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Phuket condo owners warned 'holiday rentals' less than 30 days risks fines, jail time

PHUKET: The Phuket Provincial Land Office has issued a formal warning to owners, developers and managers of condominiums that renting out their properties on a daily basis is a breach of the Hotel Act that may incur a fine or even jail time.

tourism, land, property, economics, crime,


The Phuket News

Saturday 2 July 2016, 09:00AM


Renting condos out for periods of less than 30 days, the prime length of stay for holidaymakers, may bring the owner a fine of up to B20,000 or even up to one year in jail.
Renting condos out for periods of less than 30 days, the prime length of stay for holidaymakers, may bring the owner a fine of up to B20,000 or even up to one year in jail.

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.”

C and C Marine

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.)

 

 

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Joe12 | 03 July 2016 - 21:49:06

Rorii...unbelieveable...LOL. It's just like you trying to convince everyone that nominee shareholders are not illegal. You need to spend 4-5 years studying law, so you can comprehend Acts of Parliament. I look forward with amusement to the next Act that's not illegal. At least Kurt has an excuse... I never understand his waffle.

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Rorii | 03 July 2016 - 17:27:41

Dear Editor,
Even your own article states that there is not breach of the "Hotels" act, however, it does say you must pay taxes, if you rent out you condo, this I accept, as it is income. But as for being "illegal" it is not. The "illegal" act would be if you do not pay taxes, and this would come under the jurisdiction of the Revenue Department. 

The Phuket News

Kurt | 03 July 2016 - 17:19:06

The Hotel Act of 2004 was not launched yesterday, Right?
How is it possible than that Phuket now has estimated 92,000 illegal hotel rooms?

Do I have to understand that since 2004 , now 12 years, there was no Hotel Act law enforcement? 
Why was that?
70% of the Phuket hotel rooms illegal? 
Wow, that is not nothing, hehehehe.

And what now? How to get rid of 92,000 illegal hotel rooms?
The talks/meetings/commitees, sure great paperwork starts up.

Interesting to learn what did grow illegal with Government knowledge during 12 years can be legalized during the next 12 years.
We wait and see. Looks like on forehand a hopeless undertaking.

In the thai cultural setting many of these illegal rooms were
'overseen' and not considered as illegal, right?
So, now out of the blue 12 years 'overseen' illegal becomes illegal-illegal?
Hard to believe.

But now it clearly costing the legal hotels money ( low room rates to attract tourists).
Well, to me it looks the same as with minivans, taxis, and tuk tuks.
Long live the free Phuket room market mechanism, at least for the time being as long the Hotel Act of 2004 not functions.
Guess it needs a whole new government department to set up, with many government officers to tackle 92,000 illegal Phuket hotel rooms.
Good for employment.

Anyway, panicking, promising up to 1 year jail time ( that never will executived) and/or max 20,000 thb fine ( laugh about it), will not impress.

The Phuket News

Editor | 03 July 2016 - 15:18:11

Dear Rorii,

See our Phuket Law story in April 7 explaining how such accommodation establishments are illegal, here:
http://www.thephuketnews.com/phuket-law-is-your-house-or-condo-an-illegal-hotel-57225.php

The Phuket News

Rorii | 03 July 2016 - 15:08:25

What part of the "Hotels Act" is being broken, under the "act" buildings with 4 rooms, or less, are NOT classified as hotels.
 
Just ONCE I would like to see the media, print, and online, do a decent job and ask these very simple, VERY basic, questions.

Joe12, aka Ed, aka "whoever"... read this, then supply your link, to counter my comment.
 
https://www.mayerbrown.com/files/Publication/208bbcbf-ca11-46c7-be27-db99548b84d7/Presentation/PublicationAttachment/ca281ec2-3c88-4e3b-a172-4b379108e414/alert_jsm_thailand_10jun08.pdf

The Phuket News

Pinot | 03 July 2016 - 10:40:14

Another reason not to buy a condo in Phuket. All this crazy development here under the mistaken assumption that buying a condo is a good investment. Enforcement of this rule should put a stop to the environmental disaster all this building is doing to the island. Buying a condo was already a bad financial decision, I hope this is the death knell for future development. Over 3000 units coming on-line in Kamala alone.  

The Phuket News

ERICDEKEGEL | 02 July 2016 - 16:12:40

I contacted the phuket hotel association regarding the air B&B problem and he mailed me back(unexpected and polite) That it was a problem brought up but nobody there was really interested to move on. Where can we call to denounce these people? And on top no workpermit. I have all things done properly and costs me some money each year for workpermit etc.. I can make a nice list already when I see around me, add those time sharing guys and condo salers without workpermit!

The Phuket News

Christy Sweet | 02 July 2016 - 14:55:12

First rate priced accommodation demands first rate community infrastructure which Phuket is far from achieving. Trash everywhere, ocean pollution, poor roads, unsafe transport, none of it is up to standards of Singapore. Make Phuket as expensive and watch tourism evaporate.  

The Phuket News

Nasa12 | 02 July 2016 - 11:36:00

 But Singapore or Bali don`t have all this corruption like Phuket small illegal Hotell pay money every week and that`s it.

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