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What is Sale with the Right of Redemption?
Sale with the Right of Redemption (Kai Fak) is a contract of sale wherein the seller who owns a real estate has a legal right to redeem his or her sold property within the agreed period. With this method, the seller transfers the ownership of the property to the buyer at the seller’s expense. The redemption takes place upon the reimbursement of the entire amount of the redemption price by the buyer, including all related fees incurred in the process.
Transfer of ownership back to the original owner takes place only when the buyer gets the money back on the agreed date. The period of time to buy back the property is registered on the Title Deed. The buyer must return the property in the condition in which it is at the time of redemption. If there is destruction or deterioration through the fault of the buyer he must, therefore, be liable to pay compensation.
Who has the right to exercise the Right of Redemption?
The following may exercise the right of redemption:
1. The original seller or his/her heirs; or
2. The transferee of the right; or
3. Any person expressly allowed to redeem by a contract
You can exercise the right of redemption only against the following:
1. The original buyer
2. The transferee of the property or of a right to the property provided that, in the case of movable property, he knew at the time of the transfer that such property was subject to a right of redemption.
What happens to the sold property if the seller fails to reclaim the said property within the Kai Fak period?
In the event that the seller fails to comply within the Kai Fak period or when the Kai Fak period expires, the seller loses his/her right to redeem the property from the buyer.
What happens in case the buyer is not present during the expiration of the Kai Fak period?
The seller who intends to redeem may make the deposit of the redemption price to a government depositing office within the period. The person who redeems shall hold the ownership of the property from the time of making the payment or deposit.
Can the buyer sell the property within the Kai Fak period?
The parties may agree that the buyer shall not dispose of the property sold. If the buyer disposes of it contrary to the agreement, he or she shall be liable to the seller for any damages resulting thereby.
For how long is a Kai Fak exercised?
If there is no defined period, you cannot exercise the right of redemption later than ten years after the time of the sale in case of immovable property and three years after the time of sale in case of movable property.
You can extend the period of redemption by showing a contract and registering it to the Land Department. If the contract provides a longer period, it shall be shorten to ten years and three years respectively.
What is the legal Rate of Interest?
If the parties did not fix the redemption price, you may redeem the property by reimbursing the price of the sale and the annual profit must not exceed the rate of 15% per year.
What is the difference between a Kai Fak and a Mortgage?
A Mortgage is a debt instrument or a contract, secured by the collateral of specified real estate property, that the borrower must pay back with predetermined payment terms. You can make real estate purchases without paying the entire value of the purchase up front through mortgage. This is by borrowing money from a bank or financial institution and registering the mortgage loan at the local government office using house registration documents or title deeds without changing the property ownership.
Kai Fak is not a financial debt. There is a right to redeem the sold property and there is a transfer of ownership to the buyer. This method is widely used in Thailand as an alternative to a Mortgage.