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Thai Mortgage, Lease, and Usufruct: The Importance of Registration

Transcript of the above video:

In other videos on this site or on this channel, we've talked about leases, mortgages, usufructs, superficies, various sort of property instruments for conveying enjoyment of property here in Thailand. As noted many, many times on this channel, foreign nationals pursuant to the laws the Kingdom Thailand are not, as a matter of course or as a matter of routine, able to own Thai property outright. It's a misconception that they're not able to own Thai property at all. That's actually incorrect. It's possible but only with the signing of the time Ministry of Interior and as a practical matter gaining such authorization happens rather rarely and it's not something that's routinely granted.

So that being said, with respect to things like mortgages, long-term leases and usufruct registration at the Thai land office of such instruments is going to be you know essential for enjoyment of such benefits. So what are we talking about here? Well specifically with respect to leases for example, pursuant to the civil and commercial code of Kingdom of Thailand, long term leases of immovable property with respect to specifically real estate, you need if the lease is over a duration of three calendar years, said lease needs to be registered with the Land Department here in Thailand. This registration process - it's not necessarily difficult per se but it does require a little bit of time. There needs to be some documentation put together. There's going to probably be taxes assessed with respect to the lessor etc. and that needs to be dealt with all of the Land Department.

Another instrument to think of with respect to registration at the land office is a mortgage. Now it's not as often as you think that a Thai mortgage would have any impact on a foreign national most notably because although it's not impossible for a foreign national to receive financing for real estate here in the Kingdom. Generally speaking, financing for real estate is granted in limited cases and is not granted oftentimes on the same terms that most foreigners are used to being offered in other jurisdictions. But that being said, it is possible for a foreigner to receive financing but with respect to most mortgages, it's been my experience that foreigners tend to like to go ahead and get a mortgage registered sort of in their favor.

What are we talking about here? Well for example, you may have a spouse who's wanting to put a house in her name, his name and the foreign national is putting up all the money as sort of a,  for lack of a better term, sort of family estate planning mechanism. It may be beneficial to that foreign national to go ahead and register a mortgage on that property so that in the event that something happens, you know, on a domestic sort of dispute perspective something happens the foreign national can say “Okay, that's fine you know we'll move on down the road but I'm going to go ahead and need to get my finances back from the money I put in to the marital estate.” And the mortgage can be very useful for those purposes.

Finally, usufruct is something of an interesting concept that although not wholly absent from Western legal concepts is more of a civil law creation. In my studies on these issues, it's more of a civil law creation. Usufruct is sort of a notion that you have a lifetime use of a piece of property so and in a lot of ways, the superficies aspect of usufruct and superficies has to do with the fact that it's mostly for the surface use of a piece of real estate in Thailand.

But that being said, a usufruct it's sort of akin to what we call a life estate in the common-law tradition. Basically, the individual has a lifetime full use of a piece of real estate. Again, for enjoyment of those kind of benefits to Thai real estate, such an instrument needs to go ahead and be registered at the land department and registration of the land department again could cause the assessments of various taxes and the need to show certain documentation in order to affect the registration.

But basically, the thing to take away from this video is registration is oftentimes a crucial element of securing one's rights under the laws of the Kingdom of Thailand. So for that reason, it is highly recommended that an individual who is interested in undertaking gaining enjoyment of such benefits goes ahead and retains the assistance of confident Thai legal counsel. To be clear, I'm not a Thai attorney. Again, I work here at the firm with Thai attorneys who handle this stuff on a regular basis. It's very well recommended to gain the assistance of their expertise and of their practical skills in going ahead perfecting registration of any one of these instruments. By doing so, it then allows for later enforcement of one's rights with respect to the property in question.