The Cambodian property market, especially in Phnom Penh, has grown significantly due to the country’s economic growth and foreign investment-friendly policies. However, it’s essential to learn about the country’s laws and regulations before investing in real estate.
This guide will help you do so by explaining Cambodia’s property law and regulations, as well as providing useful resources for further exploration.
Overview of the Cambodian Real Estate Market
The Q1 2023 Market Insights report from CBRE Cambodia shows a challenging environment for Phnom Penh’s real estate industry, both in the commercial and residential sectors, due to global economic struggles.
Despite facing challenges, the Cambodian real estate market offers promising opportunities for investors and developers due to its ongoing investment in infrastructure, tourism, and an expanding middle class, which point towards a bright future for the industry.
Foreign Ownership and Property Rights
The Foreign Ownership Property Law in Cambodia seeks to regulate and provide guidelines for foreigners interested in acquiring property within the country. This law allows foreigners to own certain types of properties and sets clear parameters for foreign property ownership.
Land ownership restrictions
Foreign individuals and entities are not allowed to directly own land in Cambodia. However, they can acquire land through long-term leases (15–50 years) or by setting up a landholding company wherein Cambodian nationals hold at least 51% ownership.
Condominium ownership rules
Foreigners can own condominium units in Cambodia, provided that the total foreign ownership in the building does not exceed 70%. However, they cannot own the land on which the condominium is built.
Leasehold and freehold properties
Foreigners can hold leasehold properties in Cambodia for 15 to 50 years, with the possibility of extension. However, they cannot own freehold properties, which are reserved for Cambodian nationals.
Property Rights for Cambodian Citizens
Cambodian citizens have the right to own land and property without restrictions. They can hold both freehold and leasehold titles, and they can also own any percentage of a land holding company. The preferential treatment for Cambodian nationals in property ownership aims to protect national interests and ensure the majority of the land remains under local control.
Property Rental Regulations in Cambodia
In Cambodia, rental prices are largely influenced by market forces, and there are currently no specific regulations that dictate rental prices for residential or commercial properties. This allows landlords and tenants to negotiate rental prices based on various factors, such as location, size, and amenities provided.
However, under the 2011 Cambodian Civil Code, landlords are required to comply with certain rules and obligations, including providing a safe and habitable property for tenants. While there are no direct regulations for rental prices, these obligations can indirectly influence rental price negotiations.
Common rental agreement terms and conditions
Rental agreements in Cambodia typically include the following terms and conditions:
- Rent amount and payment terms: The monthly rent and payment due date should be clearly stated in the agreement.
- Security deposit: A security deposit is typically required to cover any potential damages or unpaid rent. This amount is usually equivalent to one or two months’ rent.
- Lease term: The duration of the lease should be specified, along with any options for renewal or termination.
- Maintenance and repairs: The agreement should outline the responsibilities of both the landlord and tenant regarding maintenance and repairs.
- Rules and regulations: The rental agreement should also include any specific rules and regulations for the property, such as restrictions on pets, smoking, or modifications to the property.
Installment Payment Regulations in Cambodia
Installment payments are a common method of financing real estate purchases in Cambodia, allowing buyers to pay for a property with a series of smaller payments over a designated period. The regulations governing installment payments are primarily outlined in the 2011 Civil Code, which covers contracts and obligations between parties.
For installment payment contracts to be legally binding, they must be in writing and signed by both parties. The agreement should clearly outline the terms and conditions of the installment payments, including the total purchase price, the number of installments, the amount of each installment, and the payment schedule.
Late payment penalties
The installment payment agreement should include provisions for late payment penalties, such as additional interest charges or legal actions. These penalties should be clearly outlined in the agreement to ensure both parties understand the consequences of late payments.
Default and termination
The installment payment agreement should also specify the conditions under which the contract may be terminated, such as in cases of default by the buyer or breach of contract by the seller. In the event of termination, the agreement should outline the rights and obligations of both parties, including the possible forfeiture of any installment payments made.
Collateral and security
In some cases, installment payment agreements may include provisions for collateral or security, such as the property itself or other assets, to protect the interests of the seller. These provisions should be clearly stated in the agreement and must comply with relevant Cambodian laws.
Step-by-step Property Acquisition Process in Cambodia
In this step-by-step guide, we outline the key stages involved in the property acquisition process in Cambodia, from conducting due diligence to obtaining the property title.
By following these steps, potential buyers can confidently and efficiently navigate the Cambodian property market, ensuring a smooth and successful transaction.
- Research and property selection: Begin by researching the Cambodian property market and identifying the desired property type and location. This may involve visiting various properties, consulting with local real estate agents, and comparing prices.
- Due diligence: Conduct thorough background checks on the property and the seller. Verify the property’s title, documentation, and ensure it is free from encumbrances, liens, or outstanding taxes.
- Legal consultation: Consult with a lawyer experienced in Cambodian property law to ensure compliance with local regulations and protect your interests.
- Negotiation: Negotiate the purchase price and terms with the seller or their representative.
- Drafting the purchase agreement: Have your lawyer draft a legally binding purchase agreement that includes the property’s details, purchase price, payment terms, and any conditions or warranties.
- Signing the contract: Both the buyer and seller must sign the purchase agreement, making it legally enforceable.
- Payment: Make the agreed-upon payment to the seller, typically through a secure escrow account.
- Apply for property registration: After signing the contract and completing the payment, apply for property registration at the relevant government office. Submit the required documents, such as the purchase agreement and proof of payment.
- Pay taxes and fees: Pay the necessary transfer taxes and registration fees associated with the property acquisition.
- Obtain the property title: Once the registration process is complete, the buyer will receive the property title, officially transferring ownership of the property.
- Post-acquisition tasks: After acquiring the property, update utility accounts, insurance policies, and any other relevant documentation.
Real Estate Taxes and Fees
To better understand the financial responsibilities tied to real estate transactions in the country, we made a table outlining the various real estate taxes and fees in Cambodia. This resource can serve as a guide for property buyers, sellers, and investors, helping them make well-informed decisions in this burgeoning market.
|Property Tax||0.1% of property value||Annually, no later than 30th of September|
|Stamp Duty/Registration Tax||4% of property value||At the time of property registration|
|Capital Gains Tax||20% (flat rate)||At the time of property sale|
|Rental Income Tax||10% withholding tax||Annually, in tax filing|
|Value-Added Tax (VAT)||10% (if applicable)||At the time of property transaction|
It’s important to note that there may be additional taxes and fees depending on the specifics of the property transaction. It’s always best to consult with a local tax advisor to ensure compliance with all relevant regulations.
Common Real Estate Disputes in Cambodia
Understanding the common real estate disputes in Cambodia is essential for both foreign and local investors to protect their interests and make informed decisions. Here, we will discuss the typical real estate disputes in Cambodia, including property boundary disputes and contract disagreements, and the factors that contribute to these issues.
Property boundary disputes
Property boundary disputes are common in Cambodia, often arising from unclear land titles or conflicting land claims. These disputes can involve disagreements over the exact location of property lines, encroachments, or trespassing.
Real estate transactions in Cambodia may also be subject to contract disagreements, such as disputes over payment terms, conditions of sale, or breaches of contract. These issues may arise due to miscommunication, misunderstanding, or a lack of clarity in the contract terms.
Legal Remedies and Dispute Resolution Options
When faced with real estate disputes in Cambodia, having access to efficient and effective legal remedies and dispute resolution options is critical. By understanding these options, parties can make informed decisions on the best course of action to resolve their disputes and protect their interests.
Arbitration and mediation
Arbitration and mediation are alternative dispute resolution methods that can provide a faster and more cost-effective solution compared to litigation. In Cambodia, parties can voluntarily agree to resolve their disputes through the National Commercial Arbitration Center or engage in private mediation sessions.
Litigation in Cambodian courts
If alternative dispute resolution methods fail or are not suitable, parties may resort to litigation in Cambodian courts. This process typically involves filing a lawsuit, presenting evidence, and attending court hearings. It is essential to engage an experienced Cambodian lawyer to navigate the complexities of the local legal system.
Staying informed and up-to-date on Cambodian real estate laws is crucial for investors to ensure compliance and minimize the risk of disputes. Laws and regulations may change over time, and being knowledgeable about these updates will allow investors to make informed decisions and adjust their strategies accordingly.
Lastly, it is highly recommended to consult with legal professionals when navigating the real estate market in Cambodia. Experienced lawyers can provide invaluable assistance in conducting due diligence, drafting contracts, and resolving disputes, ultimately safeguarding your investment and ensuring a smooth real estate transaction.
Need help in understanding the real estate laws and regulations in Cambodia? Consult our property experts today!