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SCMP Reporter

THE Bank of Asia is filing a lawsuit against a Thailand property developer selling beach-front condominiums to Hongkong investors.

  The developer, Phuket Palace Co, has been selling luxury resort hotel condominiums on the Thai holiday island of Phuket, guaranteeing support and sponsorship by the Bank of Asia.

  It is now being held responsible for false advertising claims and extensive problems concerning ownership rights and hidden tax expenditures.

  ''We want the public to know that we have nothing to do with Phuket Palace.

  ''The Bank of Asia never gave any guarantee to this company, and I have contacted the manager at Phuket Palace, Mr Graham Desmond, to tell him that we are filing a lawsuit,'' said Mr Phiphat Psornsuwan, senior vice-president of the Bank of Asia in Bangkok.

  ''This is just the beginning. We had an angry client come in with his Phuket contract and it purported to have our bank manager's signature of approval on it.

  ''That contract was never signed by any member of our bank,'' Mr Psornsuwan said.

  Despite threats, Phuket Palace is continuing to advertise guarantees from the Bank of Asia.

  ''Actually, it's true, we are no longer working with the Bank of Asia because we found that they didn't speak English well enough to assist our foreign clients,'' said Mr Graham Desmond, general manager of Phuket Palace.

  ''We are now working with Siam Commercial Bank. But the Bank of Asia's name is still written on the advertisement because a lot of different banks support the development.''   But Mr Nabhengbhasang Krishnamra, senior vice-president for Siam Commercial Bank, denied the bank was working with Phuket Palace.

  ''Switched to us? That's entirely false. We do not guarantee Phuket Palace in any way and we certainly do not provide financing for them,'' he said.

  ''I'm going to look into this. The only connection we have with them is their account.

  ''They recently opened an account with us, set up especially to receive money from Hongkong investors participating in their project.

  ''But having a personal account with us has nothing to do with us guaranteeing or supporting their project,'' Mr Krishnamra said.

  Mr Psornsuwan, of the Bank of Asia, said: ''We are also getting complaints from investors saying that, after having paid their entire down payment, they are not receiving their title of ownership.''   According to Mr Nicholas Brooke, senior partner at Brooke Hillier Parker, ownership problems such as these do not come as a surprise.

  ''The property situation in Thailand is by no means clear for foreign investors,'' said Mr Brooke.

  He said that 100 per cent ownership for foreign investors was only attainable under certain circumstances and that the best foreign investors could hope for was a 30-year lease.

  One Hongkong investor, an employee of Swiss Bank Hongkong, who spoke under condition of anonymity, said: ''Myself and four others here at Swiss Bank Hongkong decided to each purchase an apartment.

  ''We quickly learned that they were way overpriced, but we knew something was definitely wrong when we couldn't get the title transferred to our name,'' he said.

  ''Now that we've paid the full US$2,000 booking fee, along with the first nine months rent, we can't even get a direct answer from the company as to when or if we will get our title of ownership.''   He said that before he paid his down payment sum, Mr Desmond had been extremely attentive and helpful, but since the problems had started he could not even contact Mr Desmond by phone.

  Another Hongkong investor said that, in addition to the ownership problems, hidden tax expenditures were adding about 10 per cent on top of the initial quoted price.

  ''All the information sent to us, as potential investors, was wrong.

  ''I don't know what we will do. In the original contract, nothing was said about the land transfer tax or government tax.

  ''It was only upon the notification of completion that we learned we had been taken for a ride.

  ''Now they're insisting that we pay an additional 10 per cent of our original investment, and 10 per cent is easily going to add up to about US$18,000 more,'' he said.

  To make matters worse, investors have discovered that the proposed return rate on the investment was drastically exaggerated.

  According to the Phuket plan, foreign investors could capitalise on tremendous returns by renting their ''hotel condominium suites'' out to holidaymakers.

 The Phuket brochure said: ''As a member of the Owners Hotel Letting Service (OHLS), you are assured of a wise and profitable investment.''   The Phuket Palace management illustrated that the OHLS would collect US$1,190 each month from holidaymakers staying in the investor's condo.

  From this amount, $520 would be subtracted as monthly bank payments towards the mortgage, leaving the foreign investor with $670 each month - a highly attractive investment scheme.

  ''The return issue was a complete exaggeration. I went down there myself and the occupancy rate in reality is quite bad,'' said the investor.

  ''Before you pay, they tell you that you will have an immediate return and that's why so many investors jump in. But this is just not true. During my trip I also found out that their 'top European management' does not exist.

  ''When a developer is in a mess like this, things can fall through and if this happens, my return will be null,'' he said.

  He added that, after paying the $2,000 booking fee, investors learned that the mortgage financing advertised was not feasible.

  But Mr Desmond, who saw these matters differently, said that business at Phuket Palace was booming.

  ''No, I don't think investors should fly down here and check things out first. By the time you get here, I won't have any apartments left. So just fax me your financial arrangements straight away, and we'll arrange the purchase in a couple of days through fax,'' Mr Desmond said.

  ''Foreign ownership problems? Not at all, there's no problem at all.

  ''It is true that, under the ordinance, a development as tall as ours doesn't have the right to engage in foreign ownership policies, but our building has special privileges.

  ''This is a great advantage because after all the apartments are sold, foreign ownership will be a thing of the past, making your apartment worth more,'' he said.

  He said that, despite the restrictive ordinance, Hongkong owners would be able to sell their apartments in the future to other foreign owners without a problem.

    He did not say how this would work.



Bank to sue over Phuket project ads