Strata Title to Provide Ease in Foreign Property Ownership

W ith the introduction of strata title in Cambodia, property ownership can now be secured by one of three forms of title: hard title, soft title and private ownership in co-owned buildings.

Hard title is the strongest form of ownership and is recognized at a national level through the Cadastral office. Soft title is the most common form of ownership and is title that is recognized at the local government level. Private ownership in co-owned buildings is the most recent form of ownership and allows foreigners to legally own property in Cambodia.

The ‘Law on Foreign Ownership’ was promulgated on 24 May, 2010. This limits foreign ownership to co-owned buildings 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).

The majority of ‘old’ Phnom Penh operates on a soft title basis and is very popular with the more Westernised clients who like the feel, history and character of these apartments, while regional Asian investors increasingly lean towards the modern strata title properties for perceived capital return.

There are a number of myths in the real estate market, especially associated with soft titles. The most common is the ownership of property on the first floor and above for soft titles. Put simply, it is illegal for foreign nationals to own a property under soft title, however, due to misinterpretation of the Law on Foreign Ownership at the local level, some sangkats (local councils) are allowing foreigners to purchase property in their own names.

This myth is also perpetuated by some agents and brokers whose lack of integrity allows them to misadvise their foreign clients. Not all sangkats allow this. For example sangkats in the southern part of the city including the popular Boeung Keng Kang sangkats will not allow a foreigner to be represented on a soft title.

Another point to be made is that sangkat officers are publicly elected officials who stand for election every five years. Where a foreigner owns property under a soft title in their own name, there is significant risk that any change in officials may result in the correct interpretation of the law – and as such, their ownership is jeopardised.

There are tried and proven structures that enable inexpensive foreign ownership of soft and hard titles. To purchase something in your own name as a foreigner where the local official  has misinterpreted the law governing ownership is a real risk and one that with the correct advice can be mitigated.

Investors in their native land generally seek legal advice before embarking upon an investment. In Cambodia these rules are abandoned by many in favour of speculation and hearsay of friends and colleagues.

Done the correct way, there are great real estate opportunities in Cambodia. The key, as in any market, is to undertake sufficient research into the market and the method of ownership before you invest.