Foreign Property Ownership in Cambodia
Love Cambodia and want to own a part of it? If that’s the case, Realestate.com.kh has put together a foreign ownership guide to the kingdom just for you.
Cambodia, unlike its three neighboring counterparts, has a freehold land ownership system for its citizens. Foreigners based in Cambodia are also allowed rights of ownership over certain properties, subject to 2010 Law on the Provision of Ownership Rights. These rights, however, are restricted to buildings that have obtained a “strata title”, which is available only to newly completed apartment buildings.
According to the strata title regulation, foreigners cannot acquire a ground-floor unit legally, and any foreign ownership allocation is limited to a maximum of 70 percent of the units in any one co-owned building. Nevertheless, a foreigner lease term over landed properties can still be up to a 50 year maximum, with a 50 year renewal option included.
Tell me more about Cambodian Land Titles
Cambodia Land Title Classifications Explained, Once and For All! To the new property buyer, Cambodian land title classifications can be rather confusing. Let’s explore the three main ways property ownership can be secured in Cambodia, and the major misconceptions surrounding Cambodian property ownership and Cambodia land titles.
All Cambodian land title records were destroyed between 1975 and 1979. This meant that after the war, proof of ownership had become near impossible. In 1989, a Cambodian Land Law was passed and a revised version was issued in 2001 allowing private ownership of land. The 2001 Land Law created the land registry system issuing Cambodia land titles that remains in place today.
Since then, more than two million Cambodia land titles have been issued to Cambodians. Property ownership can now be secured by one of three forms of Cambodia land title: Hard title, Soft title and Private Ownership in Co-owned Buildings – also known as Strata Title. In addition, a highly-secure LMAP title is also now available.
1) HARD TITLE:
- Hard title is the strongest form of property ownership in Cambodia and the best Cambodian Land Title.
- Hard titles are an ownership certificate provided by the national Land Management and Planning office.
- Hard titles contain detailed information that has been duly recognized and certified at a national level with the Ministry of Land and a cadastral office.
- A Transfer tax of four percent applies when a hard title transaction occurs.
2) SOFT TITLE:
- Soft title is the most common form of ownership and the most commonly issued Cambodia land title.
- It is a Cambodian land title that is recognized at the local government level.
- Soft titles are provided by the local Sangkat or District office and are not registered at a national level – but are still considered a possessory status.
- The majority of property transactions still occur with soft titles to avoid ownership transfer taxes and fees.
- However, most new major development projects are being transacted with hard titles as these are the most durable Cambodia land title.
Check another useful blog post on Realestate.com.kh relevant to Cambodia land titles: “Pitfalls for Foreign Property Ownership in Cambodia.”
3) PRIVATE OWNERSHIP:
- Private Ownership in Co-owned Buildings is the most recent form of ownership and allows foreigners to legally own property in Cambodia.
- This is more commonly known as a Strata Title.
- Strata Title is a less common Cambodia land title, but numbers are growing fast.
- The ‘Law on Foreign Ownership’ was promulgated on 24 May, 2010.
- This law limits foreign ownership to co-owned buildings. Foreigners still cannot own land, as it is
- Co-owned buildings are defined as a building or construction in which several owners reside, consisting of some parts that are the exclusive ownership of each co-owner (private units) and some other parts that are common spaces for the common use of co-owners (common areas).
- Strata title has also recently been extended to commercial buildings, and in particular shared office complexes.
- Learn more about the strata title process here.
- A titling system called LMAP (Land Management and Administration Project) has been introduced in Cambodia by the World Bank to improve land tenure security by the Ministry of Land Management Urban Planning and Construction.
- Under the scheme, GPS coordinates are being registered for all land plots in the country.
- If you have an LMAP title already, the borders have been agreed between neighboring parties so all border disputes have been resolved.
- This is the safest type of title.
Foreign Property Ownership in Cambodia may not be simple, but it is increasingly possible. Always do your due diligence and take your time, and soon you will achieve foreign property ownership in Cambodia, and gain a valuable property asset. For clarity on all of these issues and more, it is highly recommended by Realestate.com.kh to enlist experience legal support whenever considering a lease in Cambodia as a foreigner.
Tell me how I can own, control or lease Land as a foreigner in Cambodia
So many people ask can foreigners own land in Cambodia… Although the short answer to this is 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 is 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 crucial to limit risks.
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. Whenever 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 Prime Minister, 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 inexpensive 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 landholder 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.
Check out some other great resources on Realestate.com.kh in our Location Profiles and Investor Guides: Learn more about Cambodia, Phnom Penh, Siem Reap & Sihanoukville. Learn more about Investing in Cambodia, Foreign Ownership in Cambodia & the Cambodian Expat Experience!
Tell me more are the Strata Title Transfer Process
Cambodian laws towards land titles for foreign ownership have been largely untested amidst the current construction boom. Yet the Ministry of Land Management, Urban Planning and Construction (MLMUPC) have now started to transfer strata titles to purchasers of residential units – creating legally binding ownership within co-owned buildings.
What are the steps to creating a Strata title?
At the very first stage, the developer acquires the land that the development will be on with a hard title in the name of the development company. However, from this original master title you cannot directly transfer private unit ownerships to individual buyers. Before this, you must first transfer the total collection of split titles into the developer’s name and ownership. For example, there might be were 50 separate titles for 50 units, made from the original, single hard title.
The land department of the ministry will also screen your common area regulations and practices at this stage. If the land department is satisfied that the co-owned areas will be correctly managed and insured, then the strata titles will be issued. Once these 50 titles have been created and transferred into the company’s ownership, we can proceed to transferring these individual titles to the individual buyers.
What is involved in the transfer of the strata title from the development company to the end buyer and owner?
The MLMUPC requires fully certified documentation of the identity and marital status of the end buyer and these documents must also be supplied and translated into Khmer. Importantly, the strata title is solely in Khmer, thus no English names are permitted on the strata title and all buyers need their name to be translated. Khmer buyers, foreign buyers and the development company all must satisfy slightly different process and documentation demands.
During this stage, choose to engage the services of a qualified local legal firm to review the certified documents and their translation, to liaise with the authority at the land department and to provide legal assistance to buyers along the process until the transfer tax payment.
Does the buyer have to be in Cambodia to transfer the new strata title into their possession?
Yes. The buyers must physically be present in Cambodia to affix their thumbprint on their certified documentation, but most importantly on Vente Definitive and on Application for Ownership Transfer, both of which are standard templates to be provided by the land department. This means international investors must come back to Cambodia to get the title transferred.
What costs are accrued during the transfer process?
There is a public service fee per strata title for the conversion of the master title. There is also a public service fee for each individual strata title to be issued in the buyer’s name. Concerning the transfer tax, once the set of certified documentation is reviewed and accepted by the land department, the exact same documentation with other forms will be submitted to the General Department of Taxation.
The tax officials will then issue an invoice with the amount of transfer tax to be paid after assessment of the property value based on their determined ranges and calculation method. After issuance of the evidence from the General Department of Taxation that the tax has been paid by the buyer, the land department will complete the title transfer.
What if the buyer refuses the strata title transfer?
In theory, this will bring problems when it comes to resale because the second buyer will have difficulties to do a thorough examination or to have certitude that there are no disputes, mortgages, judgments or unpaid taxes associated with the property sold. Pure investors are usually resistant to fulfill the physical paperwork and monetary demands to transfer the ownership in their name. Some developers in this case may accept to hold the title for them – but this can cause complications for buyers later. It is not really advised.
On the other hand, such an arrangement also creates landlord liabilities for the developer holding the strata title. An effective way to mitigate this for the reassurance of the buyer is to enlist quality legal support, to ensure constant communication with the developer and to get education surrounding the process. Hiring a professional legal firm with experience in this is crucial – because they can make this transfer process as smooth and predictable as possible.
Tell me more about the Land Title Transfer process in Cambodia.
The following information explains the steps necessary for transferring land titles of ownership in Cambodia, thanks to Realestate.com.kh. Each step gives instructions, the responsible Government agency, the estimated time to complete the step, and the official cost.
Step 1 – The buyer verifies the title certificate with the Land Office, checking for potential liens (debt) or other encumbrances:
For the first step, the buyer must obtain a copy of the initial title certificate from the seller and verify proper ownership, ensuring that the seller is the rightful owner of the title certificate. He/she verifies the title certificate with the land office to ensure that there are no liens, mortgages or other encumbrances registered already for that property.
Relevant Government Agency: Land Office
Estimated time to complete the step: 10 days (should occur simultaneous to steps 2 and 3)
Official cost: According the Prakas 995 dated of December 28th 2012 on public service at Ministry of Land Management, Urban Planning and Construction = KHR 50,000/US$12.50
Step 2 – Obtain information on the property from the relevant Commune Council Official:
The land purchaser must contact the village chief or the commune council official, in which the property is located, to obtain information on the land, in addition to an official search upon the title at the municipal land office.
Relevant Government Agency: Commune Council
Estimated time to complete the step: 10 days (should occur simultaneous to steps 1 and 3)
Official cost: No Cost
Step 3 – The buyer must obtain the certificate of incorporation of the seller’s company and other official documents from the seller:
If the landowner is a legal entity, the buyer must obtain a copy of the ID of the shareholder, or person acting on behalf of the company, and a certified/notarized copy of the certificate as issued by the Ministry of Commerce. These documents are needed to verify the accuracy and identity of the company name appearing on the title certificate. A Power of Attorney is also needed, as well as a resolution signed by the Board of Directors from that company authorizing the named individual to represent the company at the land office, accompanied by the Power of Attorney implementing that Resolution.
Relevant Government Agency: Ministry of Commerce
Estimated time to complete the step: 10 days (should occur simultaneous to steps 1 and 2)
Official cost: KHR 80,000/US$20
Step 4 – Apply for registration at the District Land Office of the Ministry of Land Management, Urban Planning & Construction (MLMUPC):
When 2 persons/companies wish to buy/sell real property, they must first go together to the district office of the Ministry of Land Management, Urban Planning & Construction (MLMUPC) and arrange to prepare and sign documents. The documentation needed includes the company’s statute, its Certificate of Incorporation, and Power of Attorney (obtained in Step 3). At the same time, the original Title Certificate held by the seller must be presented to the Khan at the time of signing the deed, in order to have the name of the new owner officially inserted on the document.
Relevant Government Agency: District Land Office, MLMUPC (District Land Office of the Ministry of Land Management, Urban Planning & Construction)
Estimated time to complete the step: 20 – 30 days
Official cost: A cadastral transfer fee of KHR 600,000 is paid to MLMUPC.
Step 5 – Pay transfer tax at the Tax Collection Office:
A transfer tax of 4% of the total value of the property is paid to the Ministry of Economy and Finance at the Tax Collection Office, relevant to the location of the transferred property. A Tax Receipt is then issued to prove that the property transfer tax has been paid. The 4% transfer tax is set out in Article 40 of the Law on Finance 1995. In Phnom Penh, however, this tax is not assessed based on the true transacted value of the property; but, rather, based on a schedule of price of property determined by the Phnom Penh Municipality. The assessed valuation by the Phnom Penh Municipality is usually based on the total number of square meters, the land’s location, use, potential use etc. The tax is thus not based on the actual price for which the land is sold; rather it is based on the assessed value made by the Municipal office. If the land is more than 1200m², the surplus of the land will also be subject to “unused land tax.” For land less than 1200m², the unused land tax is not applicable. *The time for the tax office to complete the calculation of transfer tax will depend on the location of the land and its size.
Relevant Government Agency: General Department of Taxation
Estimated time to complete the step: 1 day*
Official cost: 4% of property value (transfer fee)
Step 6 – Return to Cadastral office to complete the registration process:
After all taxes are paid, the parties may return to the cadastral office at the MLMUPC and sign/thumbprint a MLMUPC form for buying/selling real property, as filled in by MLMUPC official. The signing/thumb printing must be witnessed by a local authority such as commune chief, who will also thumbprint. These procedures are based on Land Law Arts. 65, 244 and 245. Land Law Art. 69 bars transfer unless all necessary taxes are paid. The documentation provided should include payment receipts of transfer tax (obtained in Step 5).
Relevant Government Agency: MLMUPC (District Land Office of the Ministry of Land Management, Urban Planning & Construction)
Estimated time to complete the step: 5 days
Official cost: Cadastral service fee paid in Step 4
Step 7 – Obtain the certificate of title from the Municipal Land Office:
The Khan/District land office forwards all the “transfer documents” to the Municipal Land Office where it issues the final Certificate of Title in the new owner’s name. It is now registered.
Relevant Government Agency: Municipal Land Office
Estimated time to complete the step: 1 to 2 weeks. The last procedural step in practice can take several weeks, depending on the diligence of the land officials and interested parties.
Explain some of the most common pitfalls for foreign property ownership in Cambodia
Here are some clarifications of the most common misconceptions surrounding foreign property ownership in Cambodia for non-Cambodians.
- Foreign nationals are unable to buy land freehold within Cambodia as according the the Land Law 2001 and the Cambodian Constitution unless a landholding company is set up with the majority of shares being held by a Cambodian citizen or citizens.
- Alternatively, foreign nationals are able to acquire land on long-term leases as an alternative to foreign property ownership in Cambodia. These long-term leases for a foreign owner have a maximum lease term of 50 years as determined by the civil code established in December 2011. These leases can be registered at a national level with the Ministry of Land Management Urban Planning and Construction.
- Long-term leases are a compromise chosen by many international investors due to the difficulties of foreign property ownership in Cambodia. Learn more about long term lease law.
- It is extremely important to remember that it is illegal for foreign nationals to own a property under soft title.
- However, due to a common misinterpretation of the Law on Foreign Ownership by local authorities across Cambodia, some sangkats (local councils) are currently allowing foreigners to purchase property under soft titles in their own names.
- In addition, this misconception is supported by some agents and brokers who mis-advise their foreign clients as to the true nature of their soft title, claiming that it in fact represents full ownership. However, not all sangkats allow this. Boeung Keng Kang Sangkat, for example, will not allow a foreigner to be represented on a soft title whatsoever.
- Furthermore, a sangkat officer can interpret a soft title as they wish: As David Murphy, Director of IPS Cambodia, explains,”Sangkat Officers are publicly elected officials who stand for election every five years. This means that when a foreigner owns property under a soft title in their own name, there is a significant risk that any change in the elected officials of the relevant sangkat may result in the correct interpretation of the law, jeopardizing or voiding that foreigner’s effective ownership.”
- To protect from this misunderstanding, ensure that you always conduct a title search with the relevant Ministry of Land Office or Commune Office before purchasing property. Such a search should confirm who holds the title to the property and reveal any registered mortgages or other encumbrances on the title.
- Keep in mind, as the land buyer; you may not be given the actual title to conduct the search, because this is the seller’s only evidence of ownership. The buyer will instead get given a copy of the title, so it is important that you confirm that it is the most recent copy.
Foreign Property Ownership in Cambodia may not be simple, but it is increasingly possible. Always do your due diligence and take your time, and soon you will achieve foreign property ownership in Cambodia, and gain a valuable property asset.