus balonus on November 27, 2014 19:51

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Why would you buy a house for a million dollars before paying off your debt? Obviously doesn't care about his clients, just himself.

Posted by Anonymous on November 28, 2014 06:34

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I would never buy in Thailand after reading this sad story.These poor buyers

Posted by Sally San on November 28, 2014 06:42

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Sally San,

never make decisions - positive or negative - in regard of such purchases on the basis of media articles.
Media can trigger awareness of professional legal advise, yes, and then advisor should be tasked with the job to follow a transaction up to full conclusion and execution as well as on the way to explain risks in plain language that you would be able to estimate how these risks fir your risk appetite.

Posted by Sue on November 28, 2014 07:16

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I am in Thailand at the moment with the intention of buying a Condo (not in Phuket) the development that I am looking at is 8 years old, and until reading this sad story, I did not think it would be necessary to instruct a solicitor to conduct a search to ensure that there was no mortgage or any other debt on the land on which the condominium is built; I would obviously expect a search on the individual apartment that I am considering making an offer on, to make sure that it is debt and mortgage free and that it was originally purchased within the allocation of 49% that allows a foreigner to own the freehold (it is owned by a foreigner) but with the development being 8 years old I would have assumed that there would not be any issue with any mortgage or debt on the land; assumption is obviously the tool of the fool, and I have learned a valuable lesson from the sad experience of these people that I feel desperately sorry for. I am however, very surprised at how many of these people (probably all) went ahead with a purchase, furnished with the knowledge that there was a mortgage on the land, simply taking the developers word that it would be paid and that everything would be fine and dandy, and the bank cannot be blamed or criticised, given the time period they would appear to have been patient, but now have only one option for getting their debt repaid, it is indeed a sad story and a lesson for everyone

Posted by Alan on November 28, 2014 08:39

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Does anyone know if the developer's sales people still are working in Phuket? Surely they would have known the real story about what sounds like another shonky non-Thai Phuket property developer

Posted by Susie Wong on November 28, 2014 09:45

Editor Comment:

They would know the real story but don't expect them to tell it straight.

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@ Pit
Freehold title is important and you get the chanote from the seller if the property is freehold, otherwise you look elsewhere at properties that are freehold
A foreigner cannot own land here as anyone knows who has purchased a property, but there are ways of protecting your investment as every expat who has invested in property knows
Pay for some genuine advise and find out for yourself

Posted by Peter allen on November 28, 2014 15:34

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I usually have sympathy for people who make a mistake and while his situation is sad, what was he thinking when he bought that thing? Thailand does not have any of the legal protections for business transactions we take for granted at home, virtually none of them.

Posted by Robert on December 7, 2014 12:21

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Smells fishy to me. Developer moved back to UK! Um wonder why, get out fast go like the wind don't worry about those poor souls

Posted by Hellena on December 12, 2014 17:06


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