LEGAL SERVICES

1. Land and Property Ownership (General)

Potential foreign investors are often hesitant about investing in real estate in Cambodia because of the governing principal of land and property ownership: only Cambodian citizens have a 100% right of ownership and control over land and property within the Kingdom. However, legal mechanisms and documentation exist that allow foreigners to fully control the purchase, sale and use of land and property in which they have invested.

Investors are initially hesitant, yet every year hundreds of foreign nationals take up residence in Cambodia or come here and start successful businesses. The following pages will aim to provide information on how it is possible to do this, and hopefully provide a degree of reassurance that investing in real estate in Cambodia can be both safe and potentially lucrative.

2. Options for Buying Land or Property within Cambodia

Please note that the following information relates largely to the purchase of land or property, or the long-term leasing of land or property. Short-term rental agreements are dealt with separately in our web-site.

Introduction

The governing principal of Cambodian Land Law is that foreign nationals cannot hold a 100% stake in land or property within the Kingdom. However, legal mechanisms and documentation exist that allow foreigners to fully control the purchase, sale and use of land and property in which they have invested.

Foreign nationals wishing to purchase land or property within the Kingdom of Cambodia have several options open to them. The following Options detail the extent of the foreigner’s ownership of land and give advice on the legal agreements and consultation processes necessary for purchasing property safely and securely.

Independent Legal Advice

See the ‘Company Services’ section of this web-site for information on this subject. We recommend that all our customers consider taking independent legal advice before entering into any transaction.

Option 1: Sale-Purchase by forming a Company with a Cambodian Citizen

The safest way for foreign nationals to purchase land or property within Cambodia is to form a limited company in partnership with a Cambodian citizen. Any land or property purchased for investment is then registered in the name of the company. The foreigner and his Cambodian business partner record their names, as well as the joint ownership of the company, with the Ministry of Commerce.

In this instance, 49% of the land or property is vested with the foreigner and 51% with the Cambodian business partner. However, prior to any investment in land or property the Cambodian citizen must sign a written agreement giving full power of attorney to the foreigner in respect of the land holding and the business dealings of the company. Additional mortgage and security documents should be created to accompany any land-purchase or company ownership documentation. Following this procedure ensures 100% security for the foreigner’s investment.

Additional Note 1: Purchase of the Land or Property

Under this Option the foreigner is expected to pay 100% of the purchase cost of the land or property plus any construction costs.

Additional Note 2: Sale of the Land or Property plus Accrued Profit

If at some future date the land or property is sold 100% of the sale price goes directly to the foreigner. This includes any profit accrued as a result of the land or property increasing in value. This issue should be detailed carefully in any legal documentation.

Option 2: Private Sale-Purchase plus long-term Rental of Land or Property

This Option allows foreign nationals to purchase land or property and register the Land Title in the name of a Cambodian citizen. The foreigner and the Cambodian then enter into a long-term rental agreement by which the Cambodian citizen leases the land or property back to the foreigner. Leases last a period of 70 years to 99 years.

The principal of renting back personal land or property that has already been purchased will be completely alien to most foreigners. However, correct drafting of the terms of the land holding and lease arrangements make this a reasonably secure method of controlling land and property in Cambodia. A high degree of trust in the Cambodian national is recommended.

Under this Option, the foreigner may sell the land or property at any time and keep 100% of the revenue from the sale. The Cambodian citizen is not permitted to disagree with or obstruct the sale.

Once the Land Title is transferred to the Cambodian citizen, the foreigner retains possession of the original copy of the new Land Title. This is a security precaution that protects the foreigner’s interests by preventing the Cambodian citizen selling the land. Sale of the land is not possible without the original copy of the Land Title.

Copies of the Land Title and the Rental Agreement must be registered with the office of the Department of Provincial Land Management, Urban Planning and Construction, as well as the appropriate District and central government departments that handle land registry. Most importantly, a copy of the Land Title and Rental Agreement must be lodged with the Cadastral Land Registry Office.

The following organisations and individuals certify long-term leases in order to provide additional protection for the foreigner’s investment:

- RMS Group Co. Ltd.
- Company Lawyer for RMS Group Co. Ltd.
- Lawyer for the buyer (if available).
- Department of Provincial Land Management,
- Urban Planning and Construction
- Ministry of Land Management, Urban Planning and Construction
- Village Chief
- Commune Chief
- District Governor
- Property Owner

The foreigner can bequeath purchase plus rental land or property to any named individuals or organisations in the event of his/her death. RMS Group Co., Ltd. strongly recommends that any foreign investor considers this eventuality carefully and drafts the terms of their purchase plus rental agreement accordingly. If any form of bequest is desired it should be added to the Agreement prior to consultation. Similarly, a lease can also be specified to run its full term in the event of the foreigner’s death. Please make any such specifications known to your legal representative so that they can be written into the rental Agreement at the outset.

Additional Note: Option 2

Though the foreigner can sell the land or property at any time, the Cambodian citizen’s signature or thumbprint is generally required before any sale can take place. A good working relationship between both parties is very important, as is careful consideration of any problematic situations that may arise. For example, if the Khmer registered owner does not agree with a sale of the land or property, he may choose to become difficult to contact.

Option 3: Registering Land and Property with a Cambodian Citizen

This Option in very similar to Option 2 but requires 100% trust in the Cambodian citizen.

Foreign nationals have rights, under the Kingdom’s Statutes, to choose a Cambodian in whose name their Land Title is registered. That is, a foreign national can purchase land and property and register the purchased land and property directly in the name of the Cambodian citizen (see Additional Note 1 below).

Once the Land Title is transferred to the Cambodian citizen, the foreigner retains possession of the original copy of the new Land Title. This is a security precaution that protects the foreigner’s interests by preventing the Cambodian citizen selling the land. Sale of the land is not possible without the original copy of the Land Title.

Transferring the Cambodian’s rights to the foreigner via a Mortgage or Lease Agreement provides additional security for the foreigner’s investment.

Copies of the Land Title and any Mortgage or Lease Agreements that transfer the Cambodian’s rights to the foreigner must be registered with the office of the Department of Provincial Land Management, Urban Planning and Construction, as well as the appropriate District and central government departments that handle land registry. Most importantly, a copy of the Land Title and any Mortgage or Lease Agreements must be lodged with the Cadastral Land Registry Office.

Arrangements made under Option 3 require are certified by the following organisations and individuals:

- RMS Group Co., Ltd.
- Company Lawyer for RMS Group Co., Ltd.
- Lawyer for the buyer (if available).
- Department of Provincial Land Management,
- Urban Planning and Construction
- Ministry of Land Management, Urban Planning and Construction
- Village Chief
- Commune Chief
- District Governor
- Property Owner

Additional Note (Option 3)

The Cambodian citizen in whose name the Land Title is registered (Option 3) does not need to be resident in Cambodia. For example, the title can be registered with a Cambodian citizen living in the USA or Canada. The Cambodian citizen does, however, have to be able to prove Cambodian nationality.

Option 4: Marriage to a Cambodian National

Foreign buyers who are married to a Cambodian national can register purchased land or property using the name of their wife/husband on the Land Title. It is also possible for a foreign national married to a Cambodian citizen and resident in the country for a long period to apply for Cambodian citizenship. In the event of citizenship being granted, Cambodian Law holds that land can be registered in the names of both parties. Neither partner can subsequently sell the land or property without mutual agreement.

In the event of divorce or separation, division of the land or property is dependent on the conditions under which divorce or separation takes place, and/or the decision of any court ruling or arbitration relating to the divorce.

Option 5: Acquisition of Honourary Cambodian Citizenship

A foreigner may be granted honourary Cambodian citizenship if he or she donates a sum of money in excess of $39,000 to the Royal Government of Cambodia for the purposes of benefiting the people of Cambodia. In recognition of such altruism, the Royal Government of the Kingdom automatically grants honourary citizenship.

One consequence of this is that it becomes possible for a foreign national to acquire a 100% right of ownership and use over land or property purchased within the Kingdom. This arrangement is recognised by the Ministry of Land Management, Urban Planning and Construction for the Kingdom of Cambodia, and by the Royal Government.

Please Note: Honourary citizenship is recognised by the Royal Government of Cambodia as a legitimate means of purchasing land or property within the Kingdom but it does not affect the foreigner’s original nationality or citizenship in any way.

Footnote

The above Options, or their equivalents, have operated successfully in Thailand for some time and have now been adopted by the Kingdom of Cambodia. Increasing numbers of foreign citizens are investing in property within the Kingdom. These investors are finding that purchasing property in Cambodia is safe and often lucrative. This said, RMS Group Co., Ltd. recommends that all its clients seek expert legal advice before purchasing land or property.

3. Staging of Payments for Land / Property Purchase

It is important to state that the staging of payments for land or property purchases in Cambodia is flexible and that the precise percentages of the total purchase price transferred at each stage are negotiable. Two examples of possible staging arrangements are shown below.

General Payment Information

Once an investor has chosen the land or property he / she wishes to purchase and has agreed the sale price with the owner, payment is made in a series of stages. Each stage either places responsibilities on the buyer and seller, or transfers specific ownership rights from the seller to the buyer. The new Land Title is only transferred to the buyer once the full purchase price of the land and property has been paid.

The timescale for payments is generally agreed in advance and written into a Land-Sale Purchase Agreement. An example of how payment stages can be described in the Land-Sale Purchase Agreement is shown below.

Please Note:

In both examples the deposit payment is non-returnable. Payment of the deposit commits the buyer to completing the purchase transaction. Failure to complete the transaction, or to make payments within the agreed time-frame, will result in loss of the deposit.

Example 1: Payment in 3 Stages

Stage 1: the buyer pays a deposit of 5% - 10% to the owner of the land. The deposit payment is non-refundable and commits the buyer to completing the transaction. Once the deposit is paid the owner cannot change the agreed sale price or sell to a different buyer.

Stage 2: the buyer makes a second-stage payment of 40% of the purchase price. This made within an agreed time period, usually 1-2 months. At this stage in the purchasing procedure a new Land Title is created for the buyer and in the name of the buyer. The new Land Title is held by the owner until the final payment is made.

Stage 3: the buyer pays the final 50% of the purchase price to the owner. At this stage the Land Title is transferred to the buyer, who thus becomes the new owner of the land.

Example 2: Payment in 4 Stages

Stage 1: the buyer pays a deposit of 5% - 10% to the owner of the land. The deposit payment is non-refundable and commits the buyer to completing the transaction. Once the deposit is paid the owner cannot change the agreed sale price or sell to a different buyer.

Stage 2: the buyer makes a second-stage payment of 40% of the purchase price. This made within an agreed time period, usually 1-2 months. At this stage in the purchasing procedure a new Land Title is created for the buyer and in the name of the buyer. The new Land Title is held by the owner until the final payment is made.

Stage 3: the buyer’s lawyer or attorney checks the details in the new Land Title to ensure that the Land Title is correct. The buyer then pays a further 20% of the total purchase price to the owner.

Stage 4: the buyer pays the final 30% of the purchase price to the owner. At this stage the Land Title is transferred to the buyer, who thus becomes the new owner of the land.

Sample Copy: Payment Article in Land-Sale Purchase Agreement

Party B is the Buyer - Party A is the land / property owner Party B has agreed to pay the land price shown in Item 2, to Party A, in 3 Stages as follows:

Stage 1......................................US$ (........................................................)

Stage 1 is paid as a Deposit within........................................days of the signing of this Agreement. In signing this Agreement Party B agrees to complete the payment to Party A set out in Stage 2. If Party B fails to proceed with the transaction, or fails to make the payment set out in Stage 2, during the period agreed in Stage 2, Party B will automatically forfeit the Deposit paid to Party A and detailed in Stage 1.

Stage 2........................................US$ (.....................................................)

The payment of Stage 2 shall be made by...................................................... Stage 2 (completion of the Land Transfer Form) takes place at the District Government Headquarters.

Stage 3.......................................US$ (.......................................................)

Stage 3 (Final Payment) is made at the time the new Land Title is completed.

4. Forming a Company in Cambodia Introduction

Introduction

The following information gives general advice on how to form a company in Cambodia. In terms of buying and selling real estate, forming a company in partnership with a Cambodian citizen is regarded as the safest method of investing in land and property within the Kingdom. It is therefore important to have a general understanding of how foreigners can register a company in Cambodia.

The governing principal of Cambodian property law is that a foreigner cannot hold a 100% share in land or property within Cambodia. This principal also applies to the share held by a foreigner in a limited company registered in Cambodia, including limited companies formed to manage real estate. A 49% stake in a limited company can be vested with a foreigner provided that a 51% stake is vested with a Cambodian national.

Applications and Company Documents

There are two methods of applying to form a company. One is to use a prescribed application form drafted by the Ministry of Commerce. This is accompanied by a Company Document that clearly states the business purposes and structure of the company. The following issues should be among those addressed in the Company Document:

- Name of the Company
- Type of Company (e.g. limited company)
- Business purposes and objectives of the Company
- Registered address of the Company
- Duration of the Company’s business activities in Cambodia
- Terms of conduct of the business
- Binding terms and conditions affecting the conduct of
business and the rights of shareholders.

Some potential investors consider the format of the Company Document, prescribed by the Ministry of Commerce, to be inadequate and opt to privately produce their own Company Document using an independent lawyer. The advantage of this second method is that additional safeguards and conditions can be added to the Ministry’s prescribed format.

Application Fees and Company Shares

The fee for making an application to form a limited company is currently set at R 4,000,000 or US $1000. This fee is paid by the foreigner and is taken as the registered capital of the company. It also represents the total share value of the company. An example of the possible division and valuation of the shares is shown below.

Total Registered Capital of the Company: R 4,000,000 or US $1,000
Total value of all company shares: R 4,000,000 or US $1,000
Total number of company shares: Usually 1000
Individual value of shares: R 4,000 or US $1
Foreigner’s share allocation: 490 shares (Type X)
Cambodian’s share allocation: 510 shares (Type Y)

There are numerous options open to the foreign investor in terms of the company shares. For example, it is possible to divide the shares into two types (see above) and attach different rights to the different types of shares. In an arrangement like this the Cambodian’s rights might preclude him/her from voting when a new company chairman is elected, or prevent him/her from profiting from any future sale of real estate controlled by the company.

Licenses to Operate

Commercial licenses are used to license commercial companies. Generally, commercial licenses are sufficient to cover the business activities of companies dealing in real estate. Commercial licenses are granted by the Ministry of Commerce upon submission of the Company Document, presentation of the Application and the creation of shares and their distribution to the shareholders of the Company.

Large investments (in excess of $1,000,000) are licensed through the Cambodian Development Council. The CDC licenses and handles the concerns of multinational companies seeking to invest in capital works projects such as hospitals, road improvement schemes and city drainage systems.

Licenses in Cambodia are granted for the following business purposes:
- the sale, exchange or purchase, and the import or export,
- of products and materials
- commercial storage and warehousing of products and materials
- the purchase, sale or rent of land or property
- provision of medical services
- commercial distribution businesses operating by land, sea or air
- construction and capital works services including
- infrastructure improvements
- tourism and hospitality
- investment in agriculture and animal husbandry
- investment in industry
- investment in the production of handicrafts

The Cost of Setting up a Limited Company (Government facilitation fees)

Application: R 4,000,000 or US $1,000 (represents registered capital and total share value)

Licenses:

1. US $400 (1-2 months) or US $700 (1-2 weeks)

The cost of a non-company, merchant’s license used to register a small, commercial business.

2. US $1000 (for a fast-track license taking approximately 1-2 weeks)

The cost of a license used to register a large commercial company or business enterprise.

Please note:

The above costs do not include any legal fees incurred when independent legal advice is sought, or when a private Company Document is produced. The above costs also exclude any administrative fees resulting from the creation and distribution of share certificates.

5. Types of Land Title Registration (Receipts and Certificates)

Land Title in Cambodia is registered via two types of document: receipts and certificates.

Where foreign investors are concerned, the administrative costs of completing either type of registration are met by the landowner.

Receipts are generally used to register Land Title for land or property that is outside the main urban conurbations or in remote areas. It is also used for registering land that is low in value ($0.5 - $5 / square meter, for example).

Receipts are issued either by local authorities or by the Commune Chief. Khmer owners often use receipt Land Titles because they are exempt from certain tax and service fees. The fact that receipts are a largely local method of land registration means they can be open to dispute. RMS Group Co., Ltd., therefore, strongly recommends to all foreign buyers that their Land Title is registered by certificate as these are 100% secure.

Certificates are the recommended means of registering Land Title for all foreign buyers, regardless of the price or location of registered land or property. Certificates are issued by the Cadastral Registry Unit under the authority of the Ministry of Land Management, Urban Planning and Construction and are the most secure way to register land title. There is a long list of consultees for this type of registration in order to provide the highest level of security for the investor’s interests.

Typically, certificates are used locally to register land title inside the major cities in Cambodia, to register high-value development land ($300+ / square meter, for example), and to register large commercial or residential properties.

6. Associated Administrative Costs

When purchasing land or property in Cambodia, a foreigner’s only outlay is the agreed purchase cost of the land or property and any associated construction costs. All other administrative charges, taxes and commissions are met by the landowner. RMS Group Co., Ltd. charges are restricted to the commission fee of 3% of the final sale price and this fee is paid by the landowner on the completion of any sale.

7. How to Rent Property in Cambodia

General Information

Renting property in Cambodia is very straightforward and most kinds of property are available from low-budget, single room apartments to large luxury villas and town houses. RMS Group Co., Ltd. keeps extensive lists of rental properties throughout the Kingdom, as a glance at our web-site will prove. The company also operates a service which puts potential renters in touch with property owners and attempts to negotiate a monthly rental price and house contents inventory that is agreeable to both parties. Leases of varying length are available, though usually property owners prefer to rent out property for a minimum period of 6 months.

Finding a Property to Rent

There are numerous publications and web-sites available which list available rental property in Cambodia, so finding a suitable property is generally easy. A good real estate company or rental agent should be able to introduce to the owner of a property in which you are interested and negotiate an agreeable deal on the rental price of the house and its contents. For a general view of the types of rental property available please feel free to browse the RMS Group Co., Ltd. web-site.

Furnished or Unfurnished?

The generally accepted meanings of furnished and unfurnished property to not apply in Cambodia, where an unfurnished property would certainly not be devoid of furniture. In many cases the contents of a house are negotiable. It is invariably possible to rent a house or apartment already furnished to the highest standards with top-quality, locally produced fixtures and fittings.

Terms, Conditions and Example Rental Arrangements

It is probably fair to say that, as Cambodia is an Asian country and steeped in Asian customs, when it comes to arguing money and costs everything is ‘up for grabs’. This is certainly true of the monthly or yearly rental prices for property which are often negotiable even when the are not advertised as such. Similarly, rental payment agreements are very flexible in Cambodia, giving the renter a great deal of choice in the way they budget. There are various ways of arranging rental payments and deposits and two typical arrangements are as follows:

Example 1 (Monthly Payment)

Where a renter agrees with a property owner to pay rent by regular monthly installments, a deposit equal to two month’s rent is paid in advance. In many agreements this deposit is used to pay for the final two months of the rental period.

Example 2 (Negotiation of Terms of Payment)

A renter may negotiate any issue or arrangement relating to rental payments. The Cambodian rental market is very flexible in terms of rental payments and generally a renter can elect to pay rent by any means and by any number of different installments, provided they can be agreed with the property owner. Example 1 (above) is the most common method of payment but a second example might be to pay 1 full year’s rent in advance, thus avoiding the need for a deposit. RMS Group Co., Ltd. aims to assist renters and owners in arriving at a payment arrangement that is agreeable to both parties.

RMS Group Co., Ltd. Commission (rental)

In respect of both of the above examples, the RMS Group Co., Ltd. takes a commission equal to one month’s rent for one year’s lease.

The property owner always pays our commission.

Other Things to Consider

There are several things to consider if you are seeking to rent property within the Kingdom. Some of the issues and practices involved in renting property in Cambodia will be familiar to anyone who has rented overseas, and others may be less familiar. Please find below a list of some of the issues you may wish to consider if you are looking for rental property in Cambodia:

Security: Crime against foreigners is extremely rare in Cambodia. However, some visitors who come to live and work in the Kingdom choose to employ local police or private security firms to protect their goods and property. If security is a personal concern to you, you should arrange guards locally. Some higher-priced properties include 24-hour protection. 24-hour security provision by army or police officers (armed) costs $70 / month. Private (armed) security costs $150 / month and is also round-the-clock.

8. Links

http://www.mlmupc.gov.kh

http://www.aaguidebook.com