The notice, issued to all 234 registered condo projects in Phuket – hence affecting all 26,071 legally registered condo units on the island – was signed and issued by by Phuket Land Office Acting Chief Wisith Chokchai on June 9.
The notice read:
To managers/developers of condominiums,
“Today, there is a lot of news about condominium developers/owners renting out rooms or buildings that they have ownership of to foreigners or tourists on a daily basis (daily rental) rate that generate income as if they were a hotel (under the Hotel Act 2004).
“This type of operation is causes a public nuisance for renters in the same complex and creates unsafe places for tourists, which may lead to loss of life and property. It is inacceptable to operate an illegal hotel. The penalty for this is up to one year in jail or a fine of up to B20,000, or both.”
Mr Wisith told The Phuket News this week, “We want to let developers and owners know that renting out condos on a daily basis is against the Hotel Act and that they must operate their condos in accordance with how their properties are registered in order to avoid legal action.
“This issue may not be easy to tackle because sometimes it is not the developer that provides daily rentals, but the individual condo owners. Regardless, it is for the condo managers and developers to remind owners about this law and tell them that if officials find out (about illegal renting of condos) the owners will face legal action,” he said.
The public warning follows Phuket Vice Governor Chokdee Amornwat on June 3 dispatching the Phuket Land Office a specific order to combat the problem of illegal condo rentals, Mr Wisith explained.
“We were ordered to enforce regulations regarding condominiums across Phuket – owned or operated by Thais and foreigners – and not allow any rentals on a daily basis because it is against the Hotel Act 2004,” he said.
“The order came from Ministry of Interior and the Phuket Provincial Office in an effort to tackle illegal hotels (sic) on the island,” he added.
In a report sent to the provincial office, Mr Wisith explained, “The Land Office is in charge of condo registration. Every condo built in Phuket must be registered as such with the Land Office.
“There are more than 200 condo units in the Phuket Town area that are registered with us which we have sent the notice out to. The Land Office in Thalang has also sent out notices to all the condo units registered their area,” he wrote.
“All developers and the management operators of condominium projects in Phuket Town in Kathu have been warned that renting out rooms on daily basis is considered operating as a hotel.”
Mr Wisith explained to The Phuket News that the problem lies in that if a property is registered with the Land Department as a condo, then it cannot be registered as a hotel.
“And a condo must be operated as a condo, which can be rented out for periods of 30 days or longer – but cannot be rented out on a daily basis,” he said.
Dr Kritsada Tonsakul, who heads the Phuket-based Southern Thailand chapter of the Thai Hotels Association, this week voiced his support for the crackdown.
“These places that rent out on a daily basis without a hotel registration are operating illegally and it is great that officials are starting tackling them now,” he told The Phuket News on Wednesday (June 29).
“If we strictly enforce the Hotel Act and rid the island of all illegal hotel rooms, it will benefit not only the legal hotel businesses, but also greatly benefit Thailand’s, and Phuket’s, tourism industry as well.”
In December, Dr Kritsada led a delegation of tourism and hospitality leaders in filing a petition calling for the government to take action against an estimated 92,000 illegal hotel rooms in Phuket.
“At least 70 per cent of hotel rooms offered in Phuket are illegal. To make them all legal can take time and some of them simply cannot be registered as a hotel simply because structurally they are not hotels, so they must operate according to their registration,” he said this week.
“If Phuket has only legal hotel rooms available to tourists, rental prices will compete better, maybe even on par with international rates as charged by hotels in other countries. Look at places like Singapore or Bali, their rates and reservations for hotels are increasing because their hotel rooms are legal – they don’t have to compete with illegal hotel rooms rates.”
Bhuritt Maswongssa, Bhuritt Maswongssa, President of the Phuket chapter of the Tourism Council of Thailand (TCT), strongly agreed, and even warned that a tourist-accommodation price war could have a dire effect on Phuket’s tourism industry on the whole.
“If officials who have the power to stop this from happening neglect their duty and allow illegal hotels to exist, then there will be a rental rates issue among the hotel businesses. Competition over rental rates will create a domino effect. Hotels have to cut costs, and this could easily result job losses, a fall in the quality of service and trust in Phuket hotel standards. This would be a disaster for our tourism industry,” he said.
“Phuket has 2,090 hotels offering about 120,000 rooms. Our supply already exceeds demand, putting pressure on hotel prices. If this continues, we are already heading for a disaster,” he added.
Phuket property guru Bill Barnett, Managing Director of hospitality consultancy C9 Hotelworks, also condemned the practice of condos being rented out at daily rates.
“The current situation of real estate developers offering guaranteed returns in the absence of obtaining hotel licenses is a blatant abuse of Thailand’s Hotel Act. Government scrutiny in this sector is urgently needed as it undermines trading of legal hospitality operations and goes further into the issues of tax and tourist safety.”
However, while noting that the key issue driving government intervention is the current mandate to increase tax revenues, he added, “That said, the Hotel Act needs to be updated to allow condominiums that do wish to obtain hotel license and villa estates or properties a clearer pathway,as there are a many who are willing to obtain the necessary documentation.”
Phuket Governor Chamroen Tipayapongtada, when announcing earlier this year that “illegal hotels” would be coming under scrutiny, said, “There are so many businesses that provide rooms and board in Phuket operating illegally in contravention of the Hotel Act 2004.
“Businesses such as condominiums, apartments, flats, mansions, guesthouses, homes for rent, rooms for rent, commercial buildings – most of which have been altered or developed into accommodation and rented on a daily basis – are considered a hotel business and hence as illegal hotels.
“Illegal hotels are damaging legally registered hotel operators who have their hotel license. We are also concerned how these affect tourists’ safety, because we don’t have enough security to cover all these places.”
Gov Chamroen added, “We understand that some of these operators are unaware that their business operation contravenes the Hotel Act and they cannot register their business as hotels because they are not hotels
“A hotel business involves many laws, so solving this issue is not easy. The Ministry of Interior is working on this issue. I know the ministry is considering a proposal to allow other types of building to operate as hotel, which is now being considered by their policy committee.
“While we are waiting for the ministry to decide on this, we have to regulate hotel businesses in Phuket by allowing only the legal hotels to operate, and places that did not have a permit to operate as a hotel will have to wait until they are legally registered.
“People operating such illegal hotel businesses with the intention avoiding registering their business will be punished according to the law,” he said.
See also: Phuket Law: Is your house or condo an illegal hotel? (Click here.)