Property Mortgages in Thailand

Property Mortgages in Thailand. A mortgage in Thailand is a formal security agreement in which a borrower (mortgagor) uses immovable property — typically land, buildings, or condominium units — as collateral for a loan, without transferring ownership to the lender (mortgagee). Governed by the Civil and Commercial Code (CCC) and Land Department regulations, mortgages are widely used for both individual and commercial financing.

This guide examines the legal framework, registration procedures, rights and obligations of parties, enforcement, and practical considerations.

1. Legal Foundation

Mortgages in Thailand are regulated primarily under CCC Sections 702–756 and the Land Code B.E. 2497 (1954).

Key statutory provisions:

CCC Section 702 — Defines a mortgage as a contract whereby the mortgagor assigns property to secure an obligation without delivering possession.
CCC Section 714 — Requires registration of mortgages over immovable property with the Land Office to be legally valid.
CCC Section 728 — Establishes the lender’s right to enforce the mortgage if the borrower defaults.
Land Code Sections 95–96 — Define procedures and authority of the Land Department in registering mortgages.

2. Mortgageable Property

In Thailand, only certain types of property can be mortgaged:

Land with a registered title deed (Chanote or Nor Sor 3 Gor).
Buildings with a separate ownership title.
Condominium units under the Condominium Act.
Certain registered vessels and machinery (treated as immovable property under the CCC).

Note: Possessory land rights (e.g., Sor Kor 1, Por Bor Tor) generally cannot be mortgaged, as they lack transferable title.

3. Eligible Mortgagees

Under Thai law, lenders may include:

Thai banks and financial institutions.
Licensed finance companies.
Individuals or private entities — including foreign lenders, although practical enforcement may be more complex.

Foreigners may hold a mortgage over Thai land but must comply with currency exchange and remittance documentation if funds are brought from abroad.

4. Mortgage Agreement — Key Elements

A mortgage contract should include:

Identification of parties.
Full legal description of the mortgaged property (as in title deed).
Principal loan amount and interest rate.
Payment schedule.
Default clauses and enforcement rights.
Any limitations or special conditions.

While Thai law allows flexibility in drafting, all essential terms must be included in the version submitted for registration at the Land Office.

5. Registration Process

Mortgages over immovable property must be registered with the Land Office in the province where the property is located to be enforceable against third parties.

Procedure:

Preparation of Documents:
- Mortgage contract in Thai language.
- Identification documents of both parties.
- Title deed(s) of the property.
- Corporate documents if either party is a company.
Land Office Appointment — Both parties (or their attorneys with power of attorney) appear before the Land Officer.
Fee Payment:
- Registration fee: 1% of the loan amount, capped at 200,000 THB.
- Stamp duty: 0.05% of the loan amount.
Registration Entry — The mortgage is recorded on the property’s title deed and in the official register.

6. Rights and Obligations

6.1 Mortgagor (Borrower)

Retains possession and use of the property.
Must maintain the property in good condition.
Cannot sell or further encumber the property without the mortgagee’s consent.

6.2 Mortgagee (Lender)

Has no right to possess or use the property unless agreed separately.
Holds a secured interest that ranks in priority according to registration date.
Can enforce the mortgage upon default via court proceedings or, in limited cases, by private sale if agreed and legally permitted.

7. Enforcement and Foreclosure

If the borrower defaults, CCC Section 728 requires the lender to enforce the mortgage through the courts, unless the mortgage agreement includes an enforceable private sale clause.

Judicial Foreclosure Steps:

Filing of lawsuit in the competent court.
Court judgment authorizing sale of the property.
Public auction conducted by the Legal Execution Department.
Proceeds used to repay the lender; any surplus returned to the borrower.

Note: The lender cannot simply take ownership of the property without going through the legal process — “pactum commissorium” clauses (automatic transfer of ownership upon default) are void under CCC Section 729.

8. Termination of Mortgage

A mortgage ends when:

The secured obligation is fully paid.
The mortgagee releases the mortgage (registered at the Land Office).
The mortgaged property is destroyed and no substitution is possible.
The mortgage period (if fixed) expires and the loan is repaid.

9. Real-World Case Examples

Case 1 — Condominium Financing for a Foreigner
A foreign buyer obtained a mortgage over a condominium unit from a Thai bank. Funds were disbursed in Thai baht, and foreign currency remittance documents were filed. Upon resale, the bank released the mortgage at the Land Office after full repayment.

Case 2 — Private Loan Secured by Land
A Thai business owner borrowed from a private lender, registering a mortgage over agricultural land. When repayment failed, the lender initiated foreclosure. The court authorized sale by auction, with proceeds covering the debt and costs.

Case 3 — Multiple Mortgages Priority
A company mortgaged the same commercial property to two lenders at different times. The first-registered mortgage had priority in foreclosure, with the second lender receiving payment only after the first was fully satisfied.

10. Practical Considerations

Due Diligence — Check title deed history for existing encumbrances before accepting a mortgage.
Foreign Lenders — Ensure remittance and exchange documentation is prepared for repatriation of loan repayments.
Multiple Security Interests — Priority is determined strictly by registration date and time.
Insurance — Mortgage agreements often require the mortgagor to insure the property, with the mortgagee named as beneficiary.

11. Risks and Disputes

Common disputes include:

Allegations of unfair terms or excessive interest (subject to usury limits under the Civil and Commercial Code and the Interest Act B.E. 2475).
Failure to register correctly, rendering the mortgage unenforceable against third parties.
Delay in foreclosure proceedings due to court backlog.

12. Key Legal References

Civil and Commercial Code — Sections 702–756 (mortgage rules).
Land Code B.E. 2497 (1954) — Sections 95–96.
Interest Act B.E. 2475 — Governs maximum lawful interest rates.
Land Department Regulations — Mortgage registration procedures and fees.

Conclusion

Mortgages in Thailand are a robust and legally enforceable form of security for loans involving immovable property. Their validity and priority depend on proper registration with the Land Office, and their enforcement is subject to court oversight.

Whether used in commercial financing, personal borrowing, or foreign investment structuring, understanding the statutory requirements and procedural safeguards can prevent costly disputes and ensure that both lender and borrower are adequately protected.