Property Mortgages in Thailand

Property Mortgages in Thailand. Mortgaging property in Thailand is the standard way lenders secure loans against real estate, but the practice sits inside a distinctive legal and administrative framework. Success depends on clean title, correct registration at the Land Department, lender-friendly drafting, and careful handling of non-chanote titles and foreign-owned interests. This guide explains the mortgage instrument, how Thai Land Offices treat security, lender and borrower obligations, mortgageability of different title classes (including leasehold, usufruct and superficies), foreclosure and enforcement mechanics, tax and registration costs, and practical closing checklists that minimize post-closing friction.

1. The legal nature of a mortgage in Thailand

A mortgage in Thailand is a real security right registered against the title of immovable property at the relevant Land Office. Once registered, it gives the mortgagee (typically a bank) priority over subsequent creditors and creates a public record of the debt. The basic legal effect: if the mortgagor defaults, the mortgagee can apply for judicial enforcement to have the property sold at public auction, with the sale proceeds applied to the secured debt according to priority rules.

Key point: registration is decisive. An unregistered security (or a security that is defective in form) will be ineffective against third parties even if there is a contract between the parties.

2. What can be mortgaged — title classes and collateral types

Chanote (Nor Sor 4 Jor) — preferred collateral. Chanote titles are survey-backed and typically accepted by all Thai banks.
Nor Sor 3 Gor / Nor Sor 3 / Sor Kor 1 — these lesser-class titles can sometimes serve as collateral, but lenders treat them cautiously. Banks generally require a conversion plan to chanote, additional guarantees, or refusal altogether.
Condominium units — freehold title for units (Chanote-equivalent for condos) is mortgageable; juristic-person and condominium by-laws may require consent procedures for assignment or transfer on enforcement.
Registered long leases (over 3 years) — banks will lend against registered leases but usually at lower LTVs and with stricter covenants; the lease must be registered at the Land Office and ideally have a long remaining term or robust renewal mechanics.
Usufructs and superficies — these real rights can be used as collateral if they are registered and lenders accept their mortgageability; permission and subordination clauses from the landowner may be required.
Company shares, movable assets, and receivables are often used as complementary security but require separate registration or possession mechanics.

For foreigners: because foreign ownership of Thai land is restricted, many loans to foreigners are secured against a Thai-owned company’s chanote (with the foreign borrower as guarantor), or against condominium title, or against registered leasehold/superficies structures that the bank will accept.

3. Typical mortgage structure and documentation

A standard mortgage package includes:

Mortgage deed: executed before a Land Department official or with the formalities the Land Office requires. The deed must precisely identify the title number, area, mortgagor and mortgagee, secured amount, and remedies on default.
Loan agreement: commercial terms (interest rate, repayment schedule, events of default, covenants).
Promissory notes and guarantees: supplemental instruments (corporate or personal guarantees).
Power of attorney: often limited and conditional, to allow the mortgagee or its attorney to register or enforce.
Insurance assignment: requirement to insure buildings and assign proceeds to the lender.
Subordination and consent: if the property has existing rights (lease, superficies), lender gets the landowner’s consent or a subordination agreement.

Drafting detail: the mortgage deed should allow a smooth enforcement path—expressly referencing the secured documents, stipulating default triggers, and setting out the mortgagee’s ability to proceed to enforcement through judicial sale or agreed sale mechanisms where allowed.

4. Registration mechanics and priority

Mortgages are registered at the district Land Office (thesaban/amphoe Land Office). The Land Department annotates the title and records the security; the date and time of registration determine priority among competing claims. Early registration secures the mortgagee’s seniority.

Practical tip: before releasing funds, lenders always require an original certified Land Department extract showing the mortgage entry and no subsequent encumbrances. Buyers/borrowers should confirm registration receipt and take photographic and hard-copy evidence.

5. Lender due diligence and typical bank requirements

Banks perform strict due diligence:

Title search and chain of title (Land Department extracts back to conversion or a set number of years).
Licensed surveyor’s on-site tie to confirm boundaries, building footprint and encroachments.
Corporate due diligence for corporate mortgagors (DBD extracts, shareholder registers, board resolutions).
Environmental and planning checks for industrial or development collateral.
Insurance naming lender as loss payee.
Legal opinion from Thai counsel confirming enforceability, priority and mortgageability.

Lender risk appetite sets the LTV. For chanote residential loans LTVs are higher; for non-chanote, leasehold or foreign-owned assets, LTVs fall and additional guarantees are required.

6. Default, foreclosure and enforcement

Thailand’s enforcement process is judicial:

Demand and acceleration per the loan documents.
Court action for judgment and execution (unless parties have agreed a contractual sale mechanism, which still usually needs court recognition).
Public auction supervised by the court/Department of Legal Execution; sale proceeds pay secured creditors by priority.
Deficiency claims by creditors if sale proceeds do not cover the debt (subject to other creditor priorities and costs).

Because enforcement is public and may take time, lenders often include step-in rights, interim receivership clauses and strong covenants to trigger early remedies. For cross-border borrowers, courts may also seek injunctive or conservatory relief early to preserve assets.

7. Special issues — mortgages over leases and foreign ownership

Mortgaging leasehold interests: the lease must be registered and the lessor’s consent obtained. Lenders will want clear renewal mechanics and appraisal rules for rent adjustments.
Foreign owners: foreign individuals cannot usually hold land freehold. Banks will insist on condominium title, leasehold, superficies or security over Thai company shares and will require corporate and personal guarantees. Lenders often require the borrower to be a Thai entity or to have strong local settlor guarantees.
Conversion risk: where the underlying title is non-chanote, lenders typically require a conversion plan or escrow holdback until chanote is secured.

8. Costs, taxes and discharge

Registration fee: a nominal fee is payable to the Land Department based on stamped amount; mortgage registration costs (and any stamp duties) should be budgeted.
Stamp duty and specific business tax: typically apply to certain transfers, not the mortgage itself, but transactional tax exposure should be checked with counsel.
Discharge: when the loan is repaid, the mortgagee must execute a discharge deed and the Land Department will delete the annotation; always obtain the updated certified extract as proof of discharge.

9. Practical risk-management checklist for borrowers and lenders

For lenders:

insist on chanote where possible;
require surveyor report, legal opinion and insurance assignment;
limit exposure on non-chanote titles and require sponsor guarantees;
register security immediately and confirm priority before funding.

For borrowers:

ensure the mortgage description matches the Land Department title number and plot plan;
secure clear corporate resolutions if a company is the mortgagor;
confirm costs (registration, stamp duty, legal fees) and any covenant obligations that may trigger accelerated default;
negotiate reasonable cure periods and sale mechanics to avoid unduly burdensome foreclosure exposure.

10. Final practical note

Mortgages in Thailand are powerful and familiar security tools but require respect for local formalities. The single best protection for both borrower and lender is a clean chanote, a licensed surveyor’s tie, prompt Land Department registration, and a tailored set of contractual covenants and enforcement mechanics drafted by Thai counsel. Where those elements are absent, model additional guarantees, escrow and conservative pricing into the transaction — the incremental cost of those protections is usually tiny compared with the cost of a failed enforcement or a disputed title.