Can foreigners own land in Cambodia?
So many people ask can foreigners own land in Cambodia… Although the short answer to this is a very simple no, there are plenty of effective ways to control land in Cambodia for your business or personal use.
Are you a foreigner who wants to buy or lease land in Cambodia? If yes, here are some handy advice you need to read! Realestate.com.kh has put together an informative article to show you exactly how you can buy or lease land in Cambodia as a barrang, and the legal precautions you must follow if your venture is to be a success into the future. It’s not all smooth sailing though, and we advise seeking professional legal counsel for any such transaction. But, at least this article is a good start!
Broadly, under Article 44 of the Constitution, foreigners cannot own land in Cambodia. However, foreigners can establish control over land several ways: Buying land through a local company; by leasing land; by attaining Cambodian citizenship; or by buying land through a Cambodian nominee (note: this one is actually outlawed by the constitution).
- How can foreigners buy land in Cambodia through a locally-incorporated company?
This presents the least risk for foreign investors, either individual or a legal person. Multiple pieces of land can be held. However, the costs of creating a landholding company are expensive, with high maintenance costs, and rental income taxes are high. See the Law on the Investment of the Kingdom of Cambodia (Chapter VI, Article 16): “legal entities in which more than 51% of the equity capital are directly owned by natural persons or legal entities holding Cambodian citizenship”. And further: “use of land shall be permitted to investors, including long-term leases of up to a period of 70 years, renewable upon request”.
51% Cambodian ownership is necessary. However, when structured with 2 classes of shares having different rights of control, one class held by foreign investor, one by the local investors, this shareholder dominance is in check. Often, local shareholders are attributed lesser rights to transfer shares or nominate directors, and any major company decisions may require a threshold vote of a 2/3 majority.
Generally, private agreements are created in which the Cambodian shareholders grant the foreigner special rights over the land. Also, by registering a mortgage on the land, the land cannot be transferred without the consent of the foreigner. Yet, this method still can fail if the Cambodian partner denies their legal obligations. In Cambodian courts decisions may be brought, and costs are high. Hence, due diligence on any local partner is recommended to limit risks.
- How can foreigners buy land in Cambodia? How about Leasing the Land?
Often when people first ask “can foreigners buy land in Cambodia” they are quickly convinced that leasing is a better option. Long-term leases are commonly used by foreigners as a means to control land in Cambodia. And for most foreign business people, long term leases are, for all-exclusive-purposes, as effective as outright ownership. Long term leases allow all necessary rights to develop the land and gain construction permissions.
However, leasing structures are ultimately less secure than the company structure described earlier, but progress in being made on their clarification. According to the Land Law, lease lengths are highly flexible. Leases generally last for 50 years, 70 years, or 99 years. Keep in mind that leases lasting longer than 15 years must be registered at the Land Office in order to be valid. If you are trying to lease state owned land, there is a 40 years maximum on leases, with possibilities for extensions.
When leasing, do your due diligence and run a full background check on the owner, similarly as you should for any company partnerships. Leasing from the wrong person, who knows the right people in power, could mean your lease becomes very unstable, very quickly. Ensure that the lease contract includes dispute resolution outside Cambodia. However, even if you do this, in practice it may not be as effective as many believe. This is because the majority of land disputes do not involve disputes over the contract itself, rather quasi-legal matters. Cambodian courts have also been known to out rightly refuse to recognize foreign arbitration clauses.
These lease contracts might also include a clause requiring the owner to get the lessee’s permission before they may sell, or prevent the owner from selling until the new owner fully-recognizes the preexisting lease. On top of this, a ‘block sale notice’ can be registered with the relevant Land Office, which tells the office to halt any attempts to sell the land without the lease owners’ preceding permission.
Some further issues present themselves, and the lease law remains somewhat unclear. Firstly, regulation surrounding ownership over buildings at the close of the lease is uncertain. Floors above the ground floor of buildings belong to the lessee, who can then register titles for these floors. But, as the owner of the 1st floor also owns the land according to the Land Law, at the closure of the lease the owner of the land will also own this building.
Yet, in contradiction of this, the Law on Investment, which essentially covers companies registering for tax incentives, the buildings are held to be owned by the lessor. Nevertheless, the Government has become proactive on these issues of late, which is increasingly clarifying these uncertainties. Another problem once existed as leases are currently un-recordable at the Land Registry office, however, this issue is also under reform.
For clarity on all of these issues and more, it is highly recommended to enlist experience legal support whenever considering a lease in Cambodia as a foreigner.
- Can foreigners buy land in Cambodia with Cambodian citizenship?
Yes. The Government considers citizenship applications from foreigners when a significant investment is being made in Cambodia. The Ministry of the Interior, the Council of Ministers, and the President, all must agree to the grant of Citizenship – so you need to be a very serious and major investor to gain citizenship.
- Can foreigners buy land in Cambodia through a Nominee Purchase?
Buying in a local’s name is very easy and is the most in-expensive means of controlling Cambodian land. But, by doing so, you will be ignoring the Constitutional prohibition on direct ownership of property by foreigners. Therefore it is illegal and strongly discouraged by legal support in Cambodia. In short, to buy through a nominee structure, the investor signs a trust agreement with the land holder guaranteeing to hold the land on their behalf. The owner then mortgages that land and leases it to the foreigner. If things don’t go to plan, a foreigner can easily face expropriation by the state, or be forced to sell the land.