Putting a Mortgage on a Property - Special Taxes/Fees by the Land Office

[Barley]

Hello,

if I want to loan a Thai person money secured by a first mortgage on their property, how do I go about?

 

My Thai friend is to buying a property.

 

We are thinking to put a mortgage in my favor on her property to consolidate and secure my loans to her for her business.

 

What would be the procedure and are there any special taxes or fees involved.

 

Maybe someone could share their experience.

 

Thank you.

[LukKrueng]

I don't know the procedure for using a property as a collateral for a loan from a private person, but when you mortgage property to a bank you pay 1% of the sum of the loan in fees to the land office. 

[LivinLOS]

Does the first lien principal hold here ? 

I remember the case of an expat who had a setup with his wife, all nice and strong.. Wife had a vehicle accident and was deemed negligent and that invalidated the insurance.. That then had a death penalty that came at the house as an asset to be forfeited.. Eventually of course the guy ended up forking out multi million cash to retain his own home, through nothing other than a vehicle accident.  

Would a mortgage protect in that event ?? Like not in a marriage as I believe a husband and wife can be legally attacked as one ?? 

 

[khunPer]

You need a loan document - check with the land office in question if you can use a standard loan agreement, which can be bought in many paper stores and some book stores; otherwise you might need lawyer to make a loan agreement that can be registered similar to a mortgage - and thereafter register the loan as mortgage on the title deed in a land office. The title deed need to be of high class, i.e. Chanote or Nor Sor 4 (same, but two names). I'm not sure if you can have mortgage declared on a Nor Sor 3-title, there is a 30-days objection period on Nor Sor 3 title deeds.

[LarrySR]

I made a personal loan to a friend with the house as collateral a few years ago and my (very cute) attorney set up the agreement and attended the land office proceedings with my wife holding the chanote.

It all worked out with repayment of the loan when the property was sold.

Miss Bam: [email protected]

 

 

 

[Barley]

Did you have to pay any additional fee/tax for releasing the mortgage ?

[LarrySR]

 

 Since the loan was to a close friend, I charged 0% interest for the first 3 years then a modest 3% rate would begin to kick in to motivate the sale if necessary. All spelled out in the contract.

The property sold within 6 months and he picked up any expenses.

There was the attorney fee and perhaps some Land Office expenses that I wasn't aware of. 

 

The attorney only attended the initial proceedings and wasn't at the Land Office when the sale took place several months later. The Land Office Officer was very helpful and oversaw me handing over the Chanote and receiving repayment. 

 

 

 

 

 

 

Edited October 23, 2021 by LarrySR

[Barley]

So you actually kept the Chanote, even though it wasn't your property?

 

I thought a mortgage simply gets entered into the record, and the owner keeps the Chanote?

Edited October 23, 2021 by Barley

[LarrySR]

6 hours ago, Barley said:

So you actually kept the Chanote, even though it wasn't your property?

 

I thought a mortgage simply gets entered into the record, and the owner keeps the Chanote?

The attorney set up the agreement insisting I hold the Chanote. 
Same thing happens if a bank makes the loan, no?

 

[Barley]

That's something I really would like to know. 

[LarrySR]

2 hours ago, Barley said:

That's something I really would like to know. 

Did you know that when a Thai girl asks to borrow money, they have zero intention of paying it back?

 

[paddypower]

On 10/21/2021 at 12:28 PM, khunPer said:

You need a loan document - check with the land office in question if you can use a standard loan agreement, which can be bought in many paper stores and some book stores; otherwise you might need lawyer to make a loan agreement that can be registered similar to a mortgage - and thereafter register the loan as mortgage on the title deed in a land office. The title deed need to be of high class, i.e. Chanote or Nor Sor 4 (same, but two names). I'm not sure if you can have mortgage declared on a Nor Sor 3-title, there is a 30-days objection period on Nor Sor 3 title deeds.

Hi, you seem to be familiar with legal paperwork. An ex-friend used an on-line Thai law firm which offers generic Thai/English land leases, to secure himself in the situation where he bought land in the wife's name. Have you ever heard of such a law firm. tia.

[khunPer]

3 hours ago, paddypower said:

Hi, you seem to be familiar with legal paperwork. An ex-friend used an on-line Thai law firm which offers generic Thai/English land leases, to secure himself in the situation where he bought land in the wife's name. Have you ever heard of such a law firm. tia.

I've seen numerous forms for download - after paying a fee - they seems to work well. However, be aware that your firend might not secure himself at all when entering an agreement with his wife...

 

Section 1469 Civil and Commercial Code: 'Any agreement concluded between husband and wife during marriage may be avoided by either of them at any time during marriage or within one year from the day of dissolution of marriage; provided that the right of third persons acting in good faith is not affected thereby'.

Source and read more about options for protection of foreigner's investment in property HERE.

 

A solution might be to make the lease agreement - or usufruct servitude - with the previous owner, and have it declared as servitude on the title deed at the land office, before the land is transferred into a Thai spouse's name...????

[paddypower]

2 hours ago, khunPer said:

I've seen numerous forms for download - after paying a fee - they seems to work well. However, be aware that your firend might not secure himself at all when entering an agreement with his wife...

 

Section 1469 Civil and Commercial Code: 'Any agreement concluded between husband and wife during marriage may be avoided by either of them at any time during marriage or within one year from the day of dissolution of marriage; provided that the right of third persons acting in good faith is not affected thereby'.

Source and read more about options for protection of foreigner's investment in property HERE.

 

A solution might be to make the lease agreement - or usufruct servitude - with the previous owner, and have it declared as servitude on the title deed at the land office, before the land is transferred into a Thai spouse's name...????

wow! that's a zinger, a great find. I don't know what my buddy did. I did offer to check it out - but nah. You know, some people will jump into a swimming pool full of sharks and assume that they can swim faster. My situation is straightforward: we are an ex pat couple, who want to register a lease against the chanoet, which is held  by a 100% Thai owned company. I maintain pre-signed share transfer forms and up to date ID cards. I will structure it so that the lease expires after we both die. If an expat wants to buy it, he/she will buy the company and our estate will avoid the majority of capital gains taxes.  If a Thai national wants to buy, they will want the land, not the company. In that event, the company will bite the bullet on corporate taxes (which are incredibly low here, by comparison with other countries). This is all a bit off the cuff thinking. I will spend more time doing my due diligence, once I have a sample lease to work with. Also, we are blessed  with having a superb company/personal tax accountant.

[paddypower]

2 hours ago, khunPer said:

I've seen numerous forms for download - after paying a fee - they seems to work well. However, be aware that your firend might not secure himself at all when entering an agreement with his wife...

 

Section 1469 Civil and Commercial Code: 'Any agreement concluded between husband and wife during marriage may be avoided by either of them at any time during marriage or within one year from the day of dissolution of marriage; provided that the right of third persons acting in good faith is not affected thereby'.

Source and read more about options for protection of foreigner's investment in property HERE.

 

A solution might be to make the lease agreement - or usufruct servitude - with the previous owner, and have it declared as servitude on the title deed at the land office, before the land is transferred into a Thai spouse's name...????

That website you referred me to is the one I have been looking for. Thanks !!

[khunPer]

2 hours ago, paddypower said:

wow! that's a zinger, a great find. I don't know what my buddy did. I did offer to check it out - but nah. You know, some people will jump into a swimming pool full of sharks and assume that they can swim faster. My situation is straightforward: we are an ex pat couple, who want to register a lease against the chanoet, which is held  by a 100% Thai owned company. I maintain pre-signed share transfer forms and up to date ID cards. I will structure it so that the lease expires after we both die. If an expat wants to buy it, he/she will buy the company and our estate will avoid the majority of capital gains taxes.  If a Thai national wants to buy, they will want the land, not the company. In that event, the company will bite the bullet on corporate taxes (which are incredibly low here, by comparison with other countries). This is all a bit off the cuff thinking. I will spend more time doing my due diligence, once I have a sample lease to work with. Also, we are blessed  with having a superb company/personal tax accountant.

Just you get the lease agreement registered as a servitude on the title deed, you are safe. A small tax will be claimed at the land office for the full term of the leasing periods total sum, which however can add up to a relative amount when being pre-paid. No lease can run longer than 30 years, if anything longer have been agreed, it will only legally run 30 years from the initial date. There are no such thing as 30+30 years agreements.

 

An English translation of Thailand's Lease Law (tenancy) can be found HERE...????

[Banana7]

As the loaner of the money, I would definitely hold the deed/chanote until the loan is fully paid. Same with motor vehicle loans, loaner holds ownership documents, blue/green book until loan is fully paid.

[paddypower]

16 hours ago, khunPer said:

Just you get the lease agreement registered as a servitude on the title deed, you are safe. A small tax will be claimed at the land office for the full term of the leasing periods total sum, which however can add up to a relative amount when being pre-paid. No lease can run longer than 30 years, if anything longer have been agreed, it will only legally run 30 years from the initial date. There are no such thing as 30+30 years agreements.

 

An English translation of Thailand's Lease Law (tenancy) can be found HERE...????

thanks again. you might be interested to know that we bought an apartment under a 30+30 in 2003. Lost the title entirely, in Court where it was deemed to be a sale, without being registered as such. Although the lease was registered against the project building, in Phuket, the Lease declared invalid.  When we arrived in 1996, that was a very common type of lease and was allowed to be registered. I wonder what will happen, for anyone else unfortunate to end up in a legal dispute with the land owning company.

[paddypower]

17 hours ago, khunPer said:

Just you get the lease agreement registered as a servitude on the title deed, you are safe. A small tax will be claimed at the land office for the full term of the leasing periods total sum, which however can add up to a relative amount when being pre-paid. No lease can run longer than 30 years, if anything longer have been agreed, it will only legally run 30 years from the initial date. There are no such thing as 30+30 years agreements.

 

An English translation of Thailand's Lease Law (tenancy) can be found HERE...????

I read the sample Servitude Agreement, at the website you referred to (it is very short) . To clarify what i understand, I will need a lease between us and the company to lease the land and a Servitude Agreement as well, which will get registered on the Chanoet title. Is that correct? tia.

[khunPer]

3 hours ago, paddypower said:

thanks again. you might be interested to know that we bought an apartment under a 30+30 in 2003. Lost the title entirely, in Court where it was deemed to be a sale, without being registered as such. Although the lease was registered against the project building, in Phuket, the Lease declared invalid.  When we arrived in 1996, that was a very common type of lease and was allowed to be registered. I wonder what will happen, for anyone else unfortunate to end up in a legal dispute with the land owning company.

Thanks, but sorry to hear that. I've also read that 30+30-years agreements would be void, but the text in the English translation of the law just mentions "reduced to 30 years"...

Quote

Section 540. The duration of a hire of immovable property cannot exceed thirty years. If it is made for a longer period, such period shall be reduced to thirty years. The aforesaid period may be renewed, but it must not exceed thirty years from the time of renewal.

In principle you can make a 30-years lease, and an agreement with lessor about lease details for another period, like the popular 3+3 years rental agreements, but that does not mean that you have an agreement for the next 30 years. When the first period terminates, the lease has terminated, and if it cannot be renewed - the property might be sold or just transferred - you have no legal rights to continue a lease. You can of course try to sue lessor in a civil case for in-breaching an agreement.

[khunPer]

3 hours ago, paddypower said:

I read the sample Servitude Agreement, at the website you referred to (it is very short) . To clarify what i understand, I will need a lease between us and the company to lease the land and a Servitude Agreement as well, which will get registered on the Chanoet title. Is that correct? tia.

The best thing is to get a lawyer - i.e. your lawyer - to write a lease agreement in both Thai (legal binding language) and English that fit your demands. The lease shall be registered at the land office on the back of the original Chanute title deed; there are two originals, one held in file by the office, and another held by the land owner.

 

If the land is unbuilt, and you need to build a structure on it, or change excisting building(s), the land owner need to give permission for building structure, or changing, already excisting structures, which you shall get included in the lease agreement. You might furthermore wish to have a superficies servitude declared - read more HERE - so you can apply for a building permission, if you wish to build a house. You can legally be owner of the house, even when it sits on leased land, which might be a benefit, also as you will get a blue house book and can register the house as home and thereby avoid property tax on the building; or lower it, as it will be free from property tax for the first 10 million baht appraised value if used as primary home, under the present tax-rules. The burden of land tax might also be yours.

 

You can make the lease agreement so it can be transferred within the 30 year maximum period, which will give you the opportunity to sell the house together with the remaining lease periode; i.e. you might not get your money back, but you might get a sum back relative to the remaining number of years the house can be used before the lease expires; something might happen so you wish to move away before the lease expires, or before death.

 

For legally owning a house, but not the land under the house, you need...

• Permission from land owner to build the house, i.e. superficies or like document
• Architect drawing with your name as owner
• Building permission issued in your name
• All building construction contracts issued in your name, and signed by you
• All payment transfers for construction from your bank account, or if paid cash with a receipt carrying your name as payer

You'll get no further documentation for ownership - apart from the blue house book that can name you as "house-master", which is not a proof of ownership, but the house-master is the only person that can accept Thai nationals to be registered in the blue house book as living in the house, while foreigners shall have a yellow house book to be registered as living on an address - but if/when the house might be "sold" it can be registered separate from the land.

????

[paddypower]

53 minutes ago, khunPer said:

The best thing is to get a lawyer - i.e. your lawyer - to write a lease agreement in both Thai (legal binding language) and English that fit your demands. The lease shall be registered at the land office on the back of the original Chanute title deed; there are two originals, one held in file by the office, and another held by the land owner.

 

If the land is unbuilt, and you need to build a structure on it, or change excisting building(s), the land owner need to give permission for building structure, or changing, already excisting structures, which you shall get included in the lease agreement. You might furthermore wish to have a superficies servitude declared - read more HERE - so you can apply for a building permission, if you wish to build a house. You can legally be owner of the house, even when it sits on leased land, which might be a benefit, also as you will get a blue house book and can register the house as home and thereby avoid property tax on the building; or lower it, as it will be free from property tax for the first 10 million baht appraised value if used as primary home, under the present tax-rules. The burden of land tax might also be yours.

 

You can make the lease agreement so it can be transferred within the 30 year maximum period, which will give you the opportunity to sell the house together with the remaining lease periode; i.e. you might not get your money back, but you might get a sum back relative to the remaining number of years the house can be used before the lease expires; something might happen so you wish to move away before the lease expires, or before death.

 

For legally owning a house, but not the land under the house, you need...

• Permission from land owner to build the house, i.e. superficies or like document
• Architect drawing with your name as owner
• Building permission issued in your name
• All building construction contracts issued in your name, and signed by you
• All payment transfers for construction from your bank account, or if paid cash with a receipt carrying your name as payer

You'll get no further documentation for ownership - apart from the blue house book that can name you as "house-master", which is not a proof of ownership, but the house-master is the only person that can accept Thai nationals to be registered in the blue house book as living in the house, while foreigners shall have a yellow house book to be registered as living on an address - but if/when the house might be "sold" it can be registered separate from the land.

????

Great info and detailed explanation, Thanks!!

[paddypower]

8 minutes ago, paddypower said:

Great info and detailed explanation, Thanks!!

I see we are watery neighbours. We live in Khanom Beach, on the mainland.

 

[chrisandsu]

I can’t see how this can legally be done . If your friend defaults on the loan how do you as a foreigner take control of her house ? If I was the thai I’d take it to court and tell them you was entering the agreement with dirty hands knowing you would have to skirt (break) the law to take ownership . So when posters on here say they done this or done that they most likely didn’t do anything it was all done by their wife . 

[Barley]

I was thinking about the same topic. 

 

What I came up with as a solution was that a mortgage doesn't mean I will own the property but that I could force an emergency sale or auction in case of a default. 

 

Then obviously the mortgage would be paid back to me first and all money on top of the mortgage would go to the owner. 

 

I would think that would conform to Thai law of a farang not having ownership. 

 

What do you guys think?