Legal Issue - Family Land Used As Security

[djjf]

Possibly the wrong forum...

A question regarding the legality of certain actions which I've not been able to ascertain from the Civil Code:

The setup:

A Mother passes away and leaves land/chanote in her name to be split amongst her children/statutory heirs.

Let's assume there was no written will.

However, new title deeds are not made due to the cost of duties. Instead the heirs collectively agree to trust the title/chanote of all the land, still in their Mother's name, to the oldest brother.

Let's assume there was no written agreement about this.

The brother then, unbeknownst to the other heirs, proceeds to take a loan from a local lender using the chanote as security.

Let's assume that there was a contract for this and that the lender is legally licensed to make such a loan and to claim interest on this.

The brother never repays the loan or any part thereof over 5 years. The brother subsequently disappears.

The lender, having not received any payment on the loan and having made efforts to hand notices to the brother, proceeds to file the case with their lawyer, with the intention of claiming and selling the land.

The other brothers and sisters still occupy the land. They are told to vacate the land unless they immediately repay the monies owed with interest on behalf of their brother.

The questions:

Was the Brother ever in a position to use the chanote as security, as he was not the single heir - unless all other heirs had approved and accepted the loan terms between the Brother and the lender?

When accepting the chanote as collateral, is there not an obligation on the lender to seek verification that the brother was entitled to use it as security - to verify that there were no other legal claims to the land (let's assume that the chanote was still in the mother's name)

Does the lender have any claim to any land other than the part bequeathed to the brother?

Does the lender have any powers to proceed with an eviction and public sale/auction of the land to recover the debts owed to them?

Do the other heirs have any possibility of simply having the loan agreement declared void or illegal, either by court or by default by law?

For clarification:

The lender is not a commercial bank or institution, but a private person.

The other heirs have hardly any resources at their disposal, for example to hire legal assistance.

The other heirs have lived on the inherited land almost all their lives and at least since the passing of their Mother.

[bbradsby]

His name's not on the Chanote, so I would doubt any real bank would loan him money against it. Sounds more like a loan shark to me.

Edited March 7, 2012 by bbradsby

[Khun Jean]

Legally they can not do anything. They forgot about 'due diligence'.

However that would mean it is not a bank but some private person or 'easy credit' company.

In that case they can and will threaten if the amount is high enough for them to risk jail time.

[djjf]

I'm surprised there's not been more replies. Maybe the way I put the post made it seem more abstract than was strictly necessary.

To answer the two replies - yes, it is a person-to-person loan. Basically someone with a bit of cash in the neighboring village agreed to lend the brother a sum of money.

However, I gather the person in question is not a typical loan shark or "mafia" if you will. And like I said, there was apparently a proper contract between lender and borrower.

I'm not sure what was meant by the parties forgetting 'due diligence' - was that referring to the other family members/heirs not having the proper paper work done after the passing of their mother?

How much should they expect to pay a Thai lawyer for advice on the matter?

Does the government provide any services for this, eg. some sort of Citizen's Advice Bureau?

My thinking was that if the family could find the funds to lawyer up a bit, that the lender would be forced into a at least some compromise.

As it happens, the family has decided to repay the load including interest on behalf of their missing brother.

For sure the family was stupid for not having their paper work in order. But I find it frustrating that there's no recourse for them in such cases. They're so easily bullied and misled by people with a bit of cash. The lender in this case would benefit immensely from not receiving repayments. The value of the land secured far exceeds the loan amount.

One can only hope that the brother will return eventually and repay them what he owes. But that's unlikely.

[hanuman2543]

The family should go with all papers they have to the next court house. Everybody can ask there for free legal advice and then they should make a decision.

[mrbojangles]

Is there any intent on paying the money back to the guy who loaned the money and has waited patiently for 5 years?

[Khun Jean]

There is no 'proper' contract. The brother committed fraud and the lender was stupid enough to not perform 'due diligence'.

The family should pay nothing as the paper the lender holds is not worth anything.

Report the land title paper stolen and get a new one.

If the family decides to pay anyway, would that be because they are afraid of the consequences (any threats made?), the lender has connections with high placed individuals (corruption), out of sympathy for the brother, did some member of the family offer a guarantee (maybe in secret from the rest and is now the one most vocal to pay it back)?

All legit concerns and circumstances that can make someone decide it is better to just pay up.

Legally the brother should go to jail, and the family is free from his crimes.

Edited March 7, 2012 by Khun Jean

[donx]

djjf, reading your original post, it isn't clear to me if the oldest brother is listed as the owner of the land on the chanote. If so, is he the only owner listed on the chanote? If this is the case then the person that loaned the money did so legally.

[rgs2001uk]

There is no 'proper' contract. The brother committed fraud and the lender was stupid enough to not perform 'due diligence'.

The family should pay nothing as the paper the lender holds is not worth anything.

Report the land title paper stolen and get a new one.

If the family decides to pay anyway, would that be because they are afraid of the consequences (any threats made?), the lender has connections with high placed individuals (corruption), out of sympathy for the brother, did some member of the family offer a guarantee (maybe in secret from the rest and is now the one most vocal to pay it back)?

All legit concerns and circumstances that can make someone decide it is better to just pay up.

Legally the brother should go to jail, and the family is free from his crimes.

Original post from the OP,

"Let's assume that there was a contract for this and that the lender is legally licensed to make such a loan and to claim interest on this."

Lets suppose the lender now decides to sell this loan on to a debt collection agency, your logic and legalities go out the window.

There are some very unscrupulous people operating here and legal niceties dont seem to apply.

Think Chuwit and soi 10 for ones that make the news, at a local level think of cars and motorcycles being taken away by a repo man.

One way or another these people will be paid.

[djjf]

@ Khun Jean - Ok, now I get it. In that case, that reflects what I was thinking. That the contract between the lender and borrower was illegal or worthless. But I would need a Thai lawyer to look at the contract and determine that to be sure. I would also need to have access to all the documentation. I don't.

I do believe that would be a responsibility on the lender to check the legal ownership of the security being put up (like any bank would). But I could not verify that from any on Thai Law that I could find.

As for threats, the other family members supposedly learned about the deal via local gossip. When investigating they were told that the lender had now given up on retrieving the loan and had passed the matter to lawyers (that's pretty threatening) and that they were aiming to make a quick sale of land (within one month) to cover the loss. As the other family members all reside on the land in question, they would be forced to vacate.

The idea that someone inside the family is an accomplice or is otherwise involved is something I couldn't say. It's a possibility. I asked if it was possible that the brother had simply concocted this to extort money from the family. Obviously nobody wants to believe this (we will never know).

@ donx - From what little I know, the chanote is still in the name of the deceased mother, not the brother. But I did learn that the land was replotted/measured by the Land Department but apparently no new chanotes issued. Which seems weird.

In details the story gets murky. That's why I tried to make the original post as neutral as possible to focus on the issue of the legality of the loan transaction itself rather than the specific narrative.

[djjf]

@ mrbojangles

The family has decided to repay. I mentioned that above.

Edited March 7, 2012 by djjf

[Khun Jean]

Original post from the OP,

"Let's assume that there was a contract for this and that the lender is legally licensed to make such a loan and to claim interest on this."

Lets suppose the lender now decides to sell this loan on to a debt collection agency, your logic and legalities go out the window.

There are some very unscrupulous people operating here and legal niceties dont seem to apply.

Think Chuwit and soi 10 for ones that make the news, at a local level think of cars and motorcycles being taken away by a repo man.

One way or another these people will be paid.

To answer the two replies - yes, it is a person-to-person loan. Basically someone with a bit of cash in the neighboring village agreed to lend the brother a sum of money.

A debt collection agency would look at the contract and the paper and then refuse to take it.

The threat to send a lawyer is an empty one, but it seems to have its effect. The lawyer is going to do what exactly?

The person that lend the money made a mistake, family should and are not accountable for that.

I mentioned that a threat can be a reason to pay them back, but legally there is nothing to force the family to pay.

@djjf

A quick sale of the land would be impossible. The landoffice would not accept that someone using a chanote from someone else to transfer land. It just is not possible.

Ignore the threat, but be aware that threats can come in different forms, also very nasty ones. It all depends how much 'power' the lender has unfortunately. Then again the same problem would arise when someone threaten the family without a loan, how would they respond to that. At some moment you have to stand up to it.

Edited March 7, 2012 by Khun Jean

[djjf]

Sorry, have a follow up question:

Even if the lending contract is void, at what point does the heirs claim to a piece land become dated?

The mother who passed away did so 12-13 years ago and the chanote is still in her name.

From what I understand, the family sought advice from the Land Department (or local Land

Office for the district/amphur - sorry I don't know the specific name). They informed them that

the lender does have a legal claim as they have not had the chanote reissued in their names

after so many years have passed.

To me that just sounds like anyone, including the lender, could claim the land if that information

is correct. Doesn't make sense.

Edited March 9, 2012 by djjf

[Khun Jean]

On land with a chanote 'squaters' can get the title when they use the land for at least 10 years.

It does not matter one bit who holds the physical piece of paper. It is just a copy.

Go get a new copy and see what is written on it. If the lender is written on it because of the loan he has the right to take it. This means that it was registered and because of that enforceable. If it is on the chanote, which i doubt, then you have to go after the brother. If there is nothing about the loan written on the chanote, there was no loan with the chanote as collateral. period.

As it seems the 'brother' was not the owner, name not on the title, so he committed fraud. The lender was stupid.

And why should someone that makes mistakes like that need to be 'bailed out'.

Signs of the times maybe, his mistake you pay. He should call Paulson, maybe he can make a backdoor deal.

If necessary take it to the courts, don't try to offer anything as that can be seen that the family takes responsibility for the brothers actions.

[donx]

The chanote has the name of the deceased mother. I assume that there was no will for who owns the land. Wouldn't this mean, based upon the laws relating to the distribution of property in the case of no will, that the oldest brother is an owner of the land and therefore it is legal for him to use the land to borrow against? I'm wondering if this is the reason the land office is saying the loan is valid.

[djjf]

I'm starting to realise the situation is more complicated than I first anticipated.

There is "face" to consider on the part of the family, loan sharks or not, there's the uncertainty over the consequences of contesting the loan (harassment or worse) and there's still the possibility that some way or another the deal was actually registered in a way - even though it shouldn't be possible if what I know is true (ie. if the lender went with the brother to the Land Office and had them register the agreement).

It's basically seems to be so common a situation (reading on these forums and elsewhere) that it is difficult to start making a legal case out of it as it follows a different "village" system. My mistake perhaps.

I still can't find a good explanation of what a so-called Khai Fark agreement is...?

[donx]

With your last post I'm wondering if the land in question even has a chanote? Is it possible that the land title is not a full chanote?

[djjf]

Couple more points that add to my pessimism:

From what I gather, reporting a chanote stolen when knowing it is not is illegal.

And going to the Land Office to have a chanote re-issued (under cover of it being falsely reported stolen or otherwise missing) is also an offense and the lender could report it to the police as she holds the original.

[djjf]

With your last post I'm wondering if the land in question even has a chanote? Is it possible that the land title is not a full chanote?

I believe it is a Red Chanote. I've never seen it. As for the chanote I still stand by the original assumption: That there is a chanote for the land (all the land) and that it was passed to the brother to keep on behalf of his siblings 12-13 years ago when the mother passed and that it is in her name, since no new chanote/transfers were done after her passing.

I don't know if the brother falsely claimed to be the single heir or such things and had the loan registered at the Land Office (a practice I've only just read about and which seems to be the safest way to for a lender to issue loans that involve chanotes or other title deeds) against the deed along with the lender and required witnesses. But I don't think he did.

[djjf]

The chanote has the name of the deceased mother. I assume that there was no will for who owns the land. Wouldn't this mean, based upon the laws relating to the distribution of property in the case of no will, that the oldest brother is an owner of the land and therefore it is legal for him to use the land to borrow against? I'm wondering if this is the reason the land office is saying the loan is valid.

Sorry didn't see this:

I understood that the Land Office basically said the chanote is void because the family has made no efforts to re-register after so many years and therefore the lender has a claim. I did not find out if the loan was registered against the chanote at the Land Office. It was only later that I learned of this so didn't bother to ask.

I think that if there is no will, the property passes to the statutory heirs, ie. all children, equally. They all have a legal claim to part of the land. What I'm not sure about is if that legal claim expires at some point (10 years?). But then surely the fact that they have been occupying the land peacefully for decades comes into effect.

The only way I can see the lender have a legal (as in "the law") claim is if there is an agreement between her and the brother, probably on the back of the chanote and witnessed, that outlines the terms of the loan. They would then have had to go and register this with the Land Office, also with witnesses, basically allowing the automatic transfer of the land to the lender in case of a default according to the terms agreed.

But this SHOULD NOT have been possible if the chanote had the mother's name on it from what I know at present.

I don't know if a Khai Fark has a similar effect or if this IS a Khai Fark agreement.

[djjf]

Sorry, I basically just reiterated what Khun Jean outlined before with regards to transferring the chanote as part of a loan.

[Douggie Style]

Sorry don't have time to read the whole thread, so this might have been answered before..

The older brother was holding the land in trust, as a trustee, not as an owner.

So he never had title and couldn't loan against it. A trustee can't use trust property personally.

I am not sure how Thai law goes on equity but feel this will be the case and the courts will rectify this.

I feel the chanote issues probably follow this point not precede it.

But first you may need to get a court to declare there was a trust (via your lawyer), then if so the rest of the problems will probably fall away. If it goes that way you would want to request new trustees (all the family or a third party) and get the chanote issue sorted. You would also ask for all contracts, based on the breach of ubermai fidei to be voided.

Of course TIT but a lot of their commercial law is similar to west...

Edited March 9, 2012 by Douggie Style

[harrry]

Sorry don't have time to read the whole thread, so this might have been answered before..

The older brother was holding the land in trust, as a trustee, not as an owner.

So he never had title and couldn't loan against it. A trustee can't use trust property personally.

I am not sure how Thai law goes on equity but feel this will be the case and the courts will rectify this.

I feel the chanote issues probably follow this point not precede it.

But first you may need to get a court to declare there was a trust (via your lawyer), then if so the rest of the problems will probably fall away. If it goes that way you would want to request new trustees (all the family or a third party) and get the chanote issue sorted. You would also ask for all contracts, based on the breach of ubermai fidei to be voided.

Of course TIT but a lot of their commercial law is similar to west...

Thailand does not have trusts....they are ilegal

[Khun Jean]

Keep it simple. The brother committed fraud. Family is not responsible for one of its members crimes.

The lender should and can only go after him.

[mrbojangles]

@ mrbojangles

The family has decided to repay. I mentioned that above.

Then I don't understand why the lender is trying to do a quick sale. Surely if they have agreed to repay, this is the easiest option for all.

[rgs2001uk]

@ mrbojangles

The family has decided to repay. I mentioned that above.

Then I don't understand why the lender is trying to do a quick sale. Surely if they have agreed to repay, this is the easiest option for all.

I would imagine the amount borrowed was nowhere near the true value of the land.

Greater profit from selling the land than the loan being repaid.

We can talk about legalities all day long, the simple fact is, gov't land is bought sold and borrowed against every day in Thailand. Is it legal, no, but it happens.

Usually these transactions take place through the poo yai baan because its impossible to do it at the land office.

[dksharron]

YOur family is in good shape.

The lender made a mistake. A big mistake.

The brother had no right to use property which did not belong to him for collateral.

If the mother died, and the family members continued to occupy the land, and they did it 10 years, it becomes theirs.

The brother ran off, meaning he ran away from his part of the land.

The family lost no rights, as the land office said. NOT TRUE. They have all rights to the land.

They should go to the local Amphur office.

They should not pay any money.

The legal maximum interest rate on a mortgage is 15% for land office registrations. Other interest rates generally enforced by the court are only 7.5% interest.

I hope the family does not pay. If they do, they should pay no more than 7.5% / year interest.

Best of luck.

They can still change their minds to all of this. They are not bound by any verbal agreement.

They could also file charge against the brother.... :-(

No matter what, the brother could not get a legally binding loan on the property, an the family members have no reason to pay.

The lender was greedy and careless.

[mrbojangles]

The lender was greedy and careless.

A bit harsh. We don't know the lenders side of the story in all this. For all we know, the family could have known all about this loan from the start and are now trying to wriggle out of paying. Not much goes on in a village without everyone knowing. Did the brother turn up with a new Motorcy one day? What did he buy with the money? Someone must have noticed something new.

I'm not accusing the family of any of this, I'm just making a point that we don't know the full story.

[djjf]

@ mrbojangles

The family has decided to repay. I mentioned that above.

Then I don't understand why the lender is trying to do a quick sale. Surely if they have agreed to repay, this is the easiest option for all.

Sorry, maybe the sequence of events is not clear:

The family learned about the loan at a stage where the lender had given up on retrieving the loan from their brother. The family was told that the paper work had gone to the lawyer who was now dealing with it and that they could expect to get evicted in a month's time.

However, through talking to the lender the family was offered a chance to repay including interest over 8 months. The current suggestion internally in the family is that the four parties (remaining brothers and sisters) split payments between them. I think this is a recipe for disaster though as they're incapable of agreeing what to do if one of them fails to make payment. But that's another story.

[djjf]

The lender was greedy and careless.

A bit harsh. We don't know the lenders side of the story in all this. For all we know, the family could have known all about this loan from the start and are now trying to wriggle out of paying. Not much goes on in a village without everyone knowing. Did the brother turn up with a new Motorcy one day? What did he buy with the money? Someone must have noticed something new.

I'm not accusing the family of any of this, I'm just making a point that we don't know the full story.

I agree, there's a lot I also don't know. That's also why I tried to keep the initial question a bit abstract so as to focus on the legality of certain actions/contracts. I've learned a lot from the answers here and elsewhere on Thai Visa.

I think there are three things that need to be in front of me before passing further judgement:

The contract between lender and brother

The original chanote

Land Office registration details of the contract/chanote (if it exists or not, ie. if there was an agreement of sell-by-proxy or Khai Fark)

Going forward, if the lender has genuinely given some money to the brother in good faith (but without due diligence) I think there's a good chance the family will pay some or all back.

I think all the external issues here are quite common in rural Isaan: Money lending, titles as collateral, threats, families passing chanotes from generation to generation without changing the names etc.

It's just going to be incredibly hard on them in what has already been a tough year.