Personal Loan - Chinote is held by loaner, money given to loanee, when loanee pays back they get the chinote back

[MisterBKK]

Looking at this arrangement and I am interested in the legality in Thailand. Is there a legal option like escrow?

 

Someone needs money (Loanee)

Loanee has 2 chinote land

Loaner gives money given to loanee

When loanee pays back the loanee gets the chinote back

Until that time, loaner can farm that land, do whatever, like it is theirs (but not a change of ownership)

 

Can anyone shed some light on doing something like this in Thailand. I am trying to understand how one could do it without getting ripped off. Please hold all the general "Don't do it, scam, dumb falang getting ripped off, you are stupid, etc" comments. Trying to understand if it is possible, please do reply with real legitimate, lucid, factual reasons to do or not do. Thank you ????

 

 

 

 

[d4dang]

that is how it works....unscrupulous lenders may use the chinote as collateral to obtain private loans without changing the ownership....the chinote used to borrow Baht 100,000 may have been used to obtain a loan of Baht 300,000....the chinote will now cost Baht 400,000 plus interest to buy back....borrowing against chinotes is common practice

[transam]

The Chanote method used by a sensible money man man is as follows.

You and the money man go to Land office, your loan amount and the money mans  name etc are written on the back of the Chanote, so if you fail to pay the money back, or pay late you deal with both the lender and the land office to get the money back. In other words, you lose. When you complete paying for the loan, you and the money man go back to the land office to remove the transaction.

This method has a fee at the land office which must be paid by the borrower. 

[Swiss1960]

2 minutes ago, transam said:

The Chanote method used by a sensible money man man is as follows.

You and the money man go to Land office, your loan amount and the money mans  name etc are written on the back of the Chanote, so if you fail to pay the money back, or pay late you deal with both the lender and the land office to get the money back. In other words, you lose. When you complete paying for the loan, you and the money man go back to the land office to remove the transaction.

This method has a fee at the land office which must be paid by the borrower. 

Transam is absoluty correct, the loan contact must be registered against the change in the land office.

Whether the borrower or the lender can use the land during the payback time is to be decided in the contract and will likely influence the interest rate to be paid.

[blackcab]

14 hours ago, MisterBKK said:

I am trying to understand how one could do it without getting ripped off.

 

The short answer is agree a written contract then go to the land office and officially register it on the title deed.

 

The long answer is that historically land owners had lesser claims to their land and these lesser types of land title documents can not be officially encumbered with secured debt at the land office. Upcountry this is still frequently the case.

 

This inability to obtain secured debt gave rise to the informal system where a title deed is lodged with the lender as a form of security.

 

The key thing to understand is that the borrower and the lender frequently know each other and their families have known each others families for years. This family dynamic is why the system mostly works. The second option is that the lender is a well known money lender who will not hesitate to use violence to recover their money and the borrower knows that.

 

Should the borrower default on a loan with this type of informal security there is nothing the lender can legally do to get their money back.  An unsecured title deed is useless to a lender.

 

Ways to get ripped off include:

 

1. The lender is a foreigner. The dynamic between families is not there, which is the real reason the loan is repaid in the first place. Equally, a foreigner cannot successfully go around threatening violence to Thai people and everyone knows it.

 

2. The lender massively over lends on a disastrous piece of land with a loan that the borrower never intended to repay. Local people know the true value of the land. Foreigners not so much.

 

3. Lending against a fake or stolen title deed presented by an impersonator.

 

4. Lending against a genuine title deed previously reported lost or stolen presented by the genuine land owner. 

 

5. Lending against a genuine title deed to the genuine land owner who subsequently reports the title deed lost or stolen, obtains a replacement title deed from the land office then sells the land.

 

6. The lender's girlfriend or wife, in collusion with the borrower, lulls her boyfriend/husband into a false sense of security then uses one of the above to extract cash from the relationship.

 

I could go on, but I'm sure you get the picture. Unsecured loans are a matter of trust. If the borrower and lender are not in the same circle of trust then there is a higher probability of default.

[MisterBKK]

Thank you for the replies - this makes a lot more sense now. 

 

Is there anything that can be done without a Chanote? What if it is "Paw Sam Taw"  ภบท5 land? I don't remember the term, but it is before a chanote is issued.

 

[blackcab]

5 hours ago, MisterBKK said:

Is there anything that can be done without a Chanote? What if it is "Paw Sam Taw"  ภบท5 land? I don't remember the term, but it is before a chanote is issued.

 

You can encumber Nor Sor Sam น.ส.๓, Nor Sor Sam Gor น.ส.๓.ก and Chanote น.ส.๔.จ. land. You cannot encumber Por Bor Tor 5 ภ.บ.ท.๕ land, because the person with the Por Bor Tor 5 is a tenant who has no right to do so.

 

A Por Bor Tor 5 is not a document that is issued by the land office, and it has nothing to do with land ownership. Essentially the document is a receipt from the district office confirming that the tenant has paid a small amount of tax based on their occupancy of the land. Technically the possessors/owners of the land plots surrounding this plot have agreed the boundary of the land between themselves, but the land is not officially surveyed or marked.

 

Look at it in terms of a vehicle. Would you buy or lend money against a vehicle if the only document the potential borrower could show you was the tax disc in the car window to prove they had the right to drive the vehicle on the road? Can you imagine taking the tax disc to the government department responsible for registering ownership of vehicles and asking to be registered as the vehicle's new owner because the annual tax had been paid?

 

With Por Bor Tor 5 land everything I previously said applies, but with extra caution as there is nothing that is owned. People may tell you that the land will be upgraded soon, really soon, and the land is a bargain so buy it now while the price is still cheap. If you ever hear this you are not just getting the tip, you are getting the full shaft, believe you me.

 

Now imagine this... Go to the district office, and tell them you have occupied some piece of god forsaken wasteland, and you want to pay the (tiny amount of) tax. Nobody at the district office really checks too hard. After all it's a tax payment, not a question of land ownership.

 

Once you have the Por Bor Tor 5 document, go and convince someone to lend you a stack of cash.

 

It's very good that you are asking these questions because I would hate to see you get burnt.

[smutcakes]

I believe this is called Khai Fak- where the loan will be put on the title deed.

[hotandsticky]

18 hours ago, blackcab said:

 

The short answer is agree a written contract then go to the land office and officially register it on the title deed.

 

 

I could go on, but I'm sure you get the picture. Unsecured loans are a matter of trust. If the borrower and lender are not in the same circle of trust then there is a higher probability of default.

Is it worth mentioning the legal maximum rate of interest.

[blackcab]

5 hours ago, hotandsticky said:

Is it worth mentioning the legal maximum rate of interest.

 

You have not given me enough information to answer your question.

 

Do you mean a verbal or written contract?

 

What category of land would the contract be for? NS3G, PBT5, etc?

 

What do you want the contract to achieve?

[hotandsticky]

27 minutes ago, blackcab said:

 

You have not given me enough information to answer your question.

 

Do you mean a verbal or written contract?

 

What category of land would the contract be for? NS3G, PBT5, etc?

 

What do you want the contract to achieve?

 

I assumed that the maximum legal interest rate applied to all written contracts. If it is more complicated than that then I don't know.

 

 

I have seen loan debt reduced by the Land Office because the rate charged was significantly higher than the maximum. I cannot recall if that rate was 15 or 18% p.a.

[blackcab]

23 hours ago, hotandsticky said:

 

I assumed that the maximum legal interest rate applied to all written contracts. If it is more complicated than that then I don't know.

 

 

I have seen loan debt reduced by the Land Office because the rate charged was significantly higher than the maximum. I cannot recall if that rate was 15 or 18% p.a.

 

The statutory interest rate is currently 5 per cent, and this could be applied to any contract that does not specify an interest rate.

 

The maximum interest rate is 15 per cent per annum.

[hotandsticky]

23 hours ago, blackcab said:

The statutory interest rate is currently 5 per cent, and this could be applied to any contract that does not specify an interest rate.

 

The maximum interest rate is 15 per cent per annum.

Thank you.

 

If someone signs a loan (shark)  agreement with an interest rate of, say, 7% per month - would you say that is illegal/enforceable?

[blackcab]

3 hours ago, hotandsticky said:

Thank you.

 

If someone signs a loan (shark)  agreement with an interest rate of, say, 7% per month - would you say that is illegal/enforceable?

 

Loan sharks don't tend to use paper contracts as usury is illegal in Thailand as a result of the Act Prohibiting the Collection of Interest at an Excessive Rate B.E. 2560 (2017).

 

A paper contract with a 7 per cent per month interest rate would be all the evidence needed for a prosecution. The maximum punishment is 2 years imprisonment and a 200,000 baht fine. There would also be a good chance of being prosecuted for money laundering which means all available assets would be immediately seized and it would be very, very difficult and costly to get any of them back. Land, houses, vehicles, bank accounts, cash, jewellery, expensive electronics, etc all gone.

 

Is a usurious interest rate enforceable? Not in a Court, but then loan sharks never aim to be in Court. Their method of enforcement is of a different kind.

 

Consider, a foreigner loans large sums of money at usurious rates to Thai people. All the borrowers have to do is jointly petition the police and bitterly complain they are being extorted.

 

Foreigner is arrested, and at the least it is gong to be very expensive to resolve.

 

In the worst case the borrowers complain publicly to the government, the media get involved and there is now a serious chance of conviction and everything that entails.

 

Of course none of the borrowers would complain would they, if they thought the loan might be canceled and the lender would be powerless to do anything about it?

[hotandsticky]

50 minutes ago, blackcab said:

 

Loan sharks don't tend to use paper contracts as usury is illegal in Thailand as a result of the Act Prohibiting the Collection of Interest at an Excessive Rate B.E. 2560 (2017).

 

A paper contract with a 7 per cent per month interest rate would be all the evidence needed for a prosecution. The maximum punishment is 2 years imprisonment and a 200,000 baht fine. There would also a good chance of being prosecuted for money laundering which means all available assets would be immediately seized and it would be very, very difficult and costly to get any of them back. Land, houses, vehicles, bank accounts, cash, jewellery, expensive electronics, etc all gone.

 

Is a usurious interest rate enforceable? Not in a Court, but then loan sharks never aim to be in Court. Their method of enforcement is of a different kind.

 

Consider, a foreigner loans large sums of money at usurious rates to Thai people. All the borrowers have to do is jointly petition the police and bitterly complain they are being extorted.

 

Foreigner is arrested, and at the least it is gong to be very expensive to resolve.

 

In the worst case the borrowers complain publicly to the government, the media get involved and there is now a serious chance of conviction and everything that entails.

 

Of course none of the borrowers would complain would they, if they thought the loan might be canceled and the lender would be powerless to do anything about it?

 

Thank you for taking the trouble to reply with such a comprehensive and well-balanced response.

[MisterBKK]

22 hours ago, blackcab said:

 

You have not given me enough information to answer your question.

 

1). Do you mean a verbal or written contract?

 

2). What category of land would the contract be for? NS3G, PBT5, etc?

 

3). What do you want the contract to achieve?

1). Written contract.

 

2). It is Por Bor Tor 5 ภ.บ.ท.๕ land

 

3). To be able to buy chanote land that has a loan against it. The people do not have the money to release the chanote. The idea would be to loan the money against other land the same people own, then release the chanote, the chanote gets transferred to the lender. When the lendee pays back the balance (loan amount exceeds chanote land value), they get the use of the Por Bor Tor 5 land back. That PBT5 land gets rented and rent collected by lender until that time (if ever).

 

Being the land is Por Bor Tor 5, this idea seems out of steam. Would there be some other legal document that could be used in this case?

 

Thanks, the answers have been really, really good. I am learning a lot.

 

[The Hammer2021]

Personal Loan - Chinote is held by lender, money given to borrower, when borrower repays loan they get the chinote back