Sale with right of redemption (khai fak): the Thai land contract that isn't a mortgage

Why does a Koh Phangan title deed occasionally carry a 'khai fak' annotation instead of a mortgage? Because khai fak (ขายฝาก), a 'sale with right of redemption' under Civil and Commercial Code Sections 491-502, is a different legal instrument from a mortgage. The buyer becomes the full legal owner the moment the contract is registered, and the seller only keeps a time-limited contractual right to buy the property back. Miss that deadline, and there's no court process to contest — the buyer's ownership is already complete.

How it differs from a mortgage

• Ownership transfers immediately (Section 491) — unlike a mortgage, where the borrower keeps title and only grants the lender a registered security interest over it.
• No foreclosure process on default — because the buyer already owns the property, a missed redemption deadline doesn't trigger anything like the court foreclosure and auction process covered in Mortgage default and foreclosure in Thailand; ownership simply consolidates with the buyer.
• A hard cap on the redemption period — a maximum of 10 years for land and buildings, 3 years for movable property (Section 494); any longer period written into the contract is automatically cut down to the statutory maximum (Section 495).

The 2019 law that protects sellers on land deals

Because khai fak was long used to strip vulnerable landowners of their land informally at token 'sale' prices, the Protection of Citizens in Land Sale-with-Right-of-Redemption Agreements for Agriculture or Residence Act B.E. 2562 (2019) now specifically governs khai fak contracts over land used for farming or as a home. It sets the redemption period at no less than 1 year and no more than 10 years, caps the redemption price at an effective rate of no more than 15% per year (calculated from the sale date to the due date), lets the seller redeem early at a proportionally reduced price, and guarantees the seller the right to keep living on or farming the land during the redemption period without paying rent to the buyer.

Why it matters for a buyer, or a company-held villa

• It doesn't create a route around the foreign land-ownership ban. Khai fak is still a sale of land, and the Land Code's restriction on foreign ownership applies to it exactly as it does to any other transfer — see How foreigners legally own a villa.
• Check the back of the title deed. A registered khai fak shows up as an annotation on the chanote, the same place a mortgage or servitude would appear — part of the standard checks in Due diligence before buying on Koh Phangan. Land still inside its redemption period means the registered owner's title is conditional, not final.
• A Thai-majority company holding your villa's land takes on a sharper risk with khai fak than with a mortgage if it ever raises cash this way — miss the deadline and the land is gone immediately and without any court process, not just encumbered.

Khai fak is a legitimate, long-standing Thai financing tool, but it behaves nothing like a Western-style mortgage. Treat any khai fak found on a title deed, or any seller-financing proposal structured this way, as a full sale with a ticking clock — not a loan.