Property Mortgages in Thailand. Mortgages are the primary mechanism for securing loans against immovable property in Thailand. For buyers, investors, and lenders, understanding how mortgages are created, enforced, and ranked under Thai law is essential. This article explains the statutory framework, registration process, lender and borrower obligations, enforcement procedures, and practical considerations unique to the Thai context.
1. Legal Framework
Mortgages in Thailand are governed primarily by the Civil and Commercial Code (CCC), Sections 702–756. The Code defines a mortgage as a contract whereby the mortgagor (borrower) assigns immovable property to secure repayment of a debt without delivering possession to the mortgagee (lender).
Key characteristics under the CCC:
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Immovable property (land, houses, condominium units) and certain movables (ships ≥5 tons, aircraft, beasts of burden) can be mortgaged.
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The mortgage must be registered at the competent Land Office (for real estate) to be valid.
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The mortgage gives the creditor a right of preferential satisfaction from the mortgaged property if the debtor defaults.
2. What Property Can Be Mortgaged
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Land with Chanote Title (Nor Sor 4 Jor) — the strongest form of title, fully mortgageable.
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Condominium units — provided the building is registered under the Condominium Act B.E. 2522.
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Structures (houses/buildings) — if ownership is separable from land (e.g., through a superficies right).
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Leasehold rights — technically not mortgageable; instead, a lessee may assign leasehold or use other forms of security (e.g., usufruct or pledge of shares in the lessor company).
3. Parties to a Mortgage
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Mortgagor: the owner of the property. May be the debtor or a third-party guarantor who pledges property to secure another’s debt.
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Mortgagee: the creditor, usually a commercial bank or financial institution.
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Debtor: the party owing the underlying debt (who may or may not be the mortgagor).
4. Creation and Registration
A mortgage must be in writing and registered at the local Land Office where the property is situated.
Registration Procedure
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Preparation of documents: title deed, IDs, loan agreement, mortgage contract (in Thai).
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Land Office appearance: mortgagor and mortgagee (or representatives with power of attorney) attend.
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Annotation: the mortgage is noted on the back of the title deed (Chanote) and entered into Land Office records.
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Fees: generally 1% of the mortgage amount, capped at THB 200,000.
Without registration, a mortgage contract is unenforceable against third parties and has no preferential effect.
5. Mortgage Terms and Debt Structure
A mortgage secures a specific debt (usually a loan). Important terms include:
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Principal amount: the sum secured.
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Interest: subject to the Civil and Commercial Code ceiling (15% per annum unless otherwise specified).
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Repayment schedule: monthly amortizations or bullet repayment.
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Collateral description: specific land or condominium unit, with title deed number.
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Events of default: non-payment, breach of covenants, insolvency.
Thai law requires precise identification of the secured debt. Open-ended mortgages for unspecified obligations are not generally recognized.
6. Priority and Competing Interests
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Mortgages are ranked in order of registration at the Land Office.
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Earlier-registered mortgages take precedence over later ones.
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In foreclosure, the first-ranking mortgagee is paid first from auction proceeds, followed by junior creditors.
Because of this system, buyers must always conduct a title search at the Land Office to see if mortgages are annotated.
7. Rights and Duties of the Parties
Mortgagee (lender):
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Right to payment from auction proceeds of mortgaged property.
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Duty not to dispose of or use the property (mortgage is non-possessory).
Mortgagor (borrower):
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Retains possession and use of the property.
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Duty to maintain the property and avoid encumbrances that reduce value.
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Cannot unilaterally sell free of mortgage — a sale transfers the property but subject to the registered mortgage.
8. Enforcement and Foreclosure
If the debtor defaults, the mortgagee must follow formal enforcement:
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Demand for repayment: creditor issues notice.
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Court action: unlike some jurisdictions, Thai mortgagees cannot take possession directly. They must file a lawsuit to obtain a judgment.
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Public auction: the Legal Execution Department (LED) conducts an auction of the property.
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Distribution of proceeds: auction proceeds pay costs, then secured creditors in order of priority, with any surplus to the debtor.
Self-help repossession is not permitted. Foreclosure must be judicial.
9. Limitations and Defenses
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Prescription (statute of limitations): A mortgage claim prescribes in 10 years from the date the debt is due (longer if renewed by acknowledgment).
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Defenses available to mortgagor: challenge debt validity, argue satisfaction of debt, or raise improper procedure.
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Excessive interest: courts may strike down usurious rates above the legal ceiling.
10. Practical Considerations for Foreigners
Foreigners cannot own land in Thailand (with narrow exceptions, e.g., BOI promotion, treaty rights). Thus:
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Foreigners cannot mortgage land directly, but they can mortgage condominium units they own freehold.
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Foreign investors often secure land exposure indirectly — through share pledges in a Thai landholding company or by structuring superficies/leasehold agreements.
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Foreign lenders are rarely registered as mortgagees because of regulatory and practical hurdles; Thai commercial banks dominate the mortgage market.
11. Real-World Case Examples
Case 1: Condominium Mortgage Default
A Thai borrower mortgages a Bangkok condo to a bank for THB 5 million. After default, the bank sues, obtains judgment, and forces auction. A bidder buys at THB 4.5 million; proceeds repay part of the debt, leaving the borrower liable for the shortfall.
Case 2: Third-Party Mortgage
A father mortgages his land to secure his son’s business loan. When the son defaults, the bank forecloses on the father’s land. The father’s defense that he “was not the debtor” fails, as mortgage law allows third-party security.
Case 3: Priority Dispute
Two lenders accept mortgages over the same land. Bank A registers first; Bank B registers six months later. On default, Bank A receives full repayment from the auction, leaving Bank B with no recovery.
12. Reform and Trends
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Digital land registration: pilot programs aim to modernize Land Office records, improving transparency.
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Consumer protection: new rules on residential mortgage lending cap prepayment penalties and promote clearer disclosure.
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Foreign lender participation: there is discussion about easing restrictions to allow more foreign-secured financing, especially for large-scale projects.
Conclusion
Property mortgages in Thailand are a powerful security right — but only if properly registered. They give lenders priority over competing claims and allow judicial foreclosure in case of default. Borrowers retain possession and use but must respect the lender’s security interest.
For Thai borrowers, mortgages are the primary way to access property finance. For foreign buyers, mortgages are more limited but still apply to condominium ownership. In every case, the details matter: correct registration, accurate debt specification, and awareness of foreclosure procedures determine whether a mortgage protects or disappoints.