Everything You Wanted To Know About Usufruct Agreements In Thailand

[Irene]

Yes, that was the aim since it was made between two "independent" legal individuals.

[WilliamJarvis]

No problem using the land and living on it.

Selling though is not solved with a usufruct.

Your money will still be 'invested'. I would rather say 'locked' into the land and property.

With this in mind some will say it is still a (big) problem others don't.

All money you "invest" in property in Thailand is locked-in. Period. That's why you should never use money you cannot afford to walk away from to invest in Thai property.

It was the rule when I first lived there almost 20 years ago, and it is still the same rule now. Even if you could arrange the perfect ownership structure, I doubt you could sell the place that easily - too many new Moo-baans.

It's the first rule of property purchases in Thailand, don't use money you wouldn't be happy to bet on the tables in Las Vegas. If you think you'll ever need the money in the future, walk away from the deal and rent.

[MrPaddy]

Why are there so many of you that are so against owning property in Los.

Do not judge every case by the bad sotires you hear at the local by some down and out farang.

If it is setup right and with the right people, you will not have a problem. Just depends on your personal dealings more so than the bad boogy woogies in Los.

[WilliamJarvis]

Why are there so many of you that are so against owning property in Los.

Do not judge every case by the bad sotires you hear at the local by some down and out farang.

If it is setup right and with the right people, you will not have a problem. Just depends on your personal dealings more so than the bad boogy woogies in Los.

I have no problems with people owing property in Thailand. I do have problems with people who need to use that money for other things at a latter stage because they sunk everything they had in the place.

Seen it too many times.

[Khun Jean]

If it is setup right and with the right people, you will not have a problem.

I am all ears, as are many others i think.

So WHAT is the right setup?

[WilliamJarvis]

^rent, with the way property generally goes to the dogs in Thailand's climate - most properties/houses there don't last more than 30 years anyway!

[Khun Jean]

I rent all the time. It is cheap and no headaches. But the statement clearly said (although not quoted by me) "owning property".

I for one am very curious what this setup is so that we don't have any problems.

And to be specific in the situation when one is married to a Thai and want to live together in a house on a piece of land which you and your Thai spouse want to own. And even more specific what will happen with this problemless setup in these cases:

1) Thai spouse dies

2) Thai spouse divorces you and is on a vengeance

If not answered than this post mentioning a problem free setup is just pure BS.

(40M baht/1 rai excluded as is already mentioned many times to be a very specific solution applicable for only a very small percentage of people)

[Razr]

OK, I've been readin through most of this, but still having difficulties coming to a definitive answer for my situation:

I have a Thai GF that I will be marrying sometime soon (no dates set), and we are wanting to buy a house & land together.

Do I:

Buy it in her name before we're married and do an usufruct so it cannot be revoked later? How does this effect a property settlement in the event of us divorcing?

Buy the land in her name after we're married, and rely on 50% settlement in the case we divorce? Does this actually work?

Another option is to finance 50% of the house and land, but I assume for that we'd need to be legally married in order for my income to be factored into the mortgage right? If we go this route, I would assume that the bank would issue a lein against the property on the Chanote, and therefore no usufruct would be possible right? Also, what happens in the event of a divorce in this scenario?

Any other options I've missed?

[Irene]

OK, I've been readin through most of this, but still having difficulties coming to a definitive answer for my situation:

I have a Thai GF that I will be marrying sometime soon (no dates set), and we are wanting to buy a house & land together.

Do I:

Buy it in her name before we're married and do an usufruct so it cannot be revoked later? How does this effect a property settlement in the event of us divorcing? Loan her under a mortgage agreement to buy the property for subsequent usufruct or leasing. Upon divorcing you are secured with that property.

Buy the land in her name after we're married, and rely on 50% settlement in the case we divorce? Does this actually work? You are in a less secured position.

Another option is to finance 50% of the house and land, but I assume for that we'd need to be legally married in order for my income to be factored into the mortgage right? If we go this route, I would assume that the bank would issue a lein against the property on the Chanote, and therefore no usufruct would be possible right?Right. Also, what happens in the event of a divorce in this scenario? You have the right of half of assets and half of liabilities.

Any other options I've missed?

[Razr]

Loan her under a mortgage agreement to buy the property for subsequent usufruct or leasing. Upon divorcing you are secured with that property.

Can you explain this option more? Are you saying I should be the financier for my spouse - i.e. she gets a mortgage from me, and then I gain control of the property via an usufruct/lease? :confused:

[Irene]

Loan her under a mortgage agreement to buy the property for subsequent usufruct or leasing. Upon divorcing you are secured with that property.

Can you explain this option more? Are you saying I should be the financier for my spouse - i.e. she gets a mortgage from me, and then I gain control of the property via an usufruct/lease? :confused:

Right, she gets a mortgate from you and have the property secured against your loan given. Have this registered with the Land Department.

Afterwards marry her and have her as an "owner" to give a usufruct to you or lease you that property.

So, besides your rights of usage and possession of the property, your money as previously given to her to buy the property is repayable by her to you should there be any divorce thereafter, i.e.a double security.

[Razr]

Right, she gets a mortgate from you and have the property secured against your loan given. Have this registered with the Land Department.

Afterwards marry her and have her as an "owner" to give a usufruct to you or lease you that property.

So, besides your rights of usage and possession of the property, your money as previously given to her to buy the property is repayable by her to you should there be any divorce thereafter, i.e.a double security.

Thanks for the clarification and the ideas Irene!

At this stage I'm leaning towards the finance option, as it just seems the easiest all round..

If I understand this right, most banks will require 50% deposit for a mortgage backed by a foreigner's income. I've made some basic inquiries, and it seems that most banks will only offer 7 year terms, but Siam Commercial Bank are willing to do up to 30 years (I'm 33, she's 20 BTW). In this scenario, we'd obviously have to be married first, but my absolute liability in the event of a catastrophic relationship breakdown would be the 50% deposit, additionally she doesn't have to feel that there's a major trust problem in our relationship, there's no special hoops need to be jumped through with the land dept. and basic 50/50 assets split protections are already provided by law in the event of a divorce.

It'd also mean that if she wants the house unencumbered, she has to stick with me for a while (which conforms to the rule of being worth more alive than dead)

Plus it would mean I'm only outlaying half of my life's savings (thus far) - I'm still making my money day by day, unlike all the (I assume) retirees here

Sound right?

Edited March 16, 2008 by Razr

[scotsman]

Is it not true that when you get married you will have to sign a document at the land office to say its not your money that is buying the property but your wifes. I had a mortgage with my g/f with me being the lender & her being the borrower but as soon as we were getting married my lawyer told me this will have to come off the chanote as my wife can't own property with a loan from her farang husband so we had a usufruct drawn up before we married. If you have a usufruct drawn up before you marry she can't revoke it. You can also have the house in your name & land in her name with a usufruct on the land. In a divorce the land will not be part of the 50/50 split so I am told. I would go and talk with a good english speaking lawyer to find out if you can set up a mortgage with the bank with your g/f first then get a usufruct on this property before you marry.

[Razr]

I would go and talk with a good english speaking lawyer to find out if you can set up a mortgage with the bank with your g/f first then get a usufruct on this property before you marry.

I don't need a lawyer for that bit - there's no way a Thai bank will touch us if we're not married, given that she has no credit history or income worth mentioning. I've already had these discussions with a few banks

Edit: And just to jump the gun, there's no such thing as "influence" in these decisions, as every mortgage in Thailand needs to be approved both by the lending bank and then the Bank Of Thailand, who has the ultimate final say.

Edited March 16, 2008 by Razr

[Irene]

Yes, that is about right.

[Khun Jean]

A mortgage to your wife will not work it will be a debt for the both of you and mortgageing to yourself is impossible. A usufruct once married will not give the protection.

If the land is in the g/f's or wifes name with a mortgage who is going to stop her selling it with a profit and pay of the mortgage?

The land is hers 100% and she can do with it whatever she wants, unless a usufruct or lease was setup before the marriage.

[Razr]

A mortgage to your wife will not work it will be a debt for the both of you and mortgageing to yourself is impossible. A usufruct once married will not give the protection.

If the land is in the g/f's or wifes name with a mortgage who is going to stop her selling it with a profit and pay of the mortgage?

The land is hers 100% and she can do with it whatever she wants, unless a usufruct or lease was setup before the marriage.

Thanks for the input Jean.

Based on that, would you agree that 50% bank finance, after marriage, is the best option for myself?

[thaigene2]

A mortgage to your wife will not work it will be a debt for the both of you and mortgageing to yourself is impossible. A usufruct once married will not give the protection.

If the land is in the g/f's or wifes name with a mortgage who is going to stop her selling it with a profit and pay of the mortgage?

The land is hers 100% and she can do with it whatever she wants, unless a usufruct or lease was setup before the marriage.

Thanks for the input Jean.

Based on that, would you agree that 50% bank finance, after marriage, is the best option for myself?

I fully respect Irene's info - and think Irene is one of the most informative on TV. However, I've read other posts that say you (or I) would not be able to 'lend' your/my wife the money to do this (ie: be the mortgagor/mortgager) because once you get married (or possibly even cohabit) that you would lose your claim to the property --after all it's hers and only hers right? Not sure how liens work here.. As for the issue of divorce - the posters are split. At least two that I've read say they have managed to get a liquidation of the property as part of the communal assets. But good luck..The answer - as always it is the one we all keep coming back to --- why bother when it's cheaper to rent and park you investment elsewhere - out of harm's way?

[Khun Jean]

A mortgage to your wife will not work it will be a debt for the both of you and mortgageing to yourself is impossible. A usufruct once married will not give the protection.

If the land is in the g/f's or wifes name with a mortgage who is going to stop her selling it with a profit and pay of the mortgage?

The land is hers 100% and she can do with it whatever she wants, unless a usufruct or lease was setup before the marriage.

Thanks for the input Jean.

Based on that, would you agree that 50% bank finance, after marriage, is the best option for myself?

I am doing something similar at the moment, although it will be as close to 100% financing as i can get.

It is for a shophouse in bangkok, modest price range, 1.5 million baht.

The rates are good at around 3.25% for the first year and going up every year with about 1% until the final rate of 6.5% is reached.

I am planning to pay of this loan within 2-3 year so it will be comparable with a reasonable rent. I have a family member who is willing to be a guarantor for the loan if necessary, and i found out this is really helpfull in negotiating a good mortgage.

Already married long enough to have no doubts about the longevity of our marriage. But for newly weds it is an option to not commit large sums of money but every month a little bit and keep money 'working' for you on a high interest savings account or investments.

A "best" option is different for everyone. I can only tell about my experiences and plans and hope they are helpfull.

Edited March 17, 2008 by Khun Jean

[Razr]

why bother when it's cheaper to rent and park you investment elsewhere - out of harm's way?

Because Men are from Mars and Women are from Venus.. Once in a serious relationship (sometimes well before though ), all women want to start building a nest. The good husband is the one who facilitates this, even if he doesn't GAF about owning the place he lives in So long as it's all manageable financially and there's some level of protection built in in case things go awry, it's all good. You also have to remember that at our ages (33 and 20), it's highly likely kids will be on the horizon too, which places a different perspective on it all.

A "best" option is different for everyone. I can only tell about my experiences and plans and hope they are helpfull.

So true. I'm also a big fan of the KISS principle, and bank financing with inherent shared marriage assets looks pretty good on that front.

I have heard of >50% mortgages before, but it required more property as security. In that case it was finance for a 3.6M baht house, with a 2nd 2.5M (clear title) house also put up as security. That meant that the bank would now finance 50% of 3.6M + 2.5M, or 3.05M of the 3.6M required.. Unfortunately that can't apply to me as the girl nor her parents have anything of value to put up as extra security on the loan.. It would be absolutely ideal of that could be done though

[Irene]

A mortgage to your wife will not work it will be a debt for the both of you and mortgageing to yourself is impossible. A usufruct once married will not give the protection.

If the land is in the g/f's or wifes name with a mortgage who is going to stop her selling it with a profit and pay of the mortgage?

The land is hers 100% and she can do with it whatever she wants, unless a usufruct or lease was setup before the marriage.

Thanks for the input Jean.

Based on that, would you agree that 50% bank finance, after marriage, is the best option for myself?

I fully respect Irene's info - and think Irene is one of the most informative on TV. However, I've read other posts that say you (or I) would not be able to 'lend' your/my wife the money to do this (ie: be the mortgagor/mortgager) because once you get married (or possibly even cohabit) that you would lose your claim to the property --after all it's hers and only hers right? Not sure how liens work here.. As for the issue of divorce - the posters are split. At least two that I've read say they have managed to get a liquidation of the property as part of the communal assets. But good luck..The answer - as always it is the one we all keep coming back to --- why bother when it's cheaper to rent and park you investment elsewhere - out of harm's way?

I like your conclusion of "why bother" when rental is still inexpensive and prevalent depressing legal traps against "ownership" (with one exception of condo ownership). Alternative source of investment outside Thailand gives you peace of mind and the returns might be a lot to cover Thailand rental.

However, out of academic interest and after reading so many postings, the idea of mortgage comes to mind and seems to make sense. Others have misunderstood my previous post. I never stated "mortgage to your wife". I emphasised of lending to your gf, not wife, when buying property under gf's name. She has to borrow from you under mortgage. Before marriage, you in turn get the property under your lien. (first protection), then you get it under usufruct or lease (second protection).

When the love turns sour, she has to pay back debts pre-marital status and she cannot revoke usufruct or lease except through your death, (this is another risk of ownership route.

Mortgage via a bank is a doable solution if you can get a bank to give you a long term facilities, seven years is too short.

[thaigene2]

I emphasised of lending to your gf, not wife, when buying property under gf's name. She has to borrow from you under mortgage. Before marriage, you in turn get the property under your lien. (first protection), then you get it under usufruct or lease (second protection).

When the love turns sour, she has to pay back debts pre-marital status and she cannot revoke usufruct or lease except through your death, (this is another risk of ownership route.

Interesting, but why lend money to your girlfriend? If she quits paying and kicks you out of the house then what? You go to court and try to exercise the lien? Again I don;t really see the point in all this...

Again to Razr..we're older (thai and farang) and do already have kids. We rent a nice place in a central location for a fraction of what it would cost to pay a mortgage on - even a 25 year mortgage. We save our money, confident in the fact that one day we may well leave Thailand (by choice or by political upheaval, continued anti-foreigner roadblocks to employment, etc.).

At 33 (assume that's you), I assume you are confident of your ability to live in Thailand long term? (married to a Thai is not a water-tight reason to get a year-round visa - though it usually works).

Don;t get me wrong, I'd like to own a place here. I'm just not prepared to jump through all the hoops, take out an 8 years mortgage with 70,000 Baht per month payments only to find out a year or two later I can't get a new job to cover the payments..Of corse if you're rich it doesn't matter (and never has - the whole thing becomes moot).

TG2.

[Razr]

At 33 (assume that's you), I assume you are confident of your ability to live in Thailand long term? (married to a Thai is not a water-tight reason to get a year-round visa - though it usually works).

Don;t get me wrong, I'd like to own a place here. I'm just not prepared to jump through all the hoops, take out an 8 years mortgage with 70,000 Baht per month payments only to find out a year or two later I can't get a new job to cover the payments..Of corse if you're rich it doesn't matter (and never has - the whole thing becomes moot).

TG2.

Yes, I'm the 33yo.

Actually, I've been in Thailand for 7 years, was married to a TG for 4 of those (no issues with property settlement when we divorced - perhaps I got lucky), and am quite familiar with visa extensions based on marriage (easy stuff). Yes, Thailand is where I've decided to stay, and I'm confident of my ability to do so.. I'm just going to be doing it with someone else now

I may have mentioned this before, but Siam Commercial Bank have offerred us a 30 year term, however we must of course be married first.

When calculating the maximum term it apparently came down to the lesser of 30 years, or 60 minus my spouse's current age - i.e. if your spouse is 30 or less you can get 30 years, if she's 40 you will get 20 years, etc. The amount they'd let us borrow is based around the monthly repayments - from what I can gather that works out to be no more than 25-30% of my salary, and all they need to see in regards to proof of income is an official letter from my employer and the last 6 months of banking history. They do make it seem quite straight-forward, but of course this is based around 50% down, so there's not a whole lot of risk on their side either.

I'm surprised to hear you're able to rent for less than repayments on a 25y mortgage, especially given the 50% down requirement and the normal rental ROI's I see in Thailand (8-15%).. If that's the case, and the wife is happy not to be a land owner, all I can say is Lucky You

Edited March 18, 2008 by Razr

[BigSnake]

Need a Lawyer.

[Razr]

Need a Lawyer.

Who needs one, and why?

[rethaired]

Not too sure if people are aware of this, but according to Bangkok Bank (http://www.bangkokbank.com/Bangkok+Bank/Personal+Banking/Foreign+Customers/Frequently+Asked+Questions.htm#8):

What are the lending criteria for a non-resident home loan?

Bangkok Bank offers a range of home loan options, tailored to meet your needs. We offer flexible lending and attractively low interest rates.

You can borrow up to 70% of a property's appraised value or up to US$800,000

Loans can be denominated in one of four currencies – US Dollars, Singaporean Dollars, Euros and Japanese Yen

Repayments for up to 20 years

Competitive interest rate options available

Loan approval within two weeks of application

Application fees include:

Appraisal fee - Bt 2,500

Management fee - 0.5% of total loan, and

Balance clear - 3% of total loan

You will need to complete a mortgage application form that you can pick up from the branches listed above.

We also require the following documents:

Completed Mortgage Loan Application Form.

Copy of I.D. card (front and back) / passport (essential pages).

Signed copy of your Sales & Purchase Agreement or Reserve Agreement.

A reference letter from your existing bank, addressed to Bangkok Bank Public Co Ltd confirming your relationship with the bank, type of account you hold and the value of any loans or deposits you hold with the bank.

Bank statements for the last six months.

A Credit Bureau Report from your country of residence.

For employees: A letter from your employer, addressed to Bangkok Bank Public Co Ltd confirming your employment position, the number of years you have been employed and your salary, your last two years' of Income Tax Returns and computerized pay-slips for the last six months.

For Self-Employed individuals: The Balance Sheet Profit & Loss Statements from the last two years, and the last two years' Income Tax Returns

Others documents upon request

Note:

Approval of a loan is subject to the evaluation of an applicant's financial standing, repayment ability and at the bank's discretion.

The terms listed above are subject to change without prior notice.

I am considering using the mortgage route (if we were to buy a house) as it makes sense to me (considering the somewhat unfair legal parameters) and her level of poverty, since it seems like a relatively happy and safe medium. She has a job, but as a tour guide, it is seasonal and banks do not like that (or so I have been told). Of course, I am thinking of the longest term possible (a 30 year term, but I am dreaming) and as close to 70 % as possible as I don't think that at 50 she would turn her back on me (unless of course I were to be goneas in dead). I can also park my money somewhere else (and have some liquidity should anything happen) and paying the equivalent of a rent for 30 years is not a bad idea, I figure! Of course, I would prefer to buy it outright and have control of the house, but that is not possible! I am willing to take the risk that she could go anytime (and find another guy to pay it?)

I also have heard of the idea of an offshore company paying her a legitimate salary with which she could then be qualifying for and be paying the mortgage, as long as the company is willing.

Any comment?

Edited March 20, 2008 by rethaired

[thairookie]

My way 'around' it is putting the land in the name of my wifes mother, then a usufruct to me and a will that she leaves the land to our children (currently 5 and 6 years old).

Still researching the details for that.

IsaanLawyers, can you add your comment if that is a good solution?

Dear Khun Jean,

A "Will" is ambulatory, and it doesn't confer any rights on the beneficiary until the death of the Testator (the person who wrote the Will). And even upon the death of the Testator, you've got to make sure that the Will that the beneficiary is holding is the "Last Will and Testament" of the Testator. That is to say, while the Testator is still alive and kicking, he is at liberty to change his Will without having to notify any of the beneficiary.

Edited March 20, 2008 by thairookie

[thairookie]

But if, when my wife registered the property, I signed a document that said I have no interest in the property, then how could it be construed that she “acquired land as the owner in place of an alien”?

TH

Two wrongs don't make one right. If it can be proven that the money came from you, the document you signed stating you have no interest will simply mean an additional charge of "perjury".

And it sort of defies logic to declare one has no interest in the property when a usufruct is intended or already in place.

[thairookie]

I agree thaihome, and if anything you could say the 'foreigner' has acquired land for the 'Thai' person, and not the other way round.

Before you say the foreigner has acquired land for the Thai person, you have to answer if a foreigner can acquire land in the first place. It doesn't make sense to construe it as the foreigner having acquired the land for the Thai person when, to begin with, the foreigner "cannot" acquire land.

If you look at the wording it talks about 'acquiring' land and being the 'owner' of the land, on behalf of a foreigner. The foreigner is not trying to acquire or own it the land, but just wants to use the land.

Burgernev

It's not a case of the foreigner is "not trying" to acquire. More like the foreigner is incapable of acquiring. If the foreigner is not trying to acquire, this thread would not have existed in the place.

Edited March 20, 2008 by thairookie

[rethaired]

At 33 (assume that's you), I assume you are confident of your ability to live in Thailand long term? (married to a Thai is not a water-tight reason to get a year-round visa - though it usually works).

Don;t get me wrong, I'd like to own a place here. I'm just not prepared to jump through all the hoops, take out an 8 years mortgage with 70,000 Baht per month payments only to find out a year or two later I can't get a new job to cover the payments..Of corse if you're rich it doesn't matter (and never has - the whole thing becomes moot).

TG2.

Yes, I'm the 33yo.

Actually, I've been in Thailand for 7 years, was married to a TG for 4 of those (no issues with property settlement when we divorced - perhaps I got lucky), and am quite familiar with visa extensions based on marriage (easy stuff). Yes, Thailand is where I've decided to stay, and I'm confident of my ability to do so.. I'm just going to be doing it with someone else now

I may have mentioned this before, but Siam Commercial Bank have offerred us a 30 year term, however we must of course be married first.

When calculating the maximum term it apparently came down to the lesser of 30 years, or 60 minus my spouse's current age - i.e. if your spouse is 30 or less you can get 30 years, if she's 40 you will get 20 years, etc. The amount they'd let us borrow is based around the monthly repayments - from what I can gather that works out to be no more than 25-30% of my salary, and all they need to see in regards to proof of income is an official letter from my employer and the last 6 months of banking history. They do make it seem quite straight-forward, but of course this is based around 50% down, so there's not a whole lot of risk on their side either.

I'm surprised to hear you're able to rent for less than repayments on a 25y mortgage, especially given the 50% down requirement and the normal rental ROI's I see in Thailand (8-15%).. If that's the case, and the wife is happy not to be a land owner, all I can say is Lucky You

Thanks for the post. Very informative!

Does this work if you work overseas? In other words, will the bank be ok with showing income earned elsewhere than in Thailand? (More than 20 years with the same employer!)

What if I have a collateral piece of property (overseas)? I doubt this will help as it is not something they can grab. Right?

What do you think of the Bangkok Bank terms I posted?

Thanks.