This article we’re going to give you essential information about sale with the right of redemption under Civil and Commercial Code of Thailand (CCC) and Protection of people in sale with the right of redemption of land for Agriculture or Housing Act B.E. 2562 (PAHA). This type of contract is always used as a loan collateral instead of a mortgage because of an easier legal process for the lender when the borrower fails for repayment.
Sale with the right of redemption means a contract of sale whereby the ownership of the property (moveable or immovable) sold passes to the buyer with an agreement that the seller can redeem that property (Section 491 of CCC). To protect the seller, the parties may agree that the buyer shall not dispose of the property sold. If not, he shall be liable to the seller for any injury resulting thereby (Section 493 of CCC).
It means if the seller does not buy back the property, the Buyer doesn’t need to set any legal procedure to have an ownership of the property. In case of using this type of contract for loan collateral, the buyer has an ownership of the property instead of the repayment. This may be the main reason why sometimes this type of contract is used as a loan collateral instead of a mortgage (for mortgage, the borrower has the ownership of the property, the lender needs to set legal execution for debt repayment).
Importantly, sale with the right of redemption of immovable property or five tons gross vessels or more must be made in writing and registered by the competent official e.g. Marine Department or Land Department, if not it shall be void (Section 456 of CCC and Section 7 of PAHA).
Period of Redemption
The right of redemption cannot be exercised later than ten years after the time of the sale in case of immovable property and three years after the time of sale in case of movable property. The maximum period is included in the period of extension of redemption, if any. The extension of the properties mentioned above must be made in writing and registered by the competent official too. If not, the extension can not be set up against a third person who acted in good faith (Section 494 and 496 of CCC).
If a longer period is provided in the contract, it shall be reduced to ten years and three years respectively (Section 495 of CCC).
There is no minimum period of redemption for the said properties but in case of Land for Agriculture or Housing the minimum period of redemption is one year (Section 10 of PAHA).
Price of Redemption
If no price of redemption is fixed, the property may be redeemed by reimbursing the price of the sale. If the price of redemption or the price of the sale at the time of redemption is higher than fifteen percent per year of the real price of the sale, it shall be redeemed at a real price of the sale including fifteen percent per year (Section 499 of CCC).
In case of land for agriculture or housing, the legal decisions are under Consumer Protection Procedure Law (Section 10 of PAHA). However, legal decisions in case of other properties are under Civil and Commercial Procedure law.
Sale with the right of redemption is an option for loan collateral. Don’t forget that all the contracts in Thailand subject to contract validation. Check out the link before signed. More information please contact us.