30 Year Lease On House While Mortgage Is Being Paid

[ChiangMaiThai]

Excuse me if this question is naive, but I'm looking for some clarification.

If the mortgage on a house is currently in a Thais's name and being paid by that Thai, can a 30 year lease to a farang be arranged at the same time? So as long as the payments are made, the farang is in control - for 30 years anyway.

The objective is to purchase land and a house in a Thai's name - and qualify for the mortgage in a Thai's name, Then effectively allow a farang to control the property.

Thank you in advance!

[InterestedObserver]

Easy one, the bank won't allow it. Why should they?

[ChiangMaiThai]

Easy one, the bank won't allow it. Why should they?

As long as the payments are being made, why is the bank involved? Of course if they knew, they wouldn't allow it.

The farang is leasing a property from a Thai who is paying a mortgage. The lease is registered at the land office. The lease is now official. If the Thai tries to sell the house, it won't be possible because the lease has to be honored. No?

[Capealava]

Who owns the house ? The bank does. The bank has the title. You cannot lease. The Thai person does not own the house. He has nothing to lease. I went through this myself. You will always be unprotected in this case.

[ChiangMaiThai]

Doesn't the Thai person own the house with the bank holding a lien against the house until the balance of the loan is paid in full?

If the payments aren't made, the bank will take the house. But as long as the payments continue to be made, then the bank is not involved.

If the Thai person calls the police and tells them to remove this fat farang from their property, the farang can produce a lease agreement that has been registered at the land office and refuse to go anywhere. No?

[InterestedObserver]

Back to the basics. You cannot register a 30 year lease on the property because the bank will not turn over the title deed (Chanote) to the land office to complete the process. The lease must be listed on the back of the title deed. The bank is holding all the high cards. End of story.

Edited August 10, 2010 by InterestedObserver

[ChiangMaiThai]

if the lease option is not possible until it is paid off in full, are there any steps that can be taken to protect the farang in this situation? For example, a promise that the Thai will lease to the farang on such and such terms immediately after the loan to the bank is paid in full?

[InterestedObserver]

And just how do you plan on enforcing this unsecured promise (contract) if the Thai should default?

[ChiangMaiThai]

And just how do you plan on enforcing this unsecured promise (contract) if the Thai should default?

I would never let the Thai default as I have an interest in seeing that the lease is realized. So I would step in and make payments, (which would be fine with me). Even if the Thai kicked me out, as soon as the loan was paid in full, they would be obliged to lease it to me. RIght?

[liveinlos]

Over the years there are 100's of stories of farangs making the payment to the Thai, the Thai never pay the bank and the farang gets the boot and the shaft

Save yourself the aggrevation

If you cannot buy it outright, then steer clear

[trogers]

The objective is to purchase land and a house in a Thai's name - and qualify for the mortgage in a Thai's name' date=' Then effectively allow a farang to control the property.

[/quote']

Scenario 1 - Land and house is purchased and paid with cash. A 30-year lease is registered with the Land Department and recorded into the land titles. Now bank is asked to approve a mortgage on the property. Will the bank agree?

Scenario 2 - Land and house is purchased with cash and a bank mortgage. Title deed is in the hands of the bank. Owner wants to register a 30-year lease with the Land Department and ask the bank to release the land title to effect the lease. Will the bank agree?

In both cases, think of the position of the bank should there be a default on the mortgage. The bank has to foreclose and auction off the property. How many people out there will pay full price for a property that is tied down with a 30-year lease?

[BWPattaya]

The only way this would work is if you simply pay off the mortgage so the bank no longer own the house. Make sure the house is registered to the Thai person you wanted the mortgage for and register the lease at the same time as transferring the title.

No way will you have a legal lease whilst the bank own it.

[ChiangMaiThai]

The objective is to purchase land and a house in a Thai's name - and qualify for the mortgage in a Thai's name' date=' Then effectively allow a farang to control the property.

[/quote']

Scenario 1 - Land and house is purchased and paid with cash. A 30-year lease is registered with the Land Department and recorded into the land titles. Now bank is asked to approve a mortgage on the property. Will the bank agree?

Scenario 2 - Land and house is purchased with cash and a bank mortgage. Title deed is in the hands of the bank. Owner wants to register a 30-year lease with the Land Department and ask the bank to release the land title to effect the lease. Will the bank agree?

In both cases, think of the position of the bank should there be a default on the mortgage. The bank has to foreclose and auction off the property. How many people out there will pay full price for a property that is tied down with a 30-year lease?

Understood. As long as the deed needs to be shown to effect the lease and the deed is in the hands of the bank, it is impossible. So can anything be done to protect the farang up until the point where the loan is paid off and a lease can be registered?

[trogers]

The objective is to purchase land and a house in a Thai's name - and qualify for the mortgage in a Thai's name' date=' Then effectively allow a farang to control the property.

[/quote']

Scenario 1 - Land and house is purchased and paid with cash. A 30-year lease is registered with the Land Department and recorded into the land titles. Now bank is asked to approve a mortgage on the property. Will the bank agree?

Scenario 2 - Land and house is purchased with cash and a bank mortgage. Title deed is in the hands of the bank. Owner wants to register a 30-year lease with the Land Department and ask the bank to release the land title to effect the lease. Will the bank agree?

In both cases, think of the position of the bank should there be a default on the mortgage. The bank has to foreclose and auction off the property. How many people out there will pay full price for a property that is tied down with a 30-year lease?

Understood. As long as the deed needs to be shown to effect the lease and the deed is in the hands of the bank, it is impossible. So can anything be done to protect the farang up until the point where the loan is paid off and a lease can be registered?

No protection except the one under contract law for a normal lease contract of up to 2 years, and rental payment as stipulated in the lease contract, usually monthly.

[jfchandler]

How about this...

Can you have a contract executed between the two parties obligating the execution of a 30-year lease under such and such terms between the same two parties at a future point in time (such as when the mortgage is satisfied)?

[trogers]

How about this...

Can you have a contract executed between the two parties obligating the execution of a 30-year lease under such and such terms between the same two parties at a future point in time (such as when the mortgage is satisfied)?

Such a contract cannot bind heirs of the deceased, nor the bank if property is foreclosed.

Edited August 10, 2010 by trogers

[ChiangMaiThai]

How about this...

Can you have a contract executed between the two parties obligating the execution of a 30-year lease under such and such terms between the same two parties at a future point in time (such as when the mortgage is satisfied)?

Such a contract cannot bind heirs of the deceased, nor the bank if property is foreclosed.

But, what if the Thai wishes to rent the house out? They still owe the bank, but have rented it to a farang. They could sign an agreement with me as a tenant, renting at 1,000 Baht a month, with an option to renew and renew and renew up until the point that it is paid off and then the 30 year lease can be enacted. No?

[trogers]

How about this...

Can you have a contract executed between the two parties obligating the execution of a 30-year lease under such and such terms between the same two parties at a future point in time (such as when the mortgage is satisfied)?

Such a contract cannot bind heirs of the deceased, nor the bank if property is foreclosed.

But, what if the Thai wishes to rent the house out? They still owe the bank, but have rented it to a farang. They could sign an agreement with me as a tenant, renting at 1,000 Baht a month, with an option to renew and renew and renew up until the point that it is paid off and then the 30 year lease can be enacted. No?

Yes, a property owner can rent out his property. But rental agreement of 3 years or longer will need to be registered into the title deed (like a 30-year lease). If the property owner is still alive, and does not default on the mortgage, he can honor and extend lease contracts of less than 3 years and renew them.

But in the even of default and foreclosure, or if the landlord passes away, then the lease agreement will be terminated on expiry.

[jfchandler]

I think the four scenarios I'm envisioning, and they probably would apply to most folks here, are the purchase of a townhouse or house (non-condo) by a guy and his Thai GF, or farang guy and Thai wife.

1. A usufruct can be executed by a man and his GF prior to marriage that would govern the purchase of the house and control the future of the property where it's an all cash purchase and no mortgage is involved.

2. In the case of a man and his GF wanting to buy a house where a mortgage is involved, a usufruct apparently won't generally work because the lending bank won't permit it. So that's one scenario -- a house and mortgage -- where some other approach would be needed/desired.

3. In the case of an already husband and wife wanting to buy a house without a mortgage, I gather a usufruct still goes out the door, because it can be voided by either party if executed by a couple who is already married. But in an all cash purchase by a married couple with the property title held in the wife's name, then I'm assuming some kind of a rental or contract agreement could apply.

4. In the case where an already married couple want to buy a house and a mortgage is involved, then it really gets to be problematic, in terms of trying to provide some long-term protection for the farang partner.

If I've gone astray anywhere above, please correct me...

[jfchandler]

How about this...

Can you have a contract executed between the two parties obligating the execution of a 30-year lease under such and such terms between the same two parties at a future point in time (such as when the mortgage is satisfied)?

Such a contract cannot bind heirs of the deceased, nor the bank if property is foreclosed.

My context for asking the question assumed

1) I'd be paying most or all of the monthly mortgage for the home of myself and my wife (although held in her name)... so foreclosure wouldn't really be a concern.

2) Since my future wife is a bit younger than me, barring accident or illness befalling her, I wouldn't be so much worried about issues re her heirs...

I was thinking something along the lines of maybe start with the up to 3 year rental agreement, and then transition to a contract specifying execution of a long-term lease upon satisfaction of the mortgage...

You didn't say NO... can't be done... So perhaps it can...

[johnnyk]

Sounds like OP is trying to bend reality to suit himself. Wishing and hoping doesn't make it so. Its way too complicated for Thai people. They aren't stupid, they just would not see any benefit to themselves in jumping through falang hoops.

[ChiangMaiThai]

Sounds like OP is trying to bend reality to suit himself. Wishing and hoping doesn't make it so. Its way too complicated for Thai people. They aren't stupid, they just would not see any benefit to themselves in jumping through falang hoops.

Bend reality? Okay... I'm consulting a lawyer and will update the thread with my final solution.

The initial opinion is that the 30 year lease can be executed from the Thai to the Farang prior to the mortgage. The lender will insist that their mortgage be registered first, which will mean that the Farang's lease will be subject to the right of the lender, meaning the lender will foreclose if payments aren't made and the lease won't be worth anything. If payments are made, then the lease will exist and it will be impossible for the Thai to sell/rent the property or kick the Farang out of the house as he has a legal right to live there. This is exactly what many posters are saying is impossible.

So anyway, I will update with the final solution after it is done.

[InterestedObserver]

Bend reality? Okay... I'm consulting a lawyer and will update the thread with my final solution.

Since when does a lawyer dictate bank lending practices. Have you bothered to ask the bank?

[eljeque]

The farang is leasing a property from a Thai who is paying a mortgage. The lease is registered at the land office.

Once there is a mortgage registered at the land office between the bank lending and the owner boirrowing on the property, the bank will hold the land title deed and will not allow it to be taken to the land office to have a lease registered on it. The bank will not allow a claim tof right to use the property be placed upon a property which they have lent on. If the borrower defaulted, the bank would have to sell the property in order to receive their funds back, but if the leasee has rights of use for 30 years, they cannot sell the land to anyone who wants to use it.

The lease is now official. If the Thai tries to sell the house, it won't be possible because the lease has to be honored. No?

If first you have a lease on the property registered at the land office, and then the Thai owner wants to borrow on it, she cannot register a loan at the land office. The land office will not allow it.

It comes down to what the bank will do, and banks are not very flexible about anything. You could gaurantee a loan if the borrower pays 1/2 up front or something like that, but being a gaurantor and having a lease are something different.

Try speaking to a bank lending officer to see if he/she is aware of a way to work within your parameters. If so, super, you win.

Edited August 12, 2010 by eljeque

[trogers]

The lease is now official. If the Thai tries to sell the house, it won't be possible because the lease has to be honored. No?

Even unregistered lease agreements have to be honored by buyers of foreclosed properties, but such lease agreements must be of less than 3 years duration to be legal. Thus, buyers of such properties know that they can legally take possession of the property within 3 years.

[katabeachbum]

When a property is morgaged, the banks name appears last on the Chanote. One Chanote is filed in Land office, one is held by the bank.

The bank will of course not grant anything else registered on Chanote.

A 3 year lease/rental between "owner' (not the bank) and farang protects rights of residence for 3 years. A new 3 year can be issued, but be aware if "owners" id card or Tabien Baan changes before this lease starts, its invalid.

Continue this until morgage is payed. Chanote is then transfered to "owner' to become OWNER of clear Chanote. Now its possible to register lease or usufruct on property.

The 3 year leases should be equal to payments to bank, and make every single payment yourself directly to bank.

Its not safe, all it takes is a lost id card, changed name or moved adress of owner", but its one of the safest ways to buy property without money in LOS

[jfchandler]

Can you explain the reason for this advice below...particularly the part about lease payments being equal to payments to the bank.

In my thinking, the typical example is a farang husband or BF and his Thai GF or wife... with the property held/owned in her name.

In those situations, I'd presume the guy is usually the one fronting most or all the money for the house payment and, if it were me, I'd be paying the money directly to the bank holding the mortgage.

So once that is done, what difference does the terms/$ of the lease make?

If the guy is already paying the bank directly for the mortgage, why couldn't the lease be some nominal $1 a month or something like that...

The 3 year leases should be equal to payments to bank, and make every single payment yourself directly to bank.

[katabeachbum]

Can you explain the reason for this advice below...particularly the part about lease payments being equal to payments to the bank.

In my thinking, the typical example is a farang husband or BF and his Thai GF or wife... with the property held/owned in her name.

In those situations, I'd presume the guy is usually the one fronting most or all the money for the house payment and, if it were me, I'd be paying the money directly to the bank holding the mortgage.

So once that is done, what difference does the terms/$ of the lease make?

If the guy is already paying the bank directly for the mortgage, why couldn't the lease be some nominal $1 a month or something like that...

The 3 year leases should be equal to payments to bank, and make every single payment yourself directly to bank.

If conflict, you get yourself a stronger case if your payments are equal to market value, IOW payments including interest to the bank

[ChiangMaiThai]

Bend reality? Okay... I'm consulting a lawyer and will update the thread with my final solution.

Since when does a lawyer dictate bank lending practices. Have you bothered to ask the bank?

Like I said, I'll report back when I know more and after I have bothered to ask the bank. My initial understanding is that there is a means by which the 30 year lease can be registered with the lender's rights to foreclose in case of failure to pay superseding the rights of the lease holder. This is Thailand and I am sure whatever the solution is, it's not quite that simple. I'll post again when I know more.

[jfchandler]

Stronger case with whom???

If you're within the 3 year lease, you have a binding contract.

If you're outside the 3 year lease, and nothing else has replaced it, you're SOL, I would think...if there was some kind of conflict.

If conflict, you get yourself a stronger case if your payments are equal to market value, IOW payments including interest to the bank