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Difference between Freehold and Leasehold Property in Cambodia

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The stable political environment of Cambodia contributes significantly towards attracting huge international investors. The growing economy and favourable business policies also influence it. Over the years, many people have wanted to purchase property in Cambodia. 

If you plan to buy a property in Cambodia, you must choose between freehold and leasehold property. Cambodia has made significant progress as a rapidly developing country in the past few years. This is especially in terms of the business environment and infrastructure improvement. 

Cambodia has a young and dynamic workforce, a growing middle class, and a strategic location. Over the years, it has become a hub for business in Southeast Asia. Moreover, the government is also implementing various measures for growth. If you want to buy a property here, you will need the help of professionals. IPS Cambodia can support you every step of the way to invest in or start a business in Cambodia.

Freehold Property in Cambodia

Freehold properties refer to the type of property where the individual owns the entire property. The person owns the land as well. According to the rules, freehold property ownership in Cambodia is available for locals and foreigners. Therefore, if you’re considering investing in the real estate market of Cambodia, freehold properties can be a reliable option. 

Examples of Freehold Property

Houses, villas, and commercial buildings are common examples of freehold properties in Cambodia. The owner has complete rights over the property, from the land to development. 

Advantages of Owning Freehold Property

Owning a freehold property can bring in a lot of benefits. Some of the most prominent ones include

  • Full ownership: With freehold properties, you get complete ownership, even the land. As a result, if you ever wish to make any changes to the property, you would be fine with getting approval from any third party. 
  • Long-term investment: You can pass down these freehold properties to future generations. Therefore, the investment is pretty long-term, thereby bringing advantages. 
  • Potential capital appreciation: Over the years, the value of freehold properties in Cambodia can increase. Therefore, if you plan to sell the property, the return on investment will be higher. 
  • Rental income: If you have a freehold property in Cambodia, you can put it up for rent and generate rental income. 

Disadvantages of Owning Freehold Property

While there are benefits, there are some drawbacks as well. These include:

  • Higher cost: The cost of freehold properties are usually higher than the other ones. This is mostly because of control and ownership. 
  • Legal complexities: According to the details of Foreigner purchases and ownership of the real estate in Cambodia,  Foreigners who need to be made aware of Cambodia’s property laws and regulations are likely to face some legal complexities for freehold property ownership.

Leasehold Property in Cambodia

Leasehold property in Cambodia refers to the property where the individual only owns the property for a specific time. The option of owning a leasehold property in Cambodia is available for both foreigners and locals. Therefore, if you want to tap into this market, IPS Cambodia can guide you. 

Examples of Leasehold Property in Cambodia

Some prominent examples of leasehold property in Cambodia include commercial spaces, apartments, and condos. The landlord or developer owns these properties for some time and then provides them as a long-term lease to the tenant in Cambodia. 

Advantages of Owning Leasehold Property

Some of the major benefits of owning a leasehold property in Cambodia include:

  • Lower cost: Owning a leasehold property is far less than a freehold one. Therefore, you may want to get a leasehold property if you are on a budget. 
  • Less responsibility: When you own a property, your biggest responsibility is maintenance. The landlord or developer is responsible for maintenance in terms of leasehold property. 
  • Flexibility: The flexibility of owning leasehold properties in Cambodia is quite attractive. The tenant can either renew the contract for the property or move to a new property. 

Disadvantages of Owning Leasehold Property

The major drawbacks of owning a leasehold property in Cambodia are as follows:

  • Limited control: As a leasehold property owner, you have limited control over the property. You must agree to the terms and conditions set by the landlord or developer. Moreover, you will have to seek approval for improvement in case of any modifications. 
  • Limited investment potential: There is very limited investment potential for leasehold properties in Cambodia. Moreover, there is no chance for capital appreciation either.

Comparison of Freehold and Leasehold Property

Before getting a freehold or leasehold property, you must be aware of both. This will make deciding easier while buying or investing in the property. 

Some of the main points to consider for comparing the two types of properties include the following:

1. Ownership Rights and Duration of Ownership

As a freehold property owner, you get complete ownership of the land and its property. You own it completely, so there is no time limit on how long you can hold it. It belongs to you and will automatically be transferred to your heir in case of death. The freehold property that you currently own may have belonged to your ancestors. 

As a leasehold property owner, you just have the property in the lease for a specific time. Once the lease expires, you will no longer be the owner. Therefore, the ownership will revert to the actual owner after your lease expires. 

2. Legal and Financial Implications

When you own a freehold property, you must handle all legal and financial implications. Therefore, you will be entirely responsible for any repairs and maintenance. You will also have financial liability for the property via insurance. 

All the legal and financial implications for the leasehold property will belong to you till the expiry of your lease period. You must take care of rent, service charges, and all major fees. This is to be paid to the actual owner of the property. 

3. Maintenance and Renovation Responsibilities

Since the freehold property originally belonged to you, the maintenance and renovation responsibilities are yours. You need to take care of any upgrade or changes to be done on the property. 

As a leaseholder, you must only maintain the property’s interior. The landlord or property developer is responsible for maintaining the property’s exterior. However, if you make any major changes to the interior, you will need the landlord’s or freehold owner’s permission.

4. Transferability of Property Rights

You can transfer the property to the legal heir as a freehold property owner. You have complete ownership so that you can sell the property too. As the leaseholder, you can’t transfer the property papers without the owner’s permission.

Conclusion

Both freehold and leasehold properties have their own benefits to offer. However, before making a decision, it is extremely crucial to understand the benefits of each and then proceed with it accordingly. Choosing a property type that fits your current budget situation is advisable.

If you feel stuck, you can consult experts at IPS Cambodia with years of real estate experience. No matter what type of property help you need in Cambodia, IPS Cambodia is available to clear your doubts and help you find the best property. Contact them at your convenience and learn more about the Cambodian real estate market.

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