Advice for Foreigners

Buying Real Estate

PLEASE NOTE:  The following information is intended for general use only.  It is NOT legal advice.  Siem Reap City Land recommends that all foreign investors seek independent legal advice from an expert practitioner in Cambodian Land Law before purchasing property within the Kingdom.
Introduction

 

Until 2010, the Cambodian Land Law governing overseas investment in real estate stipulated that foreign nationals could only hold a 49% stake in property within the Kingdom.  New legislation in 2010 partly overturned this principal with regard to separate units in shared buildings such as apartment blocks and condos [see Real Estate News].  It is now possible for a foreigner to buy an apartment or condo without vesting part of the ownership with a Cambodian national, or with a Cambodian-registered company.  Further information on these changes is given below.

 

For all other real estate within the Kingdom, the original Land Law still applies.  Foreign nationals wishing to purchase real property within the Kingdom can choose from a number of purchase options and legal agreements to guarantee the security of their investment.  However, 51% of the ownership of any real estate purchased by foreigners must be vested with a Khmer citizen or a Cambodian-registered company. Some of the options available to foreign investors are detailed below.

 

Registering Property in the name of a Cambodian Citizen

Foreign nationals can nominate a Cambodian citizen in whose name their Title Deed can be registered.  The Cambodian citizen does not have to be resident in Cambodia.  Under this arrangement, the completed Title Deed is retained by the foreigner.  The sale of property is impossible without a valid, original Title Deed and the foreigner’s possession of the Title Deed provides a high degree of security.  Additional protection of the investment can be achieved by taking out a mortgage or lease agreement that transfers the Cambodian citizen’s ownership rights to the foreigner.

 

All Title Deeds and any additional legal documentation has to be registered with the Department of Provincial Land Management, Urban Planning and Construction, as well as District and central government departments that handle land registry.  Most importantly, a copy of the Land Title and any Mortgage or Lease Agreements must also be deposited with the Cadastral Land Registry Office.

 

Forming a Cambodian-Registered Company

One of the safest methods for a foreigner to purchase real estate in Cambodia is to set up a limited company in partnership with a Cambodian citizen.  Property purchased by the foreigner is subsequently registered in the name of the company.  All such companies must have a minimum 51% Cambodian shareholding.  Security is provided by the way in which shares in the company are allocated, and by attaching specific rights to specific share certificates, thus ensuring the foreigner has full control of the company’s assets.  Further mortgage, security and Power of Attorney documents can be created to support the company ownership documentation.  Foreigners pursuing this method are expected to pay the full price of the purchase and construction costs associated with the property.  However, if the property re-sold at a later date, all profits from the sale, including any accrued value, goes directly to the foreigner.  This latter issue should be detailed carefully in company and/or sales documentation.

 

Registering Property in the Name of a Cambodian Spouse

 

A foreign who is married to a Cambodian citizen can register property in the name of his or her wife or husband.  Many ex-pat investors with Cambodian partners choose this method.  However, be aware that in the event of divorce or separation, ownership of the any land and property, and division of its sale value, is largely dependent on the decision of local courts.  In the majority of cases, the registered owner of the property [the Cambodian national] has the greater rights.  It is highly unusual for a local court to find in favour of a foreigner in a divorce settlement that involves property.

Foreign Ownership of Condos, Apartments and Units in Multi-Ownership Buildings

The information above relates to foreign ownership of property with sub-soil.  Foreigners cannot own sub-soil in Cambodia.  However, foreigners can retain full ownership of property above ground level thanks to a new law passed in 2010.  Under this law, foreign investors can purchase a condo or apartment on the first floor of a development or above and register the ownership in their own name.  This recent piece of legislation was designed to stimulate the local property market after the economic downturn of 2008, in which a large number of Cambodian developers and real estate agencies went into receivership.

Title Deeds for this type of property must be registered with the Department of Provincial Land Management, Urban Planning and Construction, all District and central government departments that handle land registry, and with the Cadastral Land Registry Office.

Independent Legal Advice

Siem Reap City Land advises all overseas clients to seek independent legal advice before pursuing the purchase of property within the Kingdom.  There are a number of expert law firms operating within Cambodia with knowledge and experience in the field of overseas investment in real estate.  Any of these companies can provide you with up-to-date advice on secure ways of buying and registering property in the Kingdom.

 

Renting Property

 

Introduction

Any foreigner wishing to rent property in Cambodia will find the process straightforward, whether he or she is looking for budget accommodation or luxury houses: there is a huge variety of rental property available in Siem Reap to suit all needs.  Rental prices are generally negotiable and lease-lengths vary from minimum periods of 3-6 months up to several years.

Finding a Property

There are numerous property agencies, publications and websites that advertise rental property, so finding a suitable property is easy.  Some owners do not speak English, but a good real estate company or rental agency can negotiate on your behalf.  Generally there is a commission for this service, but the commission is usually paid by the property owner.    It is also possible to find rental accommodation by word-of-mouth.

Rental Terms and Conditions

Virtually all rental terms and conditions are negotiable.  This is Southeast Asia!  Monthly or yearly rental prices for property are often negotiable even when they are not advertised as such.  There are various ways to arrange rental payments and deposits and two typical methods are as follows:

1. Monthly Payment

This is by far the most common method of rental.  The renter agrees to pay the rent in

monthly installments, and a deposit equal to 1-2 month’s rent is paid in advance.  The

deposit is often used to pay for the final 1-2 months of the rental period.

2. Negotiable Terms of Payment

A renter may negotiate any issue or arrangement relating to payment of the rent,

including making a payment of the full rental term in advance.  The local rental

market is very flexible in terms of rental payments and generally a renter can elect to

pay rent by any means and by any number of different installments, provided the

arrangement is agreed with the property owner in advance and a suitable contract is

drawn up.

Furnished Property

The terms furnished and unfurnished don’t really apply in Cambodia: even ‘unfurnished’ property comes with some furniture and in most cases house contents are negotiable.  The majority of landlords are happy to rent to foreigners because they are considered reliable tenants.  Landlords are therefore only too willing to be helpful if a foreign renter requires a fridge or air conditioner.

 

Amenities

Most rental properties now come with local cable TV.  If your property doesn’t have cable, and you miss your fix of CNN, HBO or the English Premier League, arranging a cable connection is easy and monthly subscriptions cost a mere $5.  Internet links are still relatively rare in rented accommodation and the price of installation can be expensive.  Local phone companies have tried to remedy this by selling plug-and-play USBs that can be topped up when they run out.  Typically, 3GB of download capacity costs around $12. 

 

Other Considerations

Location:

Location greatly increases rental costs in Siem Reap and there are some notorious pricing ‘hot spots’ around town.  For example, any rental property near the Old Market area usually comes with a hefty price tag.  As a rule of thumb, the further out of town you go the cheaper the cost of rental becomes.

Budget:

Look carefully at any additional costs associated with property rental.  For example, heating a house is not generally an issue in Cambodia, but the tropical climate, particularly in the spring, makes air-conditioning an attractive proposition.  However, be aware that refrigeration and cooling systems add significantly to household electricity bills.

Utilities:

Electricity is a major expense and is generally charged by the number of kilowatts used.  Monthly costs can range from $7-10/month for a bed-sitter to over $100/month for a large urban house with frills like a refrigerator and air-conditioning.  Electric ovens are incredibly rare in Siem Reap, except in high-end properties, so most overseas renters use bottled gas for cooking.

Water for general use is no longer included in the majority of rental arrangements.  Typically, water is metered and customers are charged by cubic meters per month.  Some properties in Phnom Penh have piped-in drinking water, but this is not the case in Siem Reap and it is advisable not to drink tap water without boiling it first.

 

Refuse collection generally costs between $2.50-$5/month.  Talk to your landlord about splitting the costs and putting your refuse out together on collection day.

 

Pest Extermination is sometimes needed because of Cambodia’s humid climate – a veritable breeding ground for ants and other pests.  Pest-control companies charge a flat rate fee of around $50 to rid your property of bugs and rodents.  With some infestations this is a price worth paying! 

 

Security isn’t much of an issue where violent crime is concerned: the mugging of foreigners is extremely rare in Cambodia.  However, petty theft is a big problem in and the perception of foreigners as being incredibly wealthy only adds to the risk of break-ins.  Make sure the doors and windows in your property have good, strong locks and negotiate with your landlord to install adequate security before you move in.

 

New Ownership Rights for Foreigners

[Private Units in Co-Owned Buildings]

PLEASE NOTE:  The following information is intended for general use only.  It is NOT legal advice.  Siem Reap City Land recommends that all foreign investors seek independent legal advice from an expert practitioner in Cambodian Land Law before purchasing property within the Kingdom.

New Property Law in 2010
In the wake of the global economic downturn of 2008, a large number of Cambodian real estate companies went out of business.  In August 2009 the Cambodian government unveiled a draft law designed to arrest the decline in the national real estate market and stimulate overseas investment in the property sector.  This law was passed, with some amendments, in 2010.

Laws governing property ownership by overseas investors have never been particularly helpful to foreigners.  Methods of securing ownership such as vesting the property in the name of a Khmer citizen or forming a Cambodian-registered company to hold property are often convoluted and expensive as adequate legal advice is often required.  There was considerable optimism that the 2009 draft amendments to ownership laws would address some of these issues and make it easier for small and medium-scale investors to enter the Cambodian property market.

What does the New Law do?
The 2010 law provides foreign investors with a full right of ownership over private units in co-owned buildings, for example apartment blocks and condos. Under existing legislation, a foreigner buying a condo would have needed to form a limited company in Cambodia, or to have vested at least 51% of the ownership in a Khmer citizen. The new law allows a full right of ownership.

Were provisos included in the Draft Law?
There were a range of provisos attached to the draft legislation, some of which have been sensibly excised from the final draft.  The principal remaining proviso is that private units owned by foreigners must be on the first floor or above. This is to prevent foreigners owning Cambodian soil. Foreigners will not be allowed to own ground-floor property, the sub-soil of a property, or any common [shared] areas in co-owned buildings such as gardens, stairways, access points and maintenance areas.

For security reasons, the law does not apply to property within 30km of national land borders, with the exception of Special Economic Zones or important urban areas.

Total foreign ownership of private units within a building cannot exceed 49%.  For example, in an apartment block of 100 units, only 49 units can be sold to foreigners.

A clause saying that the 2009 draft law only applied to ‘useful foreigners’ was excised from the final draft.   This was presumably done because the phrase ‘useful foreigners’ was open to interpretation, and because it excluded, by definition, the majority of foreign investors from participating in the scheme.

Will the new law help the Cambodian real estate market?
The new law, as passed, should make a significant difference to the local real estate market.  Condos and apartments are becoming increasingly popular and the fact that foreign investors can buy these outright is a massive improvement on previous ownership laws relating to foreigners.  It should be noted that for properties with sub-soil the principal land laws still apply, but this new legislation is a step in the right direction and should stimulate overseas investment in Cambodian real estate.