Protect Your Property by Recording a Mortgage

If you own property in Thailand and it is not in your name then be sure to visit the offices of PAPPA Co., Ltd. (038 301 050) in order to have a mortgage recorded on the title deed (chanote in Thai) of the property so when it is sold you get all of the money.

Until May 31, 2010 the Land Office will only charge about 1.3% of the value of the property to record a mortgage.

For example, if the land and house are worth 10 million baht the Land Office will charge only 130,000 baht to record a 10 million baht lien against the property. This means the recorded owner of the property must pay the lender back the 10 million baht or let the lender sell the property to get back his 10 million baht.

PAPPA Co., Ltd. on 448/21 Thepprasit Road at Soi 3 (where the Night Market is held) offers a special package for investors which include a Mortgage Loan Agreement, Promissory Note, 30-Lease and a Power of Attorney for a reasonable fee.

Last month PAPPA Co., Ltd. recorded mortgages on property for foreigners in excess of 800 million baht. Smart investors realize they are protected and get their money back when the property is sold even if the property is in a Thai company name or a Thai person’s name.

All foreigners are being warned to put a mortgage on their property and to use other legal documents like a lease to assure they have use of the property for up to 30-years and they get the money when the property is sold.  This way the property cannot be sold without the foreigner getting his money returned.

It is illegal for foreigners to own land in Thailand. Under the Foreign Business Act (FBA) of 1999 it is “prohibited for foreigners to own land.”
The best way for the foreigner to buy property restricted to foreign ownership is to buy the property in the name of a Thai and record a mortgage on the property. PAPPA Co., Ltd. is the leading legal services firm in Thailand doing this. Staff of PAPPA Co., Ltd. fly to Phuket, Koh Samui, Chiang Mai, Udon Thani and other cities in Thailand as well as helping clients in Pattaya, Bangkok and the eastern area.

The more advanced developers like Russian House, Beach Properties, Property Management and Development are starting to recommend this method of buying property to their buyers and are using PAPPA Co., Ltd. to handle the transactions to protect the buyers.

Many foreigners have been misguided into setting up a Thai Company Limited under the illusion that owning the property in the company name gives them ownership rights. That is far from the truth. A foreigner can own only 49% of Thai company shares. The majority of shares must be owned by Thai citizens.

Everywhere in the world, stock or shareholder ownership works the same including in Thailand. If you own shares in a company you own the liquidated net asset value. This means you take the assets, in this example a house on 1,600 square metered (one Thai rai) and asses its value on sale. Then you subtract the liabilities or debts of the company.  This final figure is the Net asset Value of the company and each shareholder is entitled to his or her prorate amount.

For example, if Sergi has a Thai company in which he has 49% ownership and he used all of his money to buy a house on one rai and he spent 10 million baht then he owns only 49% of the sale of the house less any other debts the company has. The other shareholders own 51% by law!

Many foreigners are told that blank Share Transfer Agreements signed by the Thai shareholders of the Thai company that owns the property purchased with the money of the foreigner are valid. They are not. The foreigner can never own more than 49% of the company so the share transfers may be of no use to him. Share Transfers must be dated and completed in the same hand-writing. Also, the ID card of the Thai must be valid at the time of the share transfer so if the Thai changes his address, the ID card expires or is replaced because it is lost then the Share Transfer agreement is not valid to anyone.