New Mortgage Foreclosure Law in Thailand
The new amendments made to the Civil and Commercial Code announced on November 13, 2014 has made significant changes to mortgage foreclosure rules. In addition to the changes to Section 728 of the Civil and Commercial Code regarding enforcement of a mortgage debt, the amendments have also made major changes to Section 729 regarding foreclosure on the mortgaged property. As with the other changes made through the Act on Amendments to the Civil and Commercial Code (No. 20) of B.E. 2557 (2014), the new foreclosure law protects the interest of consumers against commercial banks and thereby acts as a consumer protection law.
- According to the original Section 729, the right to foreclosure was a remedy additional to the remedy in Section 728, whereby even if a debtor had still not defaulted on a mortgage debt yet, the mortgagee could sue to foreclose the property under certain conditions: (1) the debtor has failed to pay interest in five years, (2) the debtor has failed to prove to the Court that the value of the mortgaged property is greater than the debt, and (3) there are no preferential rights or other mortgages registered over the same property.
- Section 729 itself is substantially similar to the original version, except for one major difference, which is that the new Section 729 places the burden on the mortgagee to prove that the value of the mortgaged property is lesser than the mortgage.
- The major difference in the new law is Section 729/1 which is a consumer protection clause and has no equivalent in the original Civil and Commercial Code. According to Section 729/1, at any time after the deadline for paying the mortgage has passed, the mortgagor has the right to have the mortgagee publicly auction the property without having to file a proceeding in court. The mortgagor must notify the mortgagee in writing and the mortgagee must then publicly auction the property within one year from the date of receiving the written notice. A condition is that there must be no other mortgages or preferential rights over the same property.
- If the mortgagee does not publicly auction the property within the aforementioned period of time, the mortgagor shall be discharged from the interest and compensation owed by the debtor, including all associated costs related to the debt arising after the passing of the aforementioned period of time.
The new changes to the law are quite favorably to the rights of mortgagors. They save mortgagors from the hardship of having to being sued in court, which is an understandably stressful situation when considering that mortgagors are normal members of the public and mortgagees are large commercial banks. In any case, the new amendments to the law are complex and it advised that competent legal counsel be consulted to understand their implications.
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