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Scoring system can protect buyers
KANANA KATHARANGSIPORN
The law firm Rene{aac} Philippe & Partners Ltd suggests property buyers check developers' credibility before signing deals that cause losses and legal troubles. Managing partner Rene{aac}-Philippe Dubout said the developer test compiled by the company [see chart] was 90% accurate when tested on developers ranging from strong, listed firms to small, financially weak companies.
The test was designed after the company accepted a case for customers of a Koh Samui residential project who got nothing after paying for villas.
He did not disclose the name of the project or its developer, saying only that around 100 buyers out of 200 faced the problem and almost all were foreign.
''Usually, the development of a project worth almost two billion baht needs at least 900 million baht as capital. But this developer has registered capital of only four million baht,'' he said.
He added that this developer did not acquire all plots promised to buyers, and those it had were held by many companies. This project had no land allocation permits and the firm had no other activity in the property market.
The test is based on five criteria to assess the reliability of developers. The type of company is the first factor and capitalisation is a key indicator of financial health.
Buyers should also consider how long a company has been in operation _ the longer, the more reliable. A company's experience also tells its story. The more projects successfully completed, the better for buyers.
Another is its financing scheme. The terms of payment proposed say a lot about its financial situation and its ability to complete projects, he added.
''After answering these points, the potential buyer obtains a score of each developer, giving a strong and viable indication of its overall capabilities,'' said Mr Dubout.
He said most well-known or listed developers usually scored above the 75-point mark but those scoring below 40 should be seriously assessed and reconsidered by potential buyers.
''The key question for buyers is how to separate reliable developers from risky ones,'' said the Swiss lawyer who has been in Thailand as a legal consultant for more than 10 years.
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