The Director of Kathu District, Veera Kerdsirimongkol, said workers had been warned twice previously so the arrests were the next step.
The extremely valuable property runs along a 50-metre sea frontage and is 25 metre deep. It remains public land, Khun Veera believes.
But a man who claims to be the owner told Khun Veera yesterday that his grandparents had traditional ''ownership'' and that he had recently been granted permission to construct.
''The Mayor of Patong got me to dig a canal and gave me permission to build on this site in exchange,'' the man said in earshot of reporters.
After Mayor Pian Keesin's name was mentioned, Khun Veera said: ''We will see about that. First, the sor por kor [a traditional title] will have to be checked.''
Work on the plot, opposite the Aqua Restaurant, has pushed soil onto the beach, destroying coral. A large pipe has been buried to replace a canal.
Alongside the levelled off land sits a partly-constructed building - which the man says he also owns. Work on the building was halted some time back.
A sea wall about two-and-a-half metres tall is also under construction. Workers have demolished a Patong Municipality wall designed to prevent motorcycle access.
The arrested men are Sawat Timtong, Jamnong Kaorew, Likit Ratnaporn, Prommet Tongyon and Somkid Timtong.
They were taken to Kathu Police Station, which oversees Patong, and were likely to be charged last night.