Property Ownership Update : Khan Daun Penh

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This week has been an interesting one for real estate in Phnom Penh, especially if you are a foreigner who owns or was planning to own a soft title property in your own name in the central area of Khan Daun Penh. Khan Daun Penh encompasses the area from the Riverside district West through to Norodom Boulevard.

Khan Doun Penh Map

Khan Daun Penh officials announced that as of June 13th, 2016, the Sangkats will no longer transfer soft titled property into a foreigner’s name – essentially they are now enforcing a law that has always been in existence but previously allowed individual Sangkat’s to enforce it at their discretion. This follows on from a similar change made in Khan 7 Makara late last year which saw a flurry of activity as foreigners who held property in their own name sought advice and solutions to ensure that their property was secure.

The Khan’s enforcement follows a notification letter on 25th May issued by the Director of the Phnom Penh Department of Land Management, Urban Planning and Construction instructing the Chiefs of all twelve Khans in Phnom Penh City to not process any titles in a foreign buyers name unless the specific conditions for a co-owned building are met. This, of course, is referring to strata title condominiums and does not apply to soft title properties built before 2010.Soft Title Nominee

We have always strongly recommended our foreign clients follow the law governing property ownership and to use Nominee or Land Holding Company services when purchasing a Soft or Hard title. Despite the restrictive law on foreign property ownership there are a number of tried and tested mechanisms, the most effective for a soft titled property being the nominee structure.

At IPS Cambodia 95% of all our soft titled property purchased by foreign clients are conducted through this system.

Under the Nominee structure, the foreign buyer engages a Khmer national (usually a friend or colleague or professional third party) to hold their property in the nominee’s name, thus ensuring the title transfer is fully legal and Cambodian law is followed. This relationship is then secured through the use of nominee security contracts (contracts between the foreign buyer and nominee) which places a number of restrictions on the nominee including the ability to sell, transfer or move the property to any other third party without the permission of the Foreign Buyer.

The nominee structure is economical, effective and fast. If you would like more information on the process please come into IPS Cambodia and we will explain the process in detail.

6 thoughts on “Property Ownership Update : Khan Daun Penh

  1. Andrew Howells says:

    Dear Sirs

    I own an apartment via a soft title in the Riverside area (on the first floor). Can you explain the current implications of this. The property was built many years before 2010 and is currently rented out

    • Grant says:

      Hi Andrew,

      Thank you for the comment. As it stands the notification letter from the ministry doesn’t spell out the legal consequences to the foreign owners who currently hold a soft title in their own name. Based on what has happened in other Khans previously, there have been no retroactive penalties or nullification sales for those properties transferred into a foreigner’s name. Whilst we can’t rule this out happening in the future, at this stage their is no need to panic. I would definitely recommend considering the use of a nominee in the near future as it’s the safest and most cost effective method currently available. Happy to answer any other questions you have.

    • Ryan says:

      Hi Chen,

      Thank you for your question. For a company to purchase property (excluding Strata titled Condo’s) it must have a majority Khmer shareholding i.e. greater than 51%. If the Khmer shareholding is less than 51% or there is no Khmer shareholding then the company cannot legally purchase immovable property.

      If you would like to discuss further please contact Grant Fitzgerald IPS Country Manager on 077 959 861.

      Kind regards,
      IPS

  2. alain Ford says:

    Hello, regarding to the last anwer about 51 % 49 %, there is some way to make 50/50 by getting a lawer who can figure out on 2 % ownershio then in this way all have to agreed to proceed any transactions about the property.
    I guess this law is to promote Condo but i m afraid western people are not really attrack to live in a building 15/30 stories sharing a lift etc… all the time…

    Kind regards

    P

  3. Ryan says:

    Thanks for your question, there are many ways to secure a property here in Cambodia as a foreigner, a Land Holding Company (LHC) being one of them (and the most expensive option), a LHC can have a number of stakeholders however the sum of all stakeholders must be no greater than 51% Khmer, 49% Foreigner. If you insist on using a LHC then i would recommend discussing with your Lawyer, many LHC’s have more than 1 Khmer partner, if you think that is a good way to minimise any perceived risk (there is extremely little actual risk) then this should work for you.

    Kind regards,
    IPS

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