Property Mortgages in Thailand

Property Mortgages in Thailand. In Thailand, property mortgages serve as a security device whereby a debtor pledges immovable property to a creditor without delivering possession. The legal and procedural landscape for mortgaging property is significantly shaped by the Civil and Commercial Code, as well as the Land Code Act, foreign ownership laws, and banking regulations issued by the Bank of Thailand.

Unlike many jurisdictions where mortgage financing is widespread and streamlined, Thailand’s approach is more formalistic, particularly when it comes to foreign nationals, foreign lenders, or mixed-ownership developments. This article explores the legal structure, limitations, procedural requirements, and enforcement mechanisms governing property mortgages in Thailand.

1. Legal Basis of Mortgages

A mortgage in Thailand is governed primarily by Sections 702–753 of the Thai Civil and Commercial Code (CCC).

Key Characteristics:

A non-possessory real right: The mortgagor retains physical possession of the property.
Mortgages must be registered at the Land Department to be enforceable.
The mortgagee has the legal right to enforce the mortgage through judicial sale in the event of default but cannot take ownership by private agreement.

The property remains under the ownership and use of the mortgagor, but the title deed will show the mortgage as an encumbrance.

2. Types of Property That Can Be Mortgaged

Not all real property qualifies for mortgage registration in Thailand. The property must have a clear, registrable, and transferrable title.

Eligible Property Includes:

Land with Chanote (Nor Sor 4 Jor) title
Land with Nor Sor 3 Gor title (with limitations)
Condominium units (with proper unit title under the Condominium Act)
Buildings with legal construction permits

Property with only possession rights or informal occupation (e.g., Sor Kor 1, Por Bor Tor 5) cannot be mortgaged.

3. Parties Involved in a Mortgage Transaction

Mortgagor:

The owner of the property.
May be an individual or a juristic person (e.g., a Thai company).

Mortgagee:

A bank, financial institution, or private lender.
Must be a legal entity capable of holding property rights.

Foreign nationals may serve as either party with limitations discussed below.

4. Registration Procedure

A mortgage must be registered at the Land Office where the property is located. The process requires:

Original title deed
Signed mortgage agreement (must be in Thai or bilingual with Thai prevailing)
Valid IDs/passports and corporate documents
Payment of registration fee: 1% of mortgage amount (capped at THB 200,000)
Stamp duty of 0.05% of the mortgage amount

Upon successful registration, the Land Office annotates the mortgage on the back of the title deed.

5. Mortgage Amount and Valuation

The mortgage value cannot exceed the appraised value of the property, as determined by the Land Office.
In practice, commercial banks may lend 60–80% of appraised value for Thai nationals.
Foreign borrowers face stricter conditions, with many banks offering only secured or non-amortizing loans in exceptional cases.

6. Mortgages for Foreign Nationals

6.1 Ownership Limitations

Foreigners cannot own freehold land under the Land Code, except under narrow exceptions (e.g., BOI approval, foreign spouse with land registered in Thai spouse’s name). Thus:

Foreigners cannot mortgage land they cannot legally own.
Foreigners may mortgage condominium units, provided ownership complies with the Condominium Act’s foreign quota (49% foreign ownership cap).

6.2 Lending Restrictions

Thai commercial banks rarely issue property loans to foreign individuals unless:

The foreigner has permanent residence
The foreigner is married to a Thai national (property is often in spouse’s name)
The loan is issued offshore, secured by Thai property (complex, requires approvals)

7. Foreign Lenders

Foreign lenders may act as mortgagees, subject to the following:

Must obtain approval under the Exchange Control Act and notify the Bank of Thailand for inward remittance.
If interest is earned, the lender is subject to withholding tax (typically 15%) unless reduced under a Double Tax Treaty.
The mortgage must be registered in Thailand and translated into Thai.

Often, corporate investors prefer secured loans through Thai-incorporated SPVs, which simplifies enforceability.

8. Mortgage Over Condominium Units

Mortgaging a condo unit follows similar registration procedures, with added checks:

Confirmation that the unit is part of the 49% foreign quota.
Unit title deed (separate from land title) must be presented.
Juristic person (condo management) may require notice or consent.

If the mortgagor defaults, the mortgagee must pursue judicial sale of the unit.

9. Enforcement and Foreclosure

Thailand does not recognize out-of-court foreclosure. All enforcement must proceed through civil court.

Steps:

Mortgagee files a civil claim for default.
Court verifies validity and issues judgment.
Court orders auction sale of the property.
Mortgagee receives proceeds after deduction of fees and taxes.

Recovery Priorities:

Government tax debts (if any)
Mortgagee’s claim (principal + interest + fees)
Remaining proceeds go to the debtor or subordinate creditors

10. Key Limitations

Private foreclosure is prohibited: mortgagee cannot automatically take title to the property.
Interest rates are capped under usury laws unless exempted.
Duration limit: mortgages exceeding 10 years must be expressly re-registered upon expiry to remain enforceable.
Transfer restrictions: A mortgaged property cannot be transferred without mortgagee consent.

11. Alternatives to Mortgage

In situations where mortgages are not feasible, parties may consider:

Personal guarantees: Often used in SME lending.
Leasehold structures: Lease rights registered for up to 30 years.
Usufruct or superficies rights: Usufruct allows the holder to use land; superficies allows construction on land owned by another.
Share pledges: Used in corporate transactions.

Each alternative has limitations under Thai law and must be tailored carefully to the commercial intent.

Conclusion

Property mortgages in Thailand offer a well-established legal mechanism for securing debt obligations involving real estate. However, the framework is heavily formalistic, with tight regulatory oversight, restricted rights for foreigners, and strict procedural rules. Mortgages must be registered at the Land Office, and enforcement can only proceed through court order.

For foreign investors and lenders, understanding the interplay between mortgage law, foreign ownership restrictions, and banking regulation is essential. Legal and financial structuring — such as using Thai-incorporated companies, establishing appropriate nominee safeguards, or obtaining BOI approval — may be required to align mortgage structures with Thailand’s legal framework.