Section 702 of the Civil and Commercial Code defines a mortgage as follows: “A mortgage is a contract whereby a person, called the mortgagor, assigns a thing to another person, called the mortgagee (creditor), as security for the performance of an obligation, without delivering the thing to the mortgagee (creditor).”
In Thailand, immovable things of any kind can be mortgaged and the following moveable things can be mortgaged, provided they are registered according to the law.
- certain ships, vessels, steam launches, and motor boats;
- floating houses;
- beasts of burden (ex. elephants or buffalos);
- any other movable items that the law requires to be registered.
Most commonly, however, a piece of land is mortgaged as security for the repayment of a loan.
Registering a mortgage on a piece of land can provide added security for a foreigner who finances a land purchase for a Thai national. The mortgage contract is registered at the Land Office and the name of the mortgagee is listed on the title deed. Future purchasers of the land and lenders are given notice of the mortgage in this manner.
The mortgagee is entitled to be paid first from the sale of the land, in preference over ordinary creditors of the debtor. For example, Allen lends Pui 1 million THB to buy land in Pattaya. Pui assigns the land to Allen and signs a mortgage contract. The mortgage is registered at the Chonburi Land Office. Pui borrows 500,000 THB from George. Pui does not repay the 1 million THB to Allen. Allen enforces the mortgage and the land is sold at a public auction. The proceeds of the sale are 1.1 million THB. Allen will receive 1 million THB. George will receive only 100,000 THB.
The same result would occur if George registered a mortgage on the land after Allen registered his mortgage. If the proceeds of the sale are 1.1 million THB, Allen will receive 1 million THB and George will receive only 100,000 THB.
The same result would not occur, however, if Pui and Allen are married. If Pui and Allen are married, whether officially or by common law, Allan and Pui must give the officials at the Land Department a joint written confirmation that the money for the purchase of the land is wholly the separate property or the personal property of the Thai spouse, and not jointly acquired property. Allan could not also register a mortgage on the property, which would state that he provided the money to Pui to purchase the property.
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