1. Introduction
This section of the Cambodia Angkor Real Estate Co. Ltd. web-site aims to give visitors a working knowledge of the national laws relating to land and property ownership. It provides information on:
Current Political Situation (section 2).
Land and Property Ownership (section 3).
Purchasing Options available to Foreigners (section 4).
Staging of Purchase Payments (section 5).
How to form a Company in Cambodia (section 6).
Methods of Land Title Registration (section 7).
Taxes and Associated Administrative Costs (section 8).
Renting Property in Cambodia (section 9).
Links (section 10).
2. Political Stability
Cambodia’s troubled history has been an obstacle to national development and prosperity in the past and perceptions of Cambodia can still focus unfairly on the political upheavals of the 1970s and 80s. In truth Cambodia has undergone a protracted period of peace and political stability, as demonstrated by the 2008 General Election which passed off without incident. During this period of peace investment in the Kingdom has mushroomed. Overseas confidence in Cambodia was boosted when the Kingdom was granted full membership of ASEAN.
Over the past decade national investment laws have been amended or tailored to make investment as easy as possible. Consequently Cambodia is one of the most investor-friendly countries in Southeast Asia. Foreign companies and individuals are now seeing Cambodia as a secure place in which to invest their assets, and are finding that placing their trust in the Kingdom brings good returns.
3. Land and Property Ownership (General)
Potential foreign investors are often hesitant about investing in real estate in Cambodia because of the governing principal of land and property ownership: only Cambodian citizens have a 100% right of ownership and control over land and property within the Kingdom. Though this principal is far from perfect it is designed to prevent Cambodia itself from becoming foreign-owned. 90% of the population still live below the poverty line and cannot afford to buy land or property.
Overseas investors in Cambodian real estate cannot expect, or achieve, the degree of legal security a comparable investment might have in America or Europe. However, legal mechanisms and documentation exist that allow foreigners to control the purchase, sale and use of land and property in which they have invested, and to benefit from the future sale of such investments.
Investors are initially hesitant, yet every year hundreds of foreign nationals take up residence in Cambodia or come here and start successful businesses. The following pages will aim to provide information on how it is possible to do this, and will hopefully provide a degree of reassurance that investing in real estate in Cambodia can be reasonably safe and potentially lucrative.
4. Options for Buying Land or Property within Cambodia
Please note that the following information relates largely to the purchase of land or property, or the long-term leasing of land or property. Short-term rental agreements are dealt with separately in Section 9.
Introduction
The governing principal of Cambodian Land Law is that foreign nationals cannot hold a 100% stake in land or property within the Kingdom. However, legal mechanisms and documentation exist that allow foreigners to control the purchase, sale and use of land and property in which they have invested.
Foreign nationals wishing to purchase land or property within the Kingdom of Cambodia have several options open to them. The following Options detail the extent of the foreigner’s ownership of real estate, and give advice on the legal agreements and consultation processes necessary for purchasing real estate by the safest and most secure means available.
Independent Legal Advice
See the ‘Company Services’ section of this web-site for information on this subject. We recommend that all our customers consider taking independent legal advice before entering into any transaction.
Option 1: Sale-Purchase by forming a Company with a Cambodian Citizen
The safest way for foreign nationals to purchase land or property within Cambodia is to form a limited company in partnership with a Cambodian citizen or Cambodian-owned business. Any land or property purchased for investment is then registered in the name of the company. The foreigner and his Cambodian business partner[s] record their names, as well as the joint ownership of the company, with the Ministry of Commerce.
In this instance, 49% of the land or property is vested with the foreigner and 51% with the Cambodian business partner. Additional legal documentation such as mortgage agreements and/or security agreements can be created to accompany the purchase of real estate. New Title Deeds recording the company as the registered owner of the real estate are lodged with the Cadastral Registry Office in Phnom Penh.
Following this procedure ensures the highest degree of security available to a foreign investor.
Additional Note 1: Purchase / Sale of the Land or Property
Under this Option the foreigner is expected to pay 100% of the purchase cost of the land or property plus any construction costs. If at some future date the land or property is sold, 100% of the sale price goes to the foreigner. This includes any profit accrued as a result of the land or property increasing in value. This issue should be detailed carefully in any legal documentation.
Option 2: Private Sale-Purchase plus long-term Rental of Land or Property
This Option allows foreign nationals to purchase land or property and register the Land Title in the name of a Cambodian citizen. The foreigner and the Cambodian then enter into a long-term rental agreement by which the Cambodian citizen leases the land or property back to the foreigner. Leases last a period of 70 years to 99 years.
The principal of renting back personal land or property that has already been purchased will be completely alien to most foreigners. However, correct drafting of the terms of the land holding and lease arrangements make this a reasonably secure method of controlling land and property in Cambodia. A high degree of trust in the Cambodian national is recommended.
Under this Option, the foreigner may sell the land or property at any time and keep 100% of the revenue from the sale. The Cambodian citizen is not permitted to disagree with or obstruct the sale.
Once the Land Title is transferred to the Cambodian citizen, the foreigner retains possession of the original copy of the new Land Title. This is a security precaution that protects the foreigner’s interests by preventing the Cambodian citizen selling the land. Sale of the land is extremely difficult without the original copy of the Land Title.
Copies of the Land Title and the Rental Agreement must be registered with the office of the Department of Provincial Land Management, Urban Planning and Construction, as well as the appropriate District and central government departments that handle land registry. Most importantly, a copy of the Land Title and Rental Agreement must be lodged with the Cadastral Registry Office in Phnom Penh.
The following organisations and individuals certify / witness long-term leases in order to provide additional protection for the foreigner’s investment:
Cambodia Angkor Real Estate Co. Ltd.
Company Lawyer for Cambodia Angkor Real Estate Co. Ltd.
Lawyer for the buyer (if available).
Department of Provincial Land Management,
Urban Planning and Construction
Ministry of Land Management, Urban Planning and Construction
Village Chief
Commune Chief
District Governor
Property Owner
The foreigner can bequeath purchase plus rental real estate to any named individuals or organisations in the event of his/her death. Cambodia Angkor Real Estate Co. Ltd. strongly recommends that any foreign investor considers this eventuality carefully and drafts the terms of their purchase plus rental agreement accordingly. If any form of bequest is desired it should be added to the Agreement prior to consultation. Similarly, a lease can also be specified to run its full term in the event of the foreigner’s death. Please make any such specifications known to your legal representative so that they can be written into the rental Agreement at the outset.
Additional Note: Option 2
Though the foreigner can sell the land or property at any time, the Cambodian citizen’s signature or thumbprint is generally required before any sale can take place. A good working relationship between both parties is very important, as is careful consideration of any problematic situations that may arise. For example, if the Khmer owner does not agree with a sale of the land or property, he may choose to become difficult to contact.
Option 3: Registering Land and Property with a Cambodian Citizen
This Option in very similar to Option 2 but requires 100% trust in the Cambodian citizen.
Foreign nationals have rights, under the Kingdom’s Statutes, to choose a Cambodian in whose name their Land Title is registered. That is, a foreign national can purchase land and property and register the purchased land and property directly in the name of the Cambodian citizen (see Additional Note 1 below).
Once the Land Title is transferred to the Cambodian citizen, the foreigner retains possession of the original copy of the new Land Title. This is a security precaution that protects the foreigner’s interests by preventing the Cambodian citizen selling the land. Sale of the land is extremely difficult without the original copy of the Land Title.
Transferring the Cambodian’s rights to the foreigner via a Mortgage or Lease Agreement provides additional security for the foreigner’s investment.
Copies of the Land Title and any Mortgage or Lease Agreements that transfer the Cambodian’s rights to the foreigner must be registered with the office of the Department of Provincial Land Management, Urban Planning and Construction, as well as the appropriate District and central government departments that handle land registry. Most importantly, a copy of the Land Title and any Mortgage or Lease Agreements must be lodged with the Cadastral Registry Office.
Arrangements made under Option 3 are certified / witnessed as per Option 2.
Additional Note (Option 3)
The Cambodian citizen in whose name the Land Title is registered does not need to be resident in Cambodia. For example, the title can be registered with a Cambodian citizen living in the USA or Australia. The Cambodian citizen does, however, have to be able to prove Cambodian nationality.
Option 4: Marriage to a Cambodian National
Foreign buyers who are married to a Cambodian national can register purchased land or property using the name of their wife/husband on the Land Title. It is also possible for a foreign national married to a Cambodian citizen and resident in the country for a long period to apply for Cambodian citizenship. In the event of citizenship being granted, Cambodian Law holds that land can be registered in the names of both parties. Neither partner can subsequently sell the land or property without mutual agreement.
In the event of divorce or separation, division of the land or property is dependent on the conditions under which divorce or separation takes place, and/or the decision of any court ruling or arbitration relating to the divorce.
Option 5: Acquisition of Honourary Cambodian Citizenship
A foreigner may be granted honourary Cambodian citizenship if he or she donates a significant sum of money to the Royal Government of Cambodia in order to benefit the citizens of Cambodia. In recognition, the Royal Government of the Kingdom can choose to grant honourary citizenship.
One consequence of this is that it becomes possible for a foreign national to acquire a 100% right of ownership and use over land or property purchased within the Kingdom. This arrangement is recognised by the Ministry of Land Management, Urban Planning and Construction for the Kingdom of Cambodia, and by the Royal Government.
Please Note: honourary citizenship is recognised by the Royal Government of Cambodia as a legitimate means of purchasing land or property within the Kingdom but it does not affect the foreigner’s original nationality or citizenship in any way.
5. Staging of Payments for Land / Property Purchase
Long Term Mortgages / Credit Services
Long-term [25-30 years] mortgage arrangements, similar to those used in Europe or America, do not currently exist in Cambodia. It is likely that the rising cost of real estate will force a change in existing payment practices and lead to an expansion of banking and credit services. To date, however, domestic banking services have largely failed to keep up with rising property values. New and imaginative banking services will be required soon if the market is to be prevented from stagnating.
It is only just beginning to dawn on local property owners that even overseas buyers may struggle to raise the full purchase price of real estate prior to purchase. The present situation is that most sale / purchase payments are completed in a matter of weeks once the sale price and administrative procedures have been agreed.
Staging of Purchase Payments
It is important to state that the staging of payments for land or property purchases in Cambodia is flexible and that the precise percentages of the total purchase price transferred at each stage are negotiable. An example of possible staging arrangements is shown below.
General Payment Information
Once an investor has chosen the land or property he / she wishes to purchase and has agreed the sale price with the owner, payment is made in a series of stages. Each stage either places responsibilities on the buyer and seller, or transfers specific ownership rights from the seller to the buyer. The new Land Title is only transferred to the buyer once the full purchase price of the land and property has been paid.
The timescale for payments is generally agreed in advance and written into a Sale-Purchase Agreement.
Please Note: the deposit payment is non-returnable. Payment of the deposit commits the buyer to completing the purchase transaction. Failure to complete the transaction, or to make payments within the agreed time-frame, will result in loss of the deposit.
Example Payment in 3 Stages
Stage 1: the buyer pays a deposit of 5% - 10% to the owner of the land. The deposit payment is non-refundable and commits the buyer to completing the transaction. Once the deposit is paid the owner cannot change the agreed sale price or sell to a different buyer.
Stage 2: the buyer makes a second-stage payment of 40% of the purchase price. This payment is made within an agreed time period, usually 1-2 months. At this stage in the purchasing procedure a new Title Deed is created for the buyer and in the name of the buyer. The new Title Deed is held by the owner until the final payment is made.
Stage 3: the buyer pays the final 50% of the purchase price to the owner. At this stage the Title Deed is transferred to the buyer, who thus becomes the new owner.
6. Forming a Company in Cambodia
The information given below is for information purposes only. Seek expert legal advice when considering this option.
Introduction
The following information gives general advice on how to form a company in Cambodia. In terms of buying and selling real estate, forming a company in partnership with a Cambodian citizen is regarded as the safest method of investing in land and property within the Kingdom. It is therefore important to have a general understanding of how foreigners can register a company in Cambodia.
The governing principal of Cambodian property law is that a foreigner cannot hold a 100% share in land or property within Cambodia. This principal also applies to the share held by a foreigner in a limited company registered in Cambodia, including limited companies formed to manage real estate. A 49% stake in a limited company can be vested with a foreigner provided that a 51% stake is vested with a Cambodian national.
Applications and Company Documents
There are two methods of applying to form a company. One is to use a prescribed application form drafted by the Ministry of Commerce. This is accompanied by a Company Document that clearly states the business purposes and structure of the company. The following issues should be among those addressed in the Company Document:
Ø Name of the Company
Ø Type of Company (e.g. limited company)
Ø Business purposes and objectives of the Company
Ø Registered address of the Company
Ø Duration of the Company’s business activities in Cambodia
Ø Terms of conduct of the business
Ø Binding terms and conditions affecting the conduct of business
and the rights of shareholders
Some potential investors consider the format of the Company Document, prescribed by the Ministry of Commerce, to be inadequate and opt to privately produce their own Company Document using an independent lawyer. The advantage of this second method is that additional safeguards and conditions can be added to the Ministry’s prescribed format.
Application Fees and Company Shares
The fee for making an application to form a limited company is currently set at R 4,000,000 or US $1000. This fee is paid by the foreigner and is taken as the registered capital of the company. It also represents the total share value of the company. An example of the possible division and valuation of the shares is shown below.
Total Registered Capital of the Company: R 4,000,000 or US $1,000
Total value of all company shares: R 4,000,000 or US $1,000
Total number of company shares: Usually 1000
Individual value of shares: R 4,000 or US $1
Foreigner’s share allocation: 490 shares (Type X)
Cambodian’s share allocation: 510 shares (Type Y)
There are numerous options open to the foreign investor in terms of the company shares. For example, it is possible to divide the shares into two types (see above) and attach different rights to the different types of shares. In an arrangement like this the Cambodian’s rights might preclude him/her from voting when a new company chairman is elected, or prevent him/her from profiting from any future sale of real estate controlled by the company.
Licenses to Operate
Commercial licenses are used to license commercial companies. Generally, commercial licenses are sufficient to cover the business activities of companies dealing in real estate. Commercial licenses are granted by the Ministry of Commerce upon submission of the Company Document, presentation of the Application and the creation of shares and their distribution to the shareholders of the Company.
Large investments (in excess of $1,000,000) are licensed through the Cambodian Development Council. The CDC licenses and handles the concerns of multinational companies seeking to invest in capital works projects such as hospitals, road improvement schemes and city drainage systems.
Licenses in Cambodia are granted for the following business purposes:
Ø the sale, exchange or purchase, and the import or export,
Ø of products and materials
Ø commercial storage and warehousing of products and materials
Ø the purchase, sale or rent of land or property
Ø provision of medical services
Ø commercial distribution businesses operating by land, sea or air
Ø construction and capital works services including
Ø infrastructure improvements
Ø tourism and hospitality
Ø investment in agriculture and animal husbandry
Ø investment in industry
Ø investment in the production of handicrafts
7. Types of Title Registration (Receipts and Certificates)
Local ownership Title in Cambodia is registered via two types of document: receipts and certificates.
Receipts are generally used to register Ownership Title for real estate that is outside the main urban conurbations or in remote areas. Receipts are issued either by local authorities or by the Commune Chief. Khmer owners often use receipt Land Titles because they are exempt from certain taxes and service fees. The fact that receipts are a largely local method of land registration means they can be open to dispute.
Certificates are the recommended means of registering Ownership Title for all foreign buyers, regardless of the price or location of the registered land or property. Certificates are issued by the Cadastral Registry Unit under the authority of the Ministry of Land Management, Urban Planning and Construction and are the most secure way to register land title.
8. Taxes and Associated Administrative Costs
Purchase
When purchasing land or property in Cambodia, a foreigner’s outlay is the agreed purchase cost of the land or property plus any associated legal or construction costs. All other administrative charges, taxes and commissions are usually met by the landowner. Cambodia Angkor Real Estate Co. Ltd. charges are restricted to the commission fee of 3% of the final sale price. This fee is paid by the landowner on the completion of any sale.
Sale
When a foreign investor sells real estate purchased within the Kingdom he or she is liable to pay a government sales tax of 4% plus any commission fees if the sale is achieved using a real estate agency. The 4% sales tax generally covers the administration required to produce and register a new Title Deed.
Cambodia Angkor Real Estate Co. Ltd. charges a commission fee of 3% of the agreed sale price if a buyer is found by the company.
9. How to Rent Property in Cambodia
General Information
Renting property in Cambodia is very straightforward and most kinds of property are available from low-budget, single room apartments to large luxury villas, town houses and hotels. Cambodia Angkor Real Estate Co. Ltd. keeps extensive lists of rental properties throughout the Kingdom, as a glance at our web-site will prove. Leases of varying length are available, though usually owners prefer to rent out property for a minimum period of 6 months.
Finding a Property to Rent
There are numerous publications and web-sites available which list available rental property in Cambodia, so finding a suitable property is generally easy. A good real estate company or rental agent should be able to introduce you to the owner of a property in which you are interested and negotiate an agreeable deal on the rental price of the house and its contents.
Furnished or Unfurnished?
The generally accepted meanings of furnished and unfurnished property do not apply in Cambodia, where an unfurnished property would certainly not be devoid of furniture. In many cases the contents of a house are negotiable.
Terms, Conditions and Example Rental Arrangements
It is probably fair to say that, as Cambodia is an Asian country and steeped in Asian customs, when it comes to arguing money and costs everything is ‘up for grabs’. This is certainly true of the monthly or yearly rental prices for property which are often negotiable even when they are not advertised as such. Similarly, rental payment agreements are very flexible in Cambodia, giving the renter a great deal of choice in the way they budget.
There are various ways of arranging rental payments and deposits and a typical arrangement is as follows:
Monthly Payment
The renter agrees with a property owner to pay rent by regular monthly installments and a deposit equal to 1-2 month’s rent is paid in advance. In many agreements this deposit is used to pay for the final 1-2 months of the rental period.
Other Things to Consider
There are several things to consider if you are seeking to rent property within the Kingdom. Some of the issues and practices involved in renting property in Cambodia will be familiar to anyone who has rented overseas, and others may be less familiar. Please find below a list of some of the issues you may wish to consider if you are looking for rental property in Cambodia:
Budget: This is always an important issue when renting a property and you should look at the monthly or yearly cost of rental plus any associated or additional costs (see Utilities and Amenities below). For example, heating a house is not generally an issue in Cambodia. However, the tropical climate and high Spring temperatures can make the availability of air-conditioning attractive. Refrigeration and cooling systems can add significantly to household electricity bills.
Location: Location can greatly increase rental costs, particularly in Siem Reap and Phnom Penh, so the position and size of a property is well worth bearing in mind. Cambodia Angkor Real Estate Co. Ltd. can provide excellent information on pricing ‘hot spots’ in Cambodia’s major towns and cities.
Utilities:
Oil and natural gas are not used domestically, though propane gas tanks are widely used for cooking. Cooking by propane costs no more than $60 / year, even for a large household.
Electricity is a major household expense and is generally metered by the number of kilowatts used. Electricity costs about 800-900 riel [about 20 cents] per kilowatt. Monthly costs can range from $10-15 for a small apartment to over $100 / month for a large town house with a lot of electrical equipment.
Water for general use (not drinking) is sometimes metered and is not included in the rental price.
Refuse collection costs around $5 / month regardless of the size of the property.
Pest extermination, occasionally required in tropical countries to deal with infestations, costs a flat rate $50 per call-out.
Amenities: Though some properties come with cable TV and, occasionally, Internet links the price of installation can be quite expensive for properties that are not initially equipped with these amenities. As a general guide, broadband access costs about $250 to install and $60-70 / month thereafter. Cable and satellite TV costs about $5 - $10 per month (per TV set in the house).
Security: Crime against foreigners is extremely rare in Cambodia. However, some visitors who come to live and work in the Kingdom choose to employ local police or private security firms to protect their goods and property. If security is a personal concern to you, you should arrange guards locally. Some higher-priced properties include 24-hour protection. 24-hour security provision by army or police officers (armed) costs $70 / month. Private (armed) security costs $150 / month and is also round-the-clock.
For a full view of all the rental properties available through Cambodia Angkor Real Estate Co. Ltd. look at the main section of this website.
10. Links
