Mortgage

A mortgage is a kind of contract provided by the Civil and Commercial Code.

A mortgage is a written agreement whereby a person assigns either a movable or an immovable property to the land office as security for the performance of an obligation.   The following movable properties can be mortgaged provided they are registered according to law:

1. Ships or vessels of six tons and over, steam launches or motor-boats of five tons and over;

2. Floating houses;

3. Beasts of burden;

4. Any other movable with regard to which the law may provide registration for that purpose.

The movable property must be located with in the jurisdiction of government offices, and the immovable property must be located at the land office.  The principal use is borrowing money under security agreement.

Rules of Making a Mortgage Contract

The borrower (debtor) is bound to register his own land (Immovable Property) to the land office as security for money borrowed.  Such mortgaged estate must be situated near the land office.  In case of the borrower fails to perform payment, the creditor (lender) is entitled to get  all money back from the borrower by filing a lawsuit against him in court.  The court will issue a judgment ordering the mortgaged property to be seized and sold by public auction.  After the mortgaged property was sold to a third person, the creditor is entitled to recover the whole amounts of his debt. 

Special Characteristics of a Mortgaging

The burden of a mortgage agreement continues to exist with the mortgaged property,

although the mortgagor makes many contracts relating to such property later, the mortgage will be attached.  For example: leasing the mortgaged property to the third person, such person is also borne by the burden of the mortgage agreement as well.  Moreover, in the case of such mortgaged property is entitled to demand an act of performance by the other mortgagees, and the mortgaged property was seized for any reasons and sold by public auction, the first creditor (mortgagee) need to be satisfied first in whole amounts of the mortgages before the other creditors proceed the auction.  Hereby, the mortgagee is called the “Preferential Creditor” and the other creditors are called the “General Creditor”.

Furthermore, the mortgage agreement will be useful to foreigners who lend money to Thai persons to buy the immovable property in order to secure repayment of loan.  If the Thai borrower misses performance, the foreigner is entitled to receive his money back.  The lender shall assign the attorney to file the case to a competent court to having court’s order for repayment the whole amounts of his debt.  In this circumstances, the foreigner is the preferential creditor who shall be satisfied before the later creditors.

Notice : For the benefit of foreigner creditors/mortgagees, before making any mortgage agreement, make sure the fare market value is greater than the mortgage amount.