By: Magna Carta Law Office

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 of time. With this method, the ownership of the property is transferred to the buyer at the seller’s expense. The redemption takes place when the entire amount of the redemption price has been reimbursed by the buyer including all related fees incurred in the process. If the price of redemption is not fixed, the property may be redeemed by reimbursing the price of the sale and the annual profit must not exceed the rate 15% per year.

The right of redemption may be exercised only by:

  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

The right of redemption may be exercised only against:

  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.

Ownership will be transferred back to the original owner only when the buyer gets the money back on the date agreed upon in the contract. The period of time to buy back the property is registered on the Title Deed. The property must be returned in the condition in which it is at the time of redemption, provided that if the property has been destroyed or deteriorated through the fault of the buyer he must, therefore, be liable to pay compensation.

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.

If the Kai Fak period is not defined, the right of redemption cannot be exercised 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. The period of redemption may be extended which must be evidenced by a contract and registered to the Land Department by a competent official. If a longer period is provided in the contract, it shall be reduced to ten years and three years respectively.

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. 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 ownership of the property shall be vested in the person who redeems from the time of payment or deposit of the price has been made.