Usufruct With Wife

[grin]

We are buying a house from a developer and may get a mortgage from a bank. I've read all of the posts that I can find on usufructs but cannot find anything definitive on having a usufruct with a bank mortgage. Some posts state that <a> banks won't loan money with a usufruct in place and others state that <b> once the bank has a lien on the property that you cannot get a usufruct. Catch 22. Meanwhile there are posts saying that to fully protect yourself that you should get a mortgage and have a usufruct. Obviously these posts seem contradictory.

Could it be that <a> or <b> above is not true?

Or is there some way to do both? I.e. can the usufruct be in second position so that it is only valid once the mortgage is paid off?

I have an appointment with a lawyer next week so I would like to be as prepared as I can before the meeting.

Any suggestions on how this might work would be much appreciated.

Grin

Edit: tried to fix problem with parens and emoticons

Edited October 31, 2009 by grin

[tgw]

I think this should do the trick:

the mortgage contract should state that as soon as the bank repossesses the house, the usufruct is extinct.

[bellagrego]

We are buying a house from a developer and may get a mortgage from a bank. I've read all of the posts that I can find on usufructs but cannot find anything definitive on having a usufruct with a bank mortgage. Some posts state that <a> banks won't loan money with a usufruct in place and others state that <b> once the bank has a lien on the property that you cannot get a usufruct. Catch 22. Meanwhile there are posts saying that to fully protect yourself that you should get a mortgage and have a usufruct. Obviously these posts seem contradictory.

Could it be that <a> or <b> above is not true?

Or is there some way to do both? I.e. can the usufruct be in second position so that it is only valid once the mortgage is paid off?

I have an appointment with a lawyer next week so I would like to be as prepared as I can before the meeting.

Any suggestions on how this might work would be much appreciated.

Grin

Edit: tried to fix problem with parens and emoticons

[bellagrego]

We are buying a house from a developer and may get a mortgage from a bank. I've read all of the posts that I can find on usufructs but cannot find anything definitive on having a usufruct with a bank mortgage. Some posts state that <a> banks won't loan money with a usufruct in place and others state that <b> once the bank has a lien on the property that you cannot get a usufruct. Catch 22. Meanwhile there are posts saying that to fully protect yourself that you should get a mortgage and have a usufruct. Obviously these posts seem contradictory.

Could it be that <a> or <b> above is not true?

Or is there some way to do both? I.e. can the usufruct be in second position so that it is only valid once the mortgage is paid off?

I have an appointment with a lawyer next week so I would like to be as prepared as I can before the meeting.

Any suggestions on how this might work would be much appreciated.

Grin

Edit: tried to fix problem with parens and emoticons

I think you are way off the mark on the usufruct as a method of personal protection. I would opt for a Thai company formation or a lease back from spouse for that purpose. You are domed to lose all your investment should you spit with the gal, which you have a 50-50 chance to do, at best.

What ever you do, get a translation in English, and an English speaking lawyer.

be careful with your money, money number 1, you about number 5

bella

year 5 in Thailand

year 4 with ione gal

year 1 on house building

[InterestedObserver]

If you are already legally married in Thailand, which it appears you are, then any agreement made between the husband and wife is voidable by either party. Therefore, if your wife gives you a lease or usufruct on her property it offers no long term security since it can be voided in the future.

Generally, banks will not loan money (mortgage) on property that is already encumbered. The Chanote would have to be clean; i.e., no lease or usufruct recorded in the back.

That leaves you little to work with for long term security.

Edited November 3, 2009 by InterestedObserver

[nam-thip]

There seems little point in having a usufruct on a house that belongs to the bank and not your wife until such times as the mortgage is paid.

In the event of failure to pay the loan the bank will reposes the house and your out on your arse.

If a lawyer is able to draw up an usufruct it will have to be worded in such a way to consider the bank loan and that’s only if the bank agrees.

Legal advice is required as the above is only my opinion.

Try Isarn lawyers through Thai visa.

THAI CIVIL AND COMMERCIAL CODE

TITLE VII - USUFRUCT

Section 1417 - An immovable property may be subject to a usufruct by virtue of which the usufructuary is entitled to the possession, use and enjoyment of the property.

He has the right of management of the property.

The usufruct of a forest, mine or quarry entitles the usufructuary to the exploitation of the forest, mine or quarry.

Section 1418 – A usufruct may be created either for a period of time or for life of the usufructuary.

If no time has been fixed, it is presumed that the usufruct is for the life of the usufructuary. If it is created for a period of time, the provisions of Section 1403 paragraph 3 *) shall apply mutatis mutandis.

In any case the usufruct comes to an end on the death of the usufructuary.

*) Section 1403, paragraph 3 wording: "If it is granted for a period of time, the period may not exceed thirty years; if a longer period is stipulated, it shall be reduced to thirty years. The grant may be renewed for a period not exceeding thirty years from the time of renewal."

Section 1419 – If property is destroyed without compensation being paid, the owner is not bound to restore it; but if he does so to an extent, the usufruct revives to that extent.

If any compensation is paid, the owner of the usufructuary must restore the property so far as it is possible to do so, having regard to the amount of the compensation received, and the usufruct revives to that extent; but, if restoration is impossible, the usufruct comes to an end and the compensation must be divided between the owner and the usufructuary in proportion to the damages suffered by them respectively.

The same rules apply mutatis mutandis in case of expropriation as well as in the case partial destruction of the property or of partial impossibility to restore the property.

Section 1420 – When usufruct comes to an end, the usufructuary must return the property to the owner.

The usufructuary is liable for the destruction of depreciation in value of the property, unless he proves that the damage was not caused by his fault. He must replace anything which he has wrongfully consumed.

He is not bound to give compensation for depreciation in value caused by reasonable use.

Section 1421 – The usufructuary must, in the exercise of his rights, take as much care of the property as a person of ordinary prudence would take of his own property.

Section 1422 – Unless otherwise provided in the act creating a usufruct, the usufructuary may transfer the exercise of his right to a third person. In such case the owner of the property may sue the transferee direct.

Section 1423 – The owner may object to any unlawful or unreasonable use of the property.

If the owner proves that his rights are in peril, he may demand security from the usufructuary, except in the case of a donor who has reserved to himself the usufruct of the property given.

If the usufructuary fails to give security within a reasonable time fixed for the purpose, or if, in the spirit of the objection, he continues to make use of the property unlawfully or unreasonably, the Court may appoint a Receiver to manage the property in his stead. Upon security being given the Court may release the Receiver so appointed.

Section 1424 – The usufructuary is bound to keep the substance of the property unaltered, and is responsible for ordinary maintenance and petty repairs.

If important repairs of measures are necessary for the preservation of the property, the usufructuary must forthwith inform the owner thereof and permit them to be carried out. In case of default by the owner, the usufructuary may have the work carried out at the owner's expense.

Section 1425 – All extraordinary expenses must be borne by the owner, but in order to meet these expenses coming under the foregoing section he may realise part of the property unless the usufructuary is willing to advance the necessary funds without charging interest.

Section 1426 – The usufructuary shall, for the duration of the usufruct, bear expenses for the management of the property, pay taxes and duties, and be responsible for interests payable on depts. Charged upon it.

Section 1427 – If required by the owner, the usufructuary is bound to insure the property against loss for the benefit of the owner; and if the property is already insured he is bound to renew such insurance when due.

He must pay premiums of the insurance for the duration of his usufruct.

Section 1428 – No action by the owner against the usufructuary or his transferee in connection with the usufruct or vice versa may be entered later than one year after the usufruct comes to an end. But in an action by the owner who could not have known of the end of the usufruct, the prescription of the year shall run from the time when he knew or ought to have known of it.

Definition:

1. mutatis mutandis – "Due alteration, or changing whatever is required to be changed. As in, "The changes proposed for the first contract apply mutatis mutandis to all other contracts." Latin for, things being changed that ought to be changed".

[SnareBear]

We are buying a house from a developer and may get a mortgage from a bank. I've read all of the posts that I can find on usufructs but cannot find anything definitive on having a usufruct with a bank mortgage. Some posts state that <a> banks won't loan money with a usufruct in place and others state that <b> once the bank has a lien on the property that you cannot get a usufruct. Catch 22. Meanwhile there are posts saying that to fully protect yourself that you should get a mortgage and have a usufruct. Obviously these posts seem contradictory.

A usufruct is tied to the title not a person, so a title with usufruct is basically worthless as collateral. The is no legal limitation to selling and buying land titles with usufruct, but why would anyone do it? Why would anyone buy land they cant use? Thats why a bank will never give you a loan on a title with a usufruct = no value.

There is no legal limitation to setting up usufruct on a land already with mortgage, but why would the bank allow it? Then they would have suddenly lost the collateral value.

The only practical solution is: usufruct = no mortgage.

[dereklev]

If you are already legally married in Thailand, which it appears you are, then any agreement made between the husband and wife is voidable by either party. Therefore, if your wife gives you a lease or usufruct on her property it offers no long term security since it can be voided in the future.

<snip>

Do you know of any cases where a lease or usufruct has been voided and for what reason was it voided.

I have a few usufructs and am married so have a vested interest in knowing more.

[InterestedObserver]

If you are already legally married in Thailand, which it appears you are, then any agreement made between the husband and wife is voidable by either party. Therefore, if your wife gives you a lease or usufruct on her property it offers no long term security since it can be voided in the future.

<snip>

Do you know of any cases where a lease or usufruct has been voided and for what reason was it voided.

I have a few usufructs and am married so have a vested interest in knowing more.

The law is on the books......so.......best to keep the wife happy; see the Thailand Civil and Commercial Code, Section 1469 . Google it!

[dereklev]

If you are already legally married in Thailand, which it appears you are, then any agreement made between the husband and wife is voidable by either party. Therefore, if your wife gives you a lease or usufruct on her property it offers no long term security since it can be voided in the future.

<snip>

Do you know of any cases where a lease or usufruct has been voided and for what reason was it voided.

I have a few usufructs and am married so have a vested interest in knowing more.

The law is on the books......so.......best to keep the wife happy; see the Thailand Civil and Commercial Code, Section 1469 . Google it!

Yes I know the law is on the books but so is wearing a helmet when riding a motorbike.

I was asking if you, or anyone else, knew of a case where a court voided a lease or usufruct and the reasons why.

As a married man with usufructs I am also an Interested Observer

[InterestedObserver]

Yes I know the law is on the books but so is wearing a helmet when riding a motorbike.

I was asking if you, or anyone else, knew of a case where a court voided a lease or usufruct and the reasons why.

As a married man with usufructs I am also an Interested Observer

If you have any doubts about your legal position then I strongly recommend you consult a good lawyer.

Edited November 4, 2009 by InterestedObserver

[dereklev]

Yes I know the law is on the books but so is wearing a helmet when riding a motorbike.

I was asking if you, or anyone else, knew of a case where a court voided a lease or usufruct and the reasons why.

As a married man with usufructs I am also an Interested Observer

If you have doubts as to your legal position then I strongly recommend you ask a good lawyer.

No I have no doubts about my legal position and have been guided by good lawyers. I am merely curious if anyone actually knows of such a case.

[wolf5370]

From my understanding Thailand adopted USUFRUCTS for the purpose of protecting produce of land etc when a property was rented OR purchased under a loan agreement - the point being that banks could, if they so wished, decide they owned a percentage of the produce of a farm where they owned the property mortgage. So,it seems a little odd that banks would not allow a USUFRUCT in the name of the debtor. If the mortgage is to be in a different name to the USUFRUCT or deed/chanote, then it us understandable the bank wold not agree.

USUFRUCTS are good and useful, but there have been instances where, when between husband and wife alone, they have been considered matrimonial property and thus pretty much torn up by the divorce courts - that is why good lawyers always suggest adding a third party (even the children of the marriage will do apparently) as it then become external to the matrimonial possessions. As I understand it, it should be safe anyway, but there have been cases where the divorce court has overruled (i.e. ignored) the letter of the law in such cases as I mentioned before. This was told to me by a good legal company here in Thailand that specialise in USUFRUCTS.

Not sure I agree that forming a company and renting it is a safer method - for starters USUFRUCTS are legal, companies set up purely to serve as a way for a foreigner to circumvent the land laws is not.

I suggest, as stated, talk to a company that specialises in USUFRUCTS and ask about mortgages, there is probably precedence here and some kind of contract that banks would be happier with - like exit clauses or simple that the mortgage contract takes precedence over the USUFRUCT.

[donx]

Referring back to the original post, I remember reading posts where some members were recommending a mortgage and a ususfruct. If I recall correctly, I believe that those posts implied that the farang provided funds to a Thai partner and that it constitutes a mortgage where the farang (or a company controlled by the farang) is the lender. Under this situation, the farang would cetainly be willing to allow a usufruct for themselves to be attached to the land title. I don't recall hearing about anyone getting a usufruct attached to land with a bank mortgage with the exception of the case described so elegantly by wolf5370 above.

[barryofthailand]

Referring back to the original post, I remember reading posts where some members were recommending a mortgage and a ususfruct. If I recall correctly, I believe that those posts implied that the farang provided funds to a Thai partner and that it constitutes a mortgage where the farang (or a company controlled by the farang) is the lender. Under this situation, the farang would cetainly be willing to allow a usufruct for themselves to be attached to the land title. I don't recall hearing about anyone getting a usufruct attached to land with a bank mortgage with the exception of the case described so elegantly by wolf5370 above.

Absolutely correct. I did this when I bought a home in Pattaya and my name appeared on the chanut as the mortgage holder. When my wife and I decided to get divorced we sold the house and the land office in jomtien required my signature to transfer the title.

Barry

[donx]

Referring back to the original post, I remember reading posts where some members were recommending a mortgage and a ususfruct. If I recall correctly, I believe that those posts implied that the farang provided funds to a Thai partner and that it constitutes a mortgage where the farang (or a company controlled by the farang) is the lender. Under this situation, the farang would cetainly be willing to allow a usufruct for themselves to be attached to the land title. I don't recall hearing about anyone getting a usufruct attached to land with a bank mortgage with the exception of the case described so elegantly by wolf5370 above.

Absolutely correct. I did this when I bought a home in Pattaya and my name appeared on the chanut as the mortgage holder. When my wife and I decided to get divorced we sold the house and the land office in jomtien required my signature to transfer the title.

Barry

You were the mortgage holder. Did you also have a usufruct attached to the chanut?

I'm very curious as to what would have happened if your wife had defaulted on the mortgage? You wouldn't be able to take ownership of the property would you? I suppose as long as the land is sold then it doesn't matter. Correct?