This article provides you with essential information about Mortgage which is one type of collateral or security for debt repayment, whether it is a land, a house, a condominium, a factory, a warehouse or other buildings.
On one hand, it is a stable guarantee because the creditor is still entitled to be paid although the ownership of the mortgage property has been transferred to a third party. (Section 702 paragraph 2 of Civil and Commercial Code, CCC)
On the other hand, the mortgagee still has full rights to use the property including transfer the property or enter into another security for debt repayment. Also receive all fruits of it until the mortgagee has notified the mortgagor or the transferee of his intention to enforce the mortgage. (Section 702, 710 and 721 of CCC)
Definition
A mortgage is a contract whereby the mortgagor assigns a property to the mortgagee, as security for the performance of an obligation, without delivering the mortgaged property to the mortgagee (Section 702 of CCC).
Available Property for Mortgage
All immovable property can be mortgaged. Also, some movable property which are registered according to the law can also be mortgaged e.g vessels with a tonnage of five tons or more, floating house etc.
Who Can Do the Mortgage?
Only the owner of the property can enter into a mortgage contract but it is possible for collateral or security for debt repayment for somebody else. (Section 705 and 709 of CCC)
Form of Mortgage Contract
All contracts in Thailand are subject to the contract validation, it means mortgage not only need to follow the general rules of making a contract but also need to follow the special rules of it e.g. (Section 714, 704 and 708 of CCC)
1- Be made in writing and registered by the authorized official,
2- Specify the property mortgaged.
3- Contained in Thai currency with a certain amount or a maximum amount of security repayment.
Extent of Mortgage
A mortgage is security for the debt performance, also the following accessories: (Section 715, 704 and 708 of CCC)
1- Interest, as agreed rate or legal rate.
2- Compensation for non-performance of the repayment.
3- Fees of enforcement of the mortgage.
Even part of debt performance is made, whenever the debt performance has not completed, the mortgage extends to the whole property. Also, if a mortgaged property is divided into parcels, it still extends to each and all of such parcels.
Importantly, mortgage over land does not extend to the buildings upon such land after the date of contract, unless there is a special clause of the contract to that effect. (Section 716, 717 and 719 of CCC)
How To Enforce?
When the debtor fails in repayment, there will be 2 options for the creditor (Section 728 and 729 of CCC);
First; Filing the case to the Court for ordering the property to be seized and sold by public auction. Before filing the case, the mortgagee must notify the debtor in writing to perform the debt within a reasonable time frame. If the debtor fails to comply with such notice, the creditor can file the case to Court.
Second; Filling the case to the Court for and claim foreclosure of the property, subject to the following conditions:
1- The debtor has failed to pay interest for five years;
2- The value of the property is not greater than the outstanding balance due; and
3- There are no other registered mortgages or preferential rights on the property mortgage.
Conclusion
Mortgage is one of the common surety used over the world, but each country has its own law and rules concerning this surety. So before being a Mortgagee or Mortgagor, or being a part of another contract with another surety as ‘sale with the right of redemption’, More information please contact us.
