New Mortgage Law in Thailand
A major problem with the Civil and Commercial Code was that it did not contain specific clauses that protected the rights of “indirect” debtors, such as guarantors or mortgagors who mortgaged their property to guarantee the debt of another. The new amendments to the Civil and Commercial Code announced on November 13, 2014 are designed to fill in these gaps and primarily serve to protect consumers against large financial institutions. Notably, Section 728 of the Civil and Commercial Code has been revised and expanded to address the aforementioned concerns. An original translation of the new law, with changes highlighted in italics are as follows:
- “Section 728. When enforcing a mortgage, the mortgagee must send a written notification to the debtor to pay the debt within a reasonable period of time, which must be no less than sixty days from the date that the debtor receives the notification. If the debtor fails to comply with such notice, the mortgagee may enter an action in Court for a judgment ordering the mortgaged property to be seized and sold by public auction.”
- “In the case according to the first paragraph, if in the situation where a mortgagor mortgages his property in order to secure a debt that must be paid by someone else, the mortgagee must send the aforementioned written notification to the mortgagor within fifteen days from the date of sending the notification to the debtor. If the mortgagee does not proceed within fifteen days as stated, the mortgagor shall be discharged from the interest and compensation that is still owed by the debtor, including all associated costs that arise counting from the date that the aforementioned fifteen day deadline expires.“
The key difference between the original Section 728 and the amended version is that the original clause did not define a minimum amount of time to allow a debtor to secured a mortgaged debt; it stated only that the mortgagor could demand that the debtor pay the debt within a “reasonable period of time.” The other major difference is the addition of the consumer protection clause in the second paragraph. The second paragraph continues the same theme as the changes made to the suretyship laws that appear to prohibit joint liability of the debtor and the mortgagor. In any case, the new amendments to the Civil and Commercial Code are likely to have complex legal implications, businesses in Thailand are advised to consult with competent legal counsel in order to understand the new laws.
Please see our Mortgages page for Thailand property here.
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