Land purchase with private mortgage

[moorlandwalker]

Has anyone investigated the use of a private mortgage to obtain security of investment?
My GF would like to develop her small business, but needs a bigger plot of land for this, and for a house for ourselves.

I am thinking of lending her the money as a private 5 year mortgage to purchase the land, registered officially at the local Amphur. At an interest rate of inflation +2%, compound over 5 years but not payable until the end of the mortgage. If at the end of the five years the business is a success, I can renew the mortgage on the same terms. Otherwise I can sell off the land and reclaim whatever the land fetches up to the capital plus interest.

Additionally I propose that my GF grants me Usufruct on this land, so that I retain control of how the land is used (prevents family pressures on GF) and cannot be pushed out of the house if things do not work out well in the future - or if she were to die before me. If I die my children inherit the rights to repayment at the end of the mortgage period.

Capital for the business - I would purchase and own the hardware, and could sell again if the business fails.

Any thoughts or advice on this appreciated.

[wiking]

the best is, let her go to her bank and get the money

[semperfiguy]

Sounds like a great plan to me. Happy to see someone thinking with their big head and not their smaller one! Business is business...keep it that way and cover your bases. Smart man!

[semperfiguy]

the best is, let her go to her bank and get the money

What's the downside risk with this scenario? The business should be left to stand on it's own. If it fails the mortgagee probably has personal liability on the loan, so the bank forecloses the property and insists that wife pay the mortgage or a portion of it anyway. If the OP provides the money and properly covers himself with the land as collateral, then at least he has the option to sell the property and recover his investment. Just a thought!

[BobHelm]

You need to see a competent solicitor & seek their legal advice.
Personally I am doubtful if this arrangement could be made to be legal & (more importantly) enforceable through the courts.
As with most countries Thailand takes a dim view of 'unlicensed' money lending - which is problem 1.
The specific (& enforced) ownership laws Thailand has in relation to land will be problem 2.

[maaka]

its late at night, and my brain may not be working to well, but I thought a farang couldnt own land in Thailand, so even as the mortagor, you wouldnt have shall I say ' title ' to more than 50% of the land, and house, and that would only come via thai marriage laws, or thru divorce, or thru a wifes death..I guess you could own the hardware stock, and have a usufuct, but to my tired brain, you still wouldnt own the land except that part allowed to you as your wifes husband...does that make sense??...can a farang be the mortagor of thai land?

[maaka]

sorry just noticed that the lady in question is your GF, and not your wife, so therefore my previous comment regarding marriage law would alter..in essense you want to loan someone money to buy thai land, but the only safeguard you have as you see it, is the stock, and the usufruct if things go belly up..the land would still be hers or her heirs should she pass away..if someone refused to pay you back your the loan, then you wouldnt have much leverage to compell them to sell the land in order to repay you, except under contract law, and that would be a costly business in court..

perhaps you could lease land yourself, with the right to buy at a later date, should you marry said GF, and retire there at some future date. Perhaps you could have a clause in your lease that allows you to sublease, ie allows said GF to erect what I will term as a "temporary ' building on the land to live in,(and you to) and to operate a business from. meaning that if things went belly up, the building could be in theory removed at her cost, or sold to you..in this way she pays your lease, but you hold control over the land for the lease period, or until you both marry where the marriage law then comes into play..

always best to get proper legal advice in these matters. I would recommend Isaanlawyers. com, or one of the legal firms helping with sponsorship of this website.

[moorlandwalker]

I don't think I would own any of the land at any point, any more than a bank owns the land when it provides a mortgage. The bank simply holds the deeds, and the right to sell the land with vacant possession if the terms of the mortgage are not met. This is why it would be a mortgage to buy the property rather than a loan.

[KHONDAHM]

My 2 baht:

1. Have her sign a promissory note and get it notarized. That is for the cash.
2. Give her the cash at the Land office where, at the same time it is being transferred to her from the seller, you
3. Make her sign the land over to your (Thai lawyer?), but don't actually register that transfer. Instead, YOU
4. Keep possession of the ORIGINAL deed until she pays you back [*giggle*].

If things go south, you go through the courts with your promissory note to collect the cash. You can certainly prevail even as a foreigner to get a judgment (at a minimum) and then could discover and attach/liquidate whatever assets she has (house in the village, inherited land, car, motorbike, etc.). At the same time, you find a buyer and take the original deed and your Thai ? to the land office and transfer it to your buyer. No muss, no fuss, and you would not ever have to see her again to be able to sell your property. This way, you have two paths to get your money instead of just one.

[KHONDAHM]

To speculate a bit on the OP: My guess is that your claim on the land as the mortgage holder may be deemed void ad inceptio. Since there would be no way for you to legally lay claim to land in the first place, a mortgage implying that you could would not survive a challenge. Hence, why I suggest a simple promissory note for the cash you loan her instead.

the concept of a foreigner "controlling" land is folly at best. The only "control" you could ever obtain would be at the graciousness of your girlfriend, so I completely discounted the idea of maintaining "control".

[BobHelm]

The bank simply holds the deeds, and the right to sell the land with vacant possession if the terms of the mortgage are not met.

No, if the terms of a mortgage are not met the bank repossesses the property.
What they do with it after, is 'up to them' as they own it - they usually sell it as money is their business, not land, but they are under no compunction to do so.

As I suggested before you should seek proper legal advice. However I do not believe that the advice you will receive will be positive that what you are suggesting could ever be legally enforced.

[cookie]

No, if the terms of a mortgage are not met the bank repossesses the property.

they will do so indeed,
but the bank, or whatever new owner that there will be,
will have to accept the USUFRUCT!!!!!

Moorlandswalkers name will be written on the backside of the deed .
The new owner will have to accept the usufruct.
the land can be repossessed, sold,....but the usufruct will go on for the period mentioned on the back of the deed.
Hack, that is the reason why the usufruct is so interesting.
it is registered and it is written on the backside of the deed.
the land can change owners, but the usufruct WILL go on !!!!!

[maaka]

yes if you thai girlfriend buys the land and gives you an usufruct for free, it means you can enjoy the property, even ask her to leave, you can sublease and collect the monies, and its not restricted to just 30 years also. should you decide to build on the land it is possible for you to become the full owner of the building. you can also lease to a third party, such as your kids, and this second lease will last for 30yrs after you demise..and like Cookie says the usufruct has to be registered with the Land department, thereby making it almost impossible for the owner to sell without respecting the usufruct..I guess you could loan your GF the money to buy the land, take out the usufruct and then charge her a rent to recoup your inital outlay...

please take my words as mere ramblings only, and not as any sort of legal advice.

[moorlandwalker]

Thanks for all your comments. Further search has turned up the following, but like everything about Thailand on the web, unless you can read the legislation yourself in Thai you are never quite sure if it is true.
1. It is illegal for a foreigner to lend money to a Thai
2. Where Thai lends to Thai there is a very low legal maximum interest.
3. Thais get round this by effectively 'buying' the car, bike etc used as collateral for a loan, and multiplying the value of the loan so that the stated interest falls within the legal limits when in fact it is much higher. Documents are then returned to the owner if loan is repaid, otherwise lender simply collects their property.

I think the solution is going to be starting the business on rented land. Then see if it works from the sidelines.
Very frustrating trying to work out how to invest in a small business in Thailand. Got fed up with the paper work for running a small limited company in the UK. Doing it in a language I cannot read doesn't seem a good idea.

[KHONDAHM]

I'll reserve comment on 1 and 3, but #2: Have you seen the interest rates on "payday" loans and what loan sharks charge? It's ridiculous(!). I'm fairly certain #2 is off quite a bit. Note that prostitution is illegal, too. Just saying...