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Legal Update

Mortgaging Made Easier for Non-Thai Financial Institutions

3 February 2009
Mayer Brown JSM Legal Update

Summary

Thai entities, foreign entities and foreign financial institutions may now accept  mortgages of immovable property without prior approval from the Fiscal Policy Office of the Ministry of Finance under the new Financial Institution Business Act B.E. 2551 (2008).

Full Update 

"Credit foncier business"

Under the old  Finance Business, Securities Business and Credits Foncier Act B.E. 2522 (1979) a "credit foncier business" was defined as any business engaging in money lending by accepting mortgages of immovable property in the ordinary course of business.

As a result, Thai entities, foreign entities and foreign financial institutions accepting mortgages over immovable property had to obtain confirmation from the Fiscal Policy Office that they were not engaged in a "credit foncier business" before accepting the mortgage.

However, the meaning of "credit foncier business" has been changed under the Financial Institution Business Act B.E. 2551 (2008), which became effective on 3 August 2008. 

To be considered as engaged in a "credit foncier business", a business entity must: (i) accept monetary deposits from the public; and (ii) use such deposits either to lend to the public by taking a mortgage over immovable property or by purchasing the immovable property by way of sale with right of redemption.

Effect on Thai entities

Under the new law, a Thai mortgagee may now register a mortgage without obtaining prior approval from the Fiscal Policy Office so long as the Land Office is satisfied that the loan does not come from public deposits and the mortgagee does not accept monetary deposits from the public. The Land Office retains the discretion to inform and seek confirmation from the Fiscal Policy Office whenever there is uncertainty.

Effect on foreign entities

Although in theory the approval requirement has been removed, foreign entities and foreign financial institutions accepting mortgages of immovable property in Thailand may still, in practice, be required by the Land Officer to obtain confirmation from the Fiscal Policy Office.

However, the Land Department is awaiting verification from the Fiscal Policy Office on criteria and procedures to deal with foreign mortgagees. It is likely that the approval requirement will be removed. We will provide an update once the Land Department regulation has been issued.

For further information, please contact:
Araya Akomsoonthorn (araya.akomsoonthorn@mayerbrownjsm.com)
Kesara Summacarava (
kesara.summacarava@mayerbrownjsm.com)
Learn more about our Bangkok office and Real Estate practice.

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