Bank Loan And Lease/2nd Mortage

[UncleDonald]

A Thai national may purchase property (say a Bangkok house) with financial contribution from her fahlang mate and also get a substantial Thai bank loan which of course will be recorded on the title, what we call a "first mortgage" in the US. But will the bank or the land dept allow the fahlang's interest to be secured as a "second mortgage" or will they permit a recorded lease in the fahlang's name on the title? Presumably any unrecorded contractual agreement would be difficult to enforce if the Thai partner decided to sell and take all. Any experience on this one appreciated.

[Dragonman]

A Thai national may purchase property (say a Bangkok house) with financial contribution from her fahlang mate and also get a substantial Thai bank loan which of course will be recorded on the title, what we call a "first mortgage" in the US. But will the bank or the land dept allow the fahlang's interest to be secured as a "second mortgage" or will they permit a recorded lease in the fahlang's name on the title? Presumably any unrecorded contractual agreement would be difficult to enforce if the Thai partner decided to sell and take all. Any experience on this one appreciated.

<{POST_SNAPBACK}>

Foreigners cannot have any freehold interest in the land! Unless you have 40 million baht, etc.,etc. It is extremely doubtful if the partner/spouse would be able to register a leasehold interest if the property is mortgaged. As in most countries, the bank will not want it's interest prejudiced by a sitting tenant with a 30 year lease. Without a mortgage OK. It is probable that if the mortgage has already been taken out the conditions state that no lease can be entered into, thus any unrecorded conract would be void.

[Sumitr Man]

thus any unrecorded conract would be void.

If we are talking Thailand - this is not strictly true. Any unrecorded contract in excess of 3 years would be void.

However, save any limitation there may be in the mortgage agreement with the bank otherwise, there is nothing to stop you from having a 3 year lease agreement with an option to renew for a further 3 year period (6 years in total). As an additional safe-guard, you could include a provision wherein the money you put into the purchase of the property is considered a "security deposit" refundable upon termination of the lease agreement. You could also have interest accruing on the "security deposit" at the highest rate permissible under the CCC - currently 7.5%.

SM

[Dragonman]

thus any unrecorded conract would be void.

If we are talking Thailand - this is not strictly true. Any unrecorded contract in excess of 3 years would be void.

However, save any limitation there may be in the mortgage agreement with the bank otherwise, there is nothing to stop you from having a 3 year lease agreement with an option to renew for a further 3 year period (6 years in total). As an additional safe-guard, you could include a provision wherein the money you put into the purchase of the property is considered a "security deposit" refundable upon termination of the lease agreement. You could also have interest accruing on the "security deposit" at the highest rate permissible under the CCC - currently 7.5%.

SM

<{POST_SNAPBACK}>

Yes, should have clarified was talking about normal farang 30 year lease to protect interests, etc.

[UncleDonald]

I thank both respondents for their very helpful replies. Consultation with a Thai banker confirms the infeasibility of combining a mortgage and a lease as stated in the responses. But the short term agreement proposed is very creative suggestion, it at least would allow for a cooling period that might put the business relationship back on track.