Understanding Rental Agreements in Cambodia

ចែករំលែកអត្ថបទនេះ  

Whether you are a property owner looking to rent your property to a new tenant or seeking a new rental property for living or working in Cambodia, you will need to understand the local regulations and common practices concerning rental agreements in the market. While rental contracts in Cambodia are fairly consistent with international norms, there are a few things to keep in mind while creating, reviewing or negotiating rental contracts in the market.

What is a Rental Agreement?

A rental agreement is a legally binding contract between two parties, a tenant (the person looking to accommodate or use the property) and a landlord (the property’s legal owner or legal representative).

Rental agreements are essential to protect both the interests of both the tenant and the landlord. For the landlord, a rental agreement provides a legitimate and binding way to collect rent and to evict a tenant if they breach any term or condition of the contract. Meanwhile, for the tenant, the rental agreement provides a right to use the property securely for the period specified in the contract terms and ensures that they cannot be evicted or restricted from the property by the landlord without a legitimate cause. 

Importantly too, the rental agreement defines the terms and conditions under which the tenant leases the property. The agreement includes the monthly or yearly rental amount due for renting the property, the duration of the lease (how long it will be rented to the tenant), the security deposit, and other rights and duties of both parties throughout the rental term.  

Common Types of Rental Agreements in Cambodia

There are various types of rental agreements that you may encounter in Cambodia, each with specific purposes, terms and conditions. Some of the most common types of rental agreements include the following:

Lease Agreement

A lease agreement is a long-term rental agreement that typically lasts for a year or more. Lease agreements are usually used for renting apartments, houses, and commercial properties. This fixed-term agreement provides both the landlord and tenant with stability.

License Agreement

A license agreement is a short-term rental agreement that typically lasts less than one year. License agreements are often used for renting vacation rentals and furnished apartments. Unlike a lease, this agreement is more flexible. 

Although this specific type of agreement may not be widely used presently in Cambodia, it is increasing in popularity somewhat especially in relation to vacation rentals in Cambodia.

Commercial Lease

A commercial lease is an agreement for a property used for business purposes. Commercial leases typically have different terms and conditions than residential leases. Specifically designed for businesses, these agreements cater to commercial properties’ and tenants’ unique needs.

Tenancy Agreement

A tenancy agreement is a different type of lease agreement that is used in Cambodia. Tenancy agreements can be for a fixed term or based on an indefinite period. The tenancy agreement is a general term for agreements that don’t fit the above categories and usually used for shorter-term residential rentals

Difference Between Rental and Lease Agreement

The significant difference between a rental agreement and a lease agreement is the terms of the agreement. A rental agreement can be for any period, while a lease agreement is typically for a more extended period, such as one year or more. 

The method of payment for leasing is also different from renting. In renting, the tenant pays a rental fee, whereas, in leasing there are more options of payment to choose from, such as monthly, quarterly, or annually. 

The rental and lease agreement also differs in terms of their provision of renewal of agreement. At the end of the leasing tenure, the lessor may give an option of either buying the property or renewing the agreement. On the other hand, there’s no such provision in the rental agreement. 

In the case of both a lease agreement and rental agreement, the lessee/tenant has to pay the property taxes and maintenance charges of the property. But there is more flexibility regarding renewal and moving to another location in rental agreements. 

Common Rental Agreement Terms

Term of lease

The lease term is the total period for which the property is taken on as a rental/lease. The lease term is usually six months onwards, with or without a renewal option. The rental tenure also plays a crucial role at the time of negotiation for the amount of rent. The landlord’s willingness to provide a discount on rent is directly proportional to the length of tenure. 

Looking for a long-term lease in Cambodia with the best possible discount on prices? Chat with the IPS Cambodia team today!

Rental payment terms

The rental payment is the fee paid by the tenant/lessee for using the property on a monthly basis. It usually includes maintenance, fittings and fixtures included in the property, and sometimes even the furniture set is added to the terms if the property is furnished. The tenant pays the utility bills for the water and electricity supply separately; however this may also be specified in the detailed terms.

If the property is an apartment, it is usually equipped with amenities like internet, TV, Air Conditioner etc. but some landlords will charge an additional amount for inclusion of these elements. 

Security Deposit

The security deposit, otherwise known as the bond, is a fixed amount the landlord takes when entering into the rental/lease agreement. The security deposit is a refundable amount, held without interest, until the end of the tenancy period, subject to the provision that all the terms and conditions of the deal were duly complied with by the tenant. 

The security deposit generally equals 1 to 2 months of the monthly rent. The landlord holds all the rights to deduct any costs or expenses from the deposit if the tenant breaches any of the terms in the rental agreement. For example, the tenant damages the property during the rental period, and repairs are required to restore it to the pre-rental condition.

The legal fees are the amount the solicitor charges for preparing the rental/tenancy agreement. The tenant has to bear any such legal fees and other incidental costs for the agreement. Usually, no such case arises in Cambodia however as the landlord or real estate agent prepares the rent agreement at no additional charge. 

Tax on Rental

The tax rate on the rental property is equalized at 10% of the gross rental amount; the rest depends on any other provisions mentioned in the lease agreement. This tax is payable to the General Department of Taxation (GDT), a subset of the Ministry of Economy and Finance (MEF). Though the tenant can pay these taxes, the Government actively collects this tax from the landlords/property owners. 

Find out more about Taxes on Rental Properties in Cambodia!

Documents needed for the Formation of a Rental Agreement in Cambodia

Whether renting the property for the first time or the tenth, you must provide a set of documents for the rental agreement

The landlord needs to have the land title of the property, a national identification card, proof of paid property tax, and details of the premises. 

The tenant must produce a national identification card or passport, previous address (for background check), and clear criminal records. However, in some cases not all of these will be required.

Mandatory Clauses to be included in Rental Agreement

Below are the mandatory clauses that must be included in any rental agreement in Cambodia:

Payment Arrangements

It includes the mode of payment in cash or bank transfer, due date of rent payments, and frequency of payments, albeit monthly, bimonthly, quarterly, or annually. 

Termination clause

The termination clause details the terms and conditions in which a breach of the contract will legitimize an early termination of the agreement. 

Tax payment

It describes the related property taxes, VAT, or any other tax that is to be paid by the tenant in relation to the rented property. 

Utility charges

These terms will detail the ongoing costs of any associated utilities available in the property, for example the cost of electricity, water, rubbish collection, parking spaces, gym or other amenity usage etc.

Whether you are a landlord aiming to gain paying rental tenants, or a tenant planning to rent a property in Cambodia – it is crucial to understand the rent agreement thoroughly before signing it. Contact IPS Cambodia (អាភីអេសខេមបូឌា) today to assist you in renting out or managing your property in Cambodia.

Looking for rental properties in Cambodia? Start your search (ចុចទីនេះ).

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