Thai Banks - what do you make of this...?

[jimmybkk]

So another of our customers decides that they are not going to make good on the 30-day credit facility we offer them. It's a little over 100K that has been outstanding for several months now. We went down the legal route and went to court where a court order was issued stating that they need to pay us. The court accepted their proposal of repayments of 5K per month which they subsequently defaulted on in month 2 and we've received nothing since. The corporate structure of the customer in question is a partnership, meaning that the individual partners are liable for the debts of their business, and so somewhat surprisingly, upon investigation we find that one of the partners holds some land in their own name, meaning we can apply for the land to be auctioned and that we would be repaid from the proceeds of the auction, after any outstanding amounts owed to financiers of the land in question have been paid off, assuming the land has been financed against.

 

We find out that the Land Department valuation of the land is 4 million baht. But when we go to the Legal Execution Department we find out that the owner has managed to raise finance against the land with one of the top 3 Thai banks for 15 million baht, meaning that when the land is auctioned, unless it achieves more than 4 times the Land Department valuation the bank will take everything and we will get nothing.

 

Now, i know that Land Department valuations are typically below what the property may be worth on the open market, but the last time I enquired about financing a purchase of raw land with the same bank I am referring to here I was told the maximum I could hope for in terms of finance would be 50% of the bank's valuation of the land. So even taking into account a low Land Department valuation it would seem to me that the bank is massively over-exposed on this.

 

Anyone have any ideas about how this could come about legitimately? I'm thinking that most likely the owner of the land has a friend at the bank who assisted with the mortgage valuation and application, but I'm also thinking that if this is the case, it's unlikely that I have stumbled across the only incidence of such behaviour and so the financial stability of the bank must surely be called into question. Or maybe I am missing something glaringly obvious...

[kannot]

not  only  that but from what I see they dont chase these debts particularly  hard, guy  in the  village near me has owed the bank for  a house he  built but doesnt live in now for about 5  years and still it  hasnt been repossessed, sits there empty  surrounded by overgrown grass/weeds  etc. I just dont get it?

[BEVUP]

It's on everything as an example a certain Chinese bank will give you a loan of 100 perc for a used car  

You will never see it as you are a farang (with money ) & know you only have the legal option or others wise you may win a instant holiday with a return ticket at the end

Where as the locals know who's who 

[thailand49]

I think if you can go the legal route you should continue the same route to get the correct answer to your question.

Personally, over 10 years ago I went down the same route, got a legal judgement but found out the owner got tip off (another subject) to change the name to the property. Basically he made a deal with a family member to have the property given to them so I couldn't get my hands on it. In a conversation with another lawyer off the record told me majority of time in a case like this the legal judgement is useless.

[SOUTHERNSTAR]

Banks operate as follows. Mr. A gets B 15 million finance and present several assets as finance, including land. They register a mortgage of the loan amount over the property. They know the land value is less than the B 15 million, but they also know that by doing that they keep people like yourself (unsecured debtors) having access to any value of the land. For example the land value was B 5 million when they registered the mortgage and they only registered the B 5 million. Ten years down the line the property is worth B 10 m. You come along and claim your debt after the bank receives its B 5 m. But the bank is still owed B 10 m. Hope it makes sense.

[Kwasaki]

9 hours ago, jimmybkk said:

the owner has managed to raise finance against the land with one of the top 3 Thai banks for 15 million baht

I find that hard to believe if it's valued at 4 mill.

[seajae]

I take it these people own cars, houses etc, why cant you have them seized as sold to reimburse you

[BEVUP]

Well at the end of the day anything is possible as i recall what my wife quoted from a women who bought a house in the same Moo Baan as we

"HOW MANY BANKS DID YOU USE "

[SiSePuede419]

"...meaning that when the land is auctioned, unless it achieves more than 4 times the Land Department valuation the bank will take everything and we will get nothing."

 

But the owner will no longer own the land.

 

After the auction is complete, you send them a demand notice and give them 30 days or threaten "further action" (do NOT specify).

 

Houses, cars, businesses.  Step by step.

 

Say "up to you"--pay or we take further action.

 

Or you can just write it off as a "bad loan". ?

Edited April 11, 2017 by SiSePuede419

[nong38]

You have my sympathy, it must be very stressful for you and I cannot think of any way you are going to win on this one sorry to say.

My experience here is that loans or where Thais "borrow* money end up being turned into "give" accompanied with the smiling phrase "you did not understand".

Thais are usually heavily in debt when you look at what they live in and what assets are in or around it, its only a matter of time before they default and providers move in and hope to get their assets back, I see it all the time houses suddenly empty overnight.

I think you will have to end up giving this one up and putting it down to experience.

I am always being asked, through the wife, for money and my answer is always the same...............people with no money want to borrow money and how do they think they are going to pay me back? Simple answer is they make one payment, then its soon, soon, and the borrow has turned into give and its gone, never, ever get involved in lending money here, you have no protection, you are a visitor here, the locals will always win, even the Law will be side stepped to make sure you wont win.

[12DrinkMore]

9 hours ago, kannot said:

not  only  that but from what I see they dont chase these debts particularly  hard, guy  in the  village near me has owed the bank for  a house he  built but doesnt live in now for about 5  years and still it  hasnt been repossessed, sits there empty  surrounded by overgrown grass/weeds  etc. I just dont get it?

Maybe on the reposessed list for sale.

 

Apparently the banks are not allowed to sell the property for less than the outstanding loan, so they prefer to have the property sitting on the balance sheet with a full valuation rather than take a hit to the shareholders' capital or profits.

 

Sooner or later property prices will rise to enable a sale, even if it takes a couple of decades the bank does not care.

[csabo]

This is the loan collector I use.  Do you want his number??

 

 

[sloperating]

Curious that you would lend >100K unsecured. Presumably the interest rate is high (?)

 

Would repayment of 5K per month cover the interest?

 

Is the customer's contempt of court not an avenue available to you?

 

 

[jippytum]

4 hours ago, thailand49 said:

I think if you can go the legal route you should continue the same route to get the correct answer to your question.

Personally, over 10 years ago I went down the same route, got a legal judgement but found out the owner got tip off (another subject) to change the name to the property. Basically he made a deal with a family member to have the property given to them so I couldn't get my hands on it. In a conversation with another lawyer off the record told me majority of time in a case like this the legal judgement is useless.

This would not happen with a condo as the Juristic Person Manager has to issue a debt free letter to the land office to verify the condo unit and the chanote are free from loans , maintenance or utility fees prior to any transfer

[thailand49]

12 minutes ago, jippytum said:

This would not happen with a condo as the Juristic Person Manager has to issue a debt free letter to the land office to verify the condo unit and the chanote are free from loans , maintenance or utility fees prior to any transfer

Thanks, but this is unrelated since the trial and judgement wasn't granted before the transfer was done. Even in a Condo situation as you noted, it would have been debt free technically since the case hadn't been heard nor a judgement render.

As in the poster situation by the time he got the judgement the property he wanted to attached his judgement for payment had already been borrowed on thus rendering his judgement secondary to the bank?

Edited April 11, 2017 by thailand49

[BEVUP]

1 hour ago, sloperating said:

Curious that you would lend >100K unsecured. Presumably the interest rate is high (?)

 

Would repayment of 5K per month cover the interest?

 

Is the customer's contempt of court not an avenue available to you?

 

 

Exactly & also agreeing with Nong38 this is why a lot of lenders will require gold jewelry or the motor bike or ect papers

They know they will get burnt if there's no callateral as all of a sudden the borrower has fled back to their home town if not there already 

[Kabula]

Never lend money in a foreign country!

 

It's hard to beat a citizen here all the knowledge he has gained over the years.

 

Never invest in another person's business!

 

Tryng to collect here, especially in a worldwide, retreating economy,  is as messy as pissing in the wind!

 

Borrowers always seem to disappear into the jungles and remote villages never to be seen again.

[elgordo38]

14 hours ago, jimmybkk said:

So even taking into account a low Land Department valuation it would seem to me that the bank is massively over-exposed on this.

The case your stating is just one small cog in the wheel of bank over exposure. As a old geezer standing on the side of the road who was raised in hard times I count the new vehicles going by and something just does not compute. 

[elgordo38]

2 hours ago, thailand49 said:

Thanks, but this is unrelated since the trial and judgement wasn't granted before the transfer was done. Even in a Condo situation as you noted, it would have been debt free technically since the case hadn't been heard nor a judgement render.

As in the poster situation by the time he got the judgement the property he wanted to attached his judgement for payment had already been borrowed on thus rendering his judgement secondary to the bank?

Yes the time of the savers like myself is long gone. Now its borrow to the hilt and do a runner especially if your a Thai and know the lay of the land. I think the world banking system is built on quick sand. 

[elgordo38]

3 hours ago, csabo said:

This is the loan collector I use.  Do you want his number??

 

 

I sure would not want  him to get my number. What is his catch phrase? "Your number is up"

[elgordo38]

2 hours ago, jippytum said:

Juristic Person Manager has to issue a debt free letter to the land office to verify the condo unit and the chanote are free from loans

Would the Juristic Person have access to this information??

[natway09]

In my business over the years I have been involved in this problem many times.

Not sure if you loaned them cash or allowed them to charge goods.

Anyway the courts here see this as a debt between you & "customer.

It is one thing to get a court order & another to get the cash.

You can ask the court after a default period for them to give you postdated cheques (which is also strange)

as illegal to write a postdate cheque (but done all the time).

If cheque bounces you now have a criminal case.

I will admit though, sometimes it is better to walk away, before going crazy & unfortunately can give you names & businesses  who know that

[bazza73]

4 hours ago, elgordo38 said:

Yes the time of the savers like myself is long gone. Now its borrow to the hilt and do a runner especially if your a Thai and know the lay of the land. I think the world banking system is built on quick sand. 

One of our better known fraudsters in Australia, Alan Bond, put it this way: " If you owe the bank a million dollars, you've got a problem. If you owe the bank 100 million dollars, the bank's got the problem".

[elgordo38]

2 hours ago, bazza73 said:

One of our better known fraudsters in Australia, Alan Bond, put it this way: " If you owe the bank a million dollars, you've got a problem. If you owe the bank 100 million dollars, the bank's got the problem".

An old joke but good for a revisit. The banks problem of course is greed plain and simple. If they walk out the front door the quicksand awaits them. 

[nong38]

The western way of doing business and the Thai way are not the same, they may look the same but they end up differently and here its the local way that wins, we do not have a leg to stand on. My wife tells me that locals ask her how much money do I have, can I still get my leg over etc I dont know I dont know enough Thai to hear, bit the culture here is clearly different, so beware of things you dont understand.

Heads up for this.

 A few years ago a friend of my wife asked to loan some money from me and pay back at 500 bts a month, the amount was 10,000 bts.

Now I would think that the loan would be paid back after 20 months, but I need to make something on it so 24 months is reasonable you would think?

Well thats not how it works here, this is how one of the popular schemes work, take note everyone.

Someone wants to borrow/loan 10,000 bts and they want to pay you back 500bts a month. You would think that would fit the bill above, but, that is not the case. First the loanee only gets 9500, you keep the first payment.

One month later the loanee has an option return the full 10,000 or pay you 500 and the 10,000 is still outstanding. Every new month month the same 5oo or the return of the full amount, get the picture?

Now you can see why you should never ever do loans here, sooner or later you will be left high and dry because you did not understand or you were out flanked by the locals who know how to play the local game.

Its the same as business here, retire, dont get involved there is no money to be made by you, the locals yes but not you, enjoy your money, relax and have good holidays and enjoy life.

[jimmybkk]

19 hours ago, thailand49 said:

I think if you can go the legal route you should continue the same route to get the correct answer to your question.

Personally, over 10 years ago I went down the same route, got a legal judgement but found out the owner got tip off (another subject) to change the name to the property. Basically he made a deal with a family member to have the property given to them so I couldn't get my hands on it. In a conversation with another lawyer off the record told me majority of time in a case like this the legal judgement is useless.

I agree - for the amount involved in this instance it would not be worth going down any other route.

[jimmybkk]

18 hours ago, Kwasaki said:

I find that hard to believe if it's valued at 4 mill.

So do I, which is why I posted here. I was somewhat lost for words when I was told that it had a 15m mortgage against it. There is a lady who works at the bank whom I have been dealing with for several years and I have helped her out with a few small things in the past. She is most often very helpful, so when I was told of the situation I sms'd her and told her I would like to ask her a question about something - "Sure, go ahead." was her response, so I sent one back explaining the situation and asking "Is this even possible?" She never replied to my sms and I've not heard from her since, which I thought was quite telling.

[jimmybkk]

18 hours ago, seajae said:

I take it these people own cars, houses etc, why cant you have them seized as sold to reimburse you

The cars are all financed and there are no houses in the names of the owners of the business, only this land, and since the land is most likely the only asset that is appreciating I figured it was the asset to go after.  Little did I expect so much negative equity...

[jimmybkk]

17 hours ago, sloperating said:

Curious that you would lend >100K unsecured. Presumably the interest rate is high (?)

 

Would repayment of 5K per month cover the interest?

 

Is the customer's contempt of court not an avenue available to you?

 

 

 

It was "lent" by way of agreeing to payment terms of 30 days net on goods purchased, and we only gave credit to corporate entities, which I thought provided some security. There was no interest charged provided payment was made in full within 30 days. When this company failed to make payment within 60 days we instigated legal proceedings, it went to court and we won. They made a request to the court that they be allowed to pay off the debt 5,000 per month and the court agreed, subject to interest of 1.5% per month for all overdue amounts. We weren't asked if that was OK with us. When they defaulted on those monthly payments we went back to the court and they issued a court order stating that they should pay us what was owed or else any assets they owned could be seized and auctioned. So with the court order in hand we were able to identify this land that they owned it looked like it would all work out OK for us in the end... until we found out about this 15m mortgage.

[Kwasaki]

5 hours ago, jimmybkk said:

She never replied to my sms and I've not heard from her since, which I thought was quite telling.

Not surprised really,  maybe sell the debt to a  m- - -deleted  debt collector.