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My wife and I are considering purchasing the house, we are currently renting (for 8 years now). I am fully aware, that it will all be in her name, and I will have no claim, so by "we", legally everything is "her".

 

The owner have currently mortgaged the property at the local Islamic Bank. They hold a lien for about 50% of the discussed purchase price. Remaining debt is only 35% at the moment.

We have done a title deed search at the land office, there are no other liens or mortgages, and there is nothing to indicate problems with chain of ownership.

 

Downpayment would be 15% of the purchase price

The payment plan discussed is downpayment now, 6 years of monthly installments, and a final big payment at the end, to pay off the mortgage, and have the lien removed.

I, of course, want to make sure we cant get cheated.

 

As I understand it, the chanote will not be transferred to my wifes name, until the final payment is made. Is this normal procedure here with private financing? ( I had expected title transfer now, and he would then have a lien on the house as collateral)

In that case, what is the best way, we can protect ourselves? I want to make sure, that he is unable to either obtain additional mortgage (that would then have to be paid off, before a title transfer could be done), or outright selling it to someone else. We will of course have a contract regarding the deal, receipts for payments etc, but would obviously prefer to make it as difficult as possible for him to pull any tricks, should he have any ill intentions

Can we have a lien registered on the chanote, to "secure" our downpayment? Perhaps updated yearly to represent the additional monthly payments that have been made? How should we go about this?

 

He suggested that we could pay off the mortgage now, and then hold on to the original physical chanote (currently held by the Islamic bank), but I fail to see how it offers us much protection? I understand he need the original to sell the land, obtain mortgage etc. But if he approaches the land office, claims it have been lost in a fire, wouldnt they eventually issue him a new one? And the only way we would be informed about something like this, is if we have a claim registered on the chanote?

And if the Islamic Bank feel they need to hold on to the physical chanote, is it even  possible for us to register a lien? Ours would of course be secondary to theirs claim, but unsure how it would even be done practically.

 

Second issue, it turns out part of the driveway and garden is outside the area designated by the chanote (been like that for many, many years). It have been extended to close to the road so is encroaching on public land. So there is a change the local OrBaTor at some point will reclaim that part of the land, which I have factored in regarding the price. But are there any risks of a penalty or fee because of this? Or would we simply be ordered to tear down the wall, and then re-erect it within the correct chanote designated area?

 

All advice and comments welcome, let me know if more info is needed.

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17 minutes ago, Beck1976 said:

Is this normal procedure here with private financing? ( I had expected title transfer now, and he would then have a lien on the house as collateral)

There are 2 ways of doing this one is below.

https://magnacarta.co.th/home/faq-section-2/sale-with-the-right-of-redemption-kai-fak/

20 minutes ago, Beck1976 said:

Second issue, it turns out part of the driveway and garden is outside the area designated by the chanote (been like that for many, many years). It have been extended to close to the road so is encroaching on public land. So

Pay to have re-measurement done and markers put in.

 

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Thank you very much for the answers. 
Although i didnt get the answers I was hoping for 🙂

A couple of follow-up questions:
 

Quote

A: No. The property already has a mortgage registered in it, so no further encumbrance can be added without the permission of the original mortgagor. The original mortgagor will never agree to this.

Wouldnt our claim be registered as ranking second, and therefore not affect the primary mortgagors claim? Or is secondary/tertiary etc claims not really a thing here?

 

Quote

In addition, you would not get the chanote the same day you paid off his mortgage for him. The bank holds his chanote, and it would take a few days to get it back before your encumbrance could be placed on it. During that time you are completely at risk. In addition, the owner could simply refuse to register it

Wouldnt we run the same risk, if we paid the entire amount right away instead of installments? Either way, the mortgage needs to be paid of and the chanote released. 

 

 

 

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OP, you have some excellent informed replies above. 

My advice is far less technical. BTW in the last couple of months I did basically exact same thing. One difference is that I paid for it all (including makeover) in cash. That's not a brag, it's more that if/when I kick it my Thai partner would have zero debt and mortgage commitments etc.

You did not mention what the price is that your paying and your timeframe to complete payment and have full ownership.

Sounds like a mine field to me.

 

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If you feel uncomfortable with this deal then either restructure it or be prepared to feel uncomfortable for the next 6 years...

 

I would not feel comfortable either... 

 

Can you get a loan elsewhere and pay in cash in full? 

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16 hours ago, Beck1976 said:

it turns out part of the driveway and garden is outside the area designated by the chanote (been like that for many, many years). It have been extended to close to the road so is encroaching on public land

could it be that a road improvement i.e. widening is upcoming ?

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Thank you all for the replies.

 

@DrJack54

Im only mid-forties, and the payment would be done in 6 years maximum, so I definitely hope Im still around by then.

The purchase price is 3.5 million fwiw. That is already an attractive price for the place, and since he was willing to do interest free installments, the effective price is even lower.

 

@1FinickyOne

For now Im just trying to understand the various risks, as this is the first time Im doing a RE purchase, where the seller arent paid in full right away. 

I was unable to mortgage a property I own in Denmark, as I havent lived or worked inside EU for many years now.

If international travel restrictons are lifted, we can pay the full amount in a year, but that is out of my control, so dont want to rely on that.

Furthermore he dont want to wait that long, as he need the downpayment to pay of debt to his family. 

 

@blackcab

I wasnt aware the court action would become more difficult. In that case I fully understand the primary mortgagor wont allow it.

 

The way you describe a normal land transaction is pretty much how I imagined it.
What I meant was, that in any case we would need to hand over a cheque for the amount of the existing mortgage, as well as the remaining sum. But since that will be in front of several witnesses, I can see how that will be completely safe.

 

I am willing to assume some risk, to make the deal happen, as long as I know what the risks are. While I would obviously hate ending up in court, I believe we would stand a good chance of recovering our money, as he owns a few more properties (at present time debt free, although that can change of course).

 

If we pay of the mortgage, assuming he still cooperates, we would then be able to place a lien on the house, for the amount we had paid, right? 
Exactly how would that lien protect us? We would be able to block any further encumbrances on the property, as well as preventing him from selling it?

Would we be in a better position, should he pass away? If he got divorced?

Would we need a property lawyer, or can it be done with just the seller and my wife present at the land office? And what kind of costs/taxes are associated with this?

I havent been able to find information, how its practically done.

 

Thank you in advance.

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4 minutes ago, Beck1976 said:

he need the downpayment to pay of debt to his family. 

this is not really a good sign to me... someone w/financial problems is not someone I want to be doing business with.. even if it cost a bit more, can you get a bank loan, either here or back home? This sounds like someone I never want to see again... you have been renting from him for a long time, why doesn't he have money? 

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1 hour ago, KKr said:

could it be that a road improvement i.e. widening is upcoming ?

it have of course crossed my mind, but I dont think so. He have been asking us for several years, if we were interested in buying the property, but his asking price was way to high.

 

Furthermore, they have been putting in drainage between the road and the wall, this last year, for a long stretch of the road, so I doubt there are any plans to widen it. Also, there is not that much traffic, so a widening isnt necessary.

Finally, there is an electricity pole, that the wall was build around back then, that the electric company will move outside the wall beginning of next week.

 

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3 minutes ago, 1FinickyOne said:

this is not really a good sign to me... someone w/financial problems is not someone I want to be doing business with.. even if it cost a bit more, can you get a bank loan, either here or back home? This sounds like someone I never want to see again... you have been renting from him for a long time, why doesn't he have money? 

I fully get your point, but find his situation "believable", in lack of better word.

He build a 4-unit apartment building, right next to his house, which was financed by selling another house 3 years ago, and then a smaller loan from family. He only got one tenant so far though, who recently moved in, at 9000/month I think. We are in one of the tourist villages on the west coast of Phuket, so a lot of vacancies due to Covid. We've been paying 15k/month, and both he and his wife are retired, so have been relying on rental income.

 

Despite sufficient networth and income, we have not been able to obtain a loan, unfortunately. My wife is a stay-at-home mom for many years, and I make my income primarily from rental income from Denmark. Thai banks wants us to work in Thailand, and Danish banks wants me to live and work within EU.

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If you wish to proceed, your first port of call is his bank.They can & will restructure for both of you & ensure you are protected  (they hold the title deed now? )

Make any arrangements through them with your lawyers approval & only pay any monies to the bank.

They can pay the old owner any residual

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Q: I believe we would stand a good chance of recovering our money, as he owns a few more properties (at present time debt free, although that can change of course).

 

A: I am sure the seller and his family are honourable people and that you will have no problems at all.

 

I would point out though that a final judgement of Court in matters such as these can take up to ten years, and then you have to have the judgement executed.

 

Importantly, you will have to pay your own legal costs every step of the way, which could be a very substantial su of money indeed. And then when you finally take possession of your property the house itself could be totally stripped bare of everything apart from the walls.

 

Or you could take possession and find a tenant in situ with a 3 year lease. You would then have to pay to take the tenant to Court to evict them (and there would be very little chance of the Court evicting a tenant in this situation).

 

Q: If we pay of the mortgage, assuming he still cooperates, we would then be able to place a lien on the house, for the amount we had paid, right?

 

A: Yes, but only if the seller grants you permission to do this.

 

Q: Exactly how would that lien protect us? We would be able to block any further encumbrances on the property.

 

A: No, because you would not have a mortgage. You would have a different type of encumbrance, which would allow the owner in some circumstances to place other types of encumbrance against the property without your consent.

 

Q: ...as well as preventing him from selling it?

 

A: You cannot stop the owner selling their property. They do not need your consent to do so, but they must repay you any money owed before the sale is officially recorded. If you refuse to accept the money or you are not available the owner can pay the full sum to the land office who will keep the money until you claim it from them.

 

If your encumbrance is for 1 million, but towards the end of the contract you have paid 3 million in total, the owner can pay you 1 million, sell the property and keep the additional payments of 2 million. You would have to pay to take the owner to Court for the 2 million and hope they had any assets left to claim against after the Court case was finally completed.

 

Q: Would we be in a better position, should he pass away? If he got divorced?

 

A: Yes, because you would have a real property right, but only for the sum encumbered.

 

Q: Would we need a property lawyer, or can it be done with just the seller and my wife present at the land office?

 

A: It can be done without a lawyer. Thai people do not use lawyers unless the transaction is especially complicated. The land office officials are really helpful if you give them a little thank you money.

 

Q: And what kind of costs/taxes are associated with this?

 

A: It's impossible to answer this. You need to ask at your land office. Fees and taxes are not a secret; they will tell you if you ask.

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About deed registration and ownership 

To my experience and knowledge, a title deed cannot be transferred to a new registered owner, before all debt and interest declared as servitude (i.e. mortgage) has been fully paid.

 

In theory you, or rather your wife, owns nothing. You have an agreement with the seller, and if anything goes wrong it’s a question of taking the seller to court and claim compensation.

 

So it’s a question of thrust between the parties – the bank holding the mortgage servitude will act accordingly to the law – however, often people are trustworthy, but you don’t have a guarantee; i.e. what if the owner dies and you are going to negotiate with heirs about “your home”?

 

The best way would be to pay off the mortgage, and fully pay the seller for the property, move the title deed to your wife’s name, and obtain a new mortgage registered as servitude. This might also be what you are used to from your home country, so it is in my home country. The bank will normally hold the title deed, and in principle the bank is the owner of the property, as the bank might also have a power of attorney to move the title; i.e. when you have a mortgage, you don’t really own your home, but isn't that’s how it is almost all over the World?

 

About land occupying public area 

Concerning some of the land being on public land, which might cause a problem in the future, it might also widely depend on how it’s locally handled, and other external circumstances. In older time the land was not measured very correctly, and later upgrades to higher title deeds often changed the land borders, so when for example upgrading from Nor Sor Sarm-title to Chanote-title, the borderline could have been moved; the process could have been over a number of various titles from originally claiming land, or a family being granted land.

 

I have personal experience from land covering area owned by the Marine Department, the owner of most, if not all, Thai beaches; i.e. kind of public land. In older time coconut palms were planted in the corners to mark the land borders. So was my land marked, and the Nor Sor Sarm title deed cement markers were fairly close to the palms. The previous owner had made a beachfront protection by cement rings, but in a line with the palms, which were little outside the cement markers, to stop erosion during monsoon season; the cement rings had been there for 20 years or longer when I bought the land.

 

Before building anything I wanted the land upgraded to Chanote title and full ownership, which include acceptance from all neighbors, satellite measure of land borders and new cement markers. However, the new beachfront markers were about two and a half meter further back from the beachfront, and thereby the erosion protection. Shortly after a lot of important looking people in uniforms showed up, and said they came from the Marine Department, and that my land and erosion protection was occupying public beach. This claim was caused by incident a few years earlier with tsunami on the Phuket side of the Malacca Peninsula, where lots of land were illegally used to close to the beachfronts, and therefore damaged by the tsunami. So it was not only me, but almost all beachfront landowners with erosion protection occupying public beach.

 

We were all taken to court, a quite long lasting process, where we had to explain our cases, and finally pay fines. Some years later the beachfront landowners could apply for use of the illegally occupied area, and pay a rent for using it. In my case I was lucky, having plead guilty from the beginning, and could document that I haven’t raised the erosion protection, which was part of the property when I took over, but if I had removed it, I would have damaged the neighbor's land during monsoon storms. My fine was minor compared to some of the other landowner’s that were fined more than 15 times as much for even a smaller occupied beach-area. 10 years years later I eventually I got a written permission to use the beachfront land without paying any fees.

 

I.e. amazing Thailand: In worst case you might not only be asked to remove whatever is occupying public land, but you could also be both fined, and asked to pay compensation.

In best case scenario nothing at all happens...🙂

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