Property law

UAE enacted its current land law in 2001, establishing a national immovable property registration system. Under this system, registration of title on the national register is conclusive evidence of ownership, and all transfers of land must be registered in order for ownership to pass.

1. Property tenure/ownership

Cambodia adopted a freehold system of land tenure under the 2001 Land Law.  Private ownership of land is permissible for all types of land.  At present, three main types of land tenure exist:

•  Freehold: fee simple, unrestricted;

• Leasehold: long term leasehold (15 years or greater) creates “in rem” rights.  The new Civil Code provides for a maximum lease period, for all leases entered into after 21 December 2011, of 50 years, with a right of renewal for a further 50 year period; and

• Concessions: conditional leases granted by the Government over state private land.  Concessions are used for specific development purposes with the land subject to specific conditions of use.  Concessions are used primarily for agricultural projects, island development and mineral exploitation.  The Royal Government of Cambodia temporarily suspended the grant of new land concessions on 7 May 2012.

2. Property acquisition by foreigners

Ownership of land is restricted to Cambodian citizens.  Cambodian citizens include individuals and companies in which 51% or more of the shares are held by Cambodian citizens.

Despite the restriction, foreigners can acquire land in Cambodia through the following ways:

• Khmer nominee: some clients elect to register the title deed directly in the name of a Cambodian nominee.  This option can be problematic though in the event of the death or disappearance of the Khmer nominee, or where there is a breakdown in the relationship between the parties.

•  Cambodian Landholding Company: with 51% shares held by Cambodian nominees (so as to satisfy the Khmer nationality requirements) and the foreigner investor owning 49%.

• Strata Title: foreigners may acquire title to qualifying condominiums subject to certain conditions.

• Short or long-term lease: there are no restrictions on foreigners taking leases (whether short or long-term) of private or state private land.

• Land concession: foreigners have been permitted to take concessions of state private land (subject to the approval, on a case by case basis, of the Royal Government of Cambodia).

• Citizenship: it is possible for foreigners to acquire Cambodian citizenship (and with it the right to purchase land), but note that it is a costly and time-consuming process.

3. Hard title

Hard title refers to three types of property title certificates: Certificate of Land Use and Occupation Rights, Certificate of Immovable Property Possession, and Certificate of Immovable Property Ownership. Of the three, the first two are registered sporadically and indicate possessory status whereas the last one, which is registered systematically in relation to the adjoining parcels, is the strongest and definite one and indicates full ownership status. The first two types of hard title remain theoretically contestable, but in fact they are also registered with the national-level cadastral registry, and there has been hardly any case of dispute pertaining to their status.

4. Soft title

Because private ownership was not possible before the enactment of the Land Law, the national land registration process was started only after 2001. In effect, many properties remain unregistered. These parts of land are normally held under a variety of documentary forms, normally recognized by the local level authorities, ranging from an application for land occupation to a letter of transfer acknowledged by local authorities to even a simple and private sale-purchase agreement. All of these are known as “soft title” documents, which are soft legally and physically (i.e. in terms of both the legality and the sheet of paper).

In fact, the phrase “soft title” is neither stated in the Land Law nor any other regulation. However, in practice, this term is being used widely among ordinary Cambodians to refer to any form of land tenure that can serve as evidence of possession or occupation, without any proper registration at the national level with the Cadastral Administration. Thus, soft title is mainly subject to contest by third parties although such an evidential document can act as a step towards legal possession and ownership if it is undisputed and the property is lawfully acquired. Notwithstanding the aforesaid, ordinary Cambodians sometimes accept such a soft title in daily sales and purchases of immovable properties. Also, some financial institutions are known to have accepted soft title documents as collateral for small-scale loans.

When a property is held under a soft title, there is a risk that there might be competing claims to title since it is not confirmed and recorded at the national level registry. A common problem is overlapping boundaries. There was no technically reliable way of demarcating boundaries in the old days, and the overlaps can be substantial. In addition, other problems associated with a soft title may arise, which will potentially lead to disputes, including duplicates of soft title documents issued to different applicants, issuance of a soft title document against the existence of a hard title certificate, issuance of a duplicate soft title while the property has been encumbered, or issuance of a soft title over State’s property.

– Can a ‘soft title’ be registered?

There are two ways that’s a soft title may be registered at the national level and thereby converted into a ‘hard title’ in Cambodia.

• Systematic Registration: being a government-initiated process conducted on a rolling village-by village basis (i.e. soft titles or sporadic titles are registered systematically in relation to adjoining land parcels); and

• Sporadic Registration: being a type of registration conducted on a specific plot of land, on a case by case basis. This form of registration takes account of the slow roll out of the systematic registration process, and allows the holders of ‘soft titles’ to obtain greater certainty regarding the legal status of their land.

Note that sporadically registered title may be converted to full ownership once the systematic registration is conducted.

5. Foreign ownership of co-owned buildings

The Law on Providing Foreigners with Ownership Rights in Co-Owned Buildings (promulgated 24 May 2010) permits foreigners to own certain qualifying condominiums provided that:

1. the subject building has a “strata” title;
2. the subject condominium is located above the ground floor;
3. foreign ownership of the building does not exceed 70%; and
4. there is a property management agreement in place amongst the co-owners.

It is predominately newly constructed apartment buildings that have “strata” titles.  It is technically possible to convert the title of an older, existing building to a strata title, but to our knowledge, has not yet been done.

6. Sale and purchase process

The following is intended as a very general summary of the sale and purchase process (and assumes that the client is legally capable of owning the subject property).  As you can appreciate, each transaction is different.

Step	Description	Remarks
1	Identification of property/negotiation of terms with the Owner	Clients generally seek our assistance in identifying their preference properties and doing initial negotiation with the owners.
2	Initial Due Diligence	We often undertake due diligence on the title documents (including investigations with local authorities and the Cadastral office) without a binding sale and purchase agreement (“SPA”) in place.  The purpose of due diligence is to flush out any potential issues or third party claims to the land.  Due diligence in advance of a binding contract generally occurs when a client is confident that the property will not be sold to a third party in the meantime.  Alternatively, the parties can enter into a binding sale contract from the outset, and make provision for due diligence, and the withdrawal of the purchaser if the due diligence findings are not satisfactory.
3	Sale and Purchase Agreement	We can assist with the drafting, negotiation and execution of the SPA.  In most cases, we incorporate the agreed commercial terms into our base SPA, and thereafter tailor the SPA so that it reflects any other unique client requirements.  The form of the SPA is thereafter negotiated with the Seller.  Some Sellers accept the SPA as originally drafted and others dispute every clause.  This is where increased costs and time delays can occur.  Each situation differs, but generally speaking Khmer Sellers will require the payment of a 10% deposit upon the signing of the SPA, which they will thereafter use to pay the 4% transfer tax (which is based on the Government-assessed value of the land).
4	Submission of transfer/conversion documents to the Cadastral	Once the SPA has been executed, any conditions precedent are completed, and due diligence has been undertaken to the satisfaction of the purchaser, the next step is for the title transfer documents (and in the case of soft titles, title conversion documents) to be completed and submitted to the Cadastral office for processing.  The Seller usually controls this process, and attends to the payment of the 4% transfer tax.  The Cadastral generally takes 4 to 6 weeks to process the transfer and to issue the new/updated titles deed(s).
5	Confirmatory due diligence	We undertake final due diligence on the new/updated title deeds (i.e. to confirm that the transfer is valid and that our client is now the registered owner).  It is at this point that the final payment of the purchase monies is made to the Seller.

7. Property Transfer Process

Both parties to a transaction must thump-print (in person before cadastral officials) on any dealing instrument to be registered with the cadastral. The transfer registration can take three (3) to six (6) weeks for the transfer process to be completed, depending on the location of the property.

In the case of companies, the local authorities will require resolution and power of attorney from all shareholders granting power to a person authorize to thumb-print on behalf of the company – this authorized person is usually required to be a Cambodian citizen per customary practice. In the case that of a married person, the spouse also needs to thumb-print on spousal declaration if the property is to be transfer to only a husband or wife, but not a couple, and for an unmarried person, a ‘declaration of single status’ needs to be issued by the local authority and accompany the transfer documents.

The Cadastral officer begins processing the transfer by taking the Vente Definitive and other required documents to the Sangkat (i.e., commune level office).   Certification may be necessary at the Sangkat level where a new owner is unmarried or where a spouse expressly declares no interest in the subject land.

1. The Sangkat officer certifies on the Vente Definitive.
2. The Cadastal officer will pick up the Vente Definitive from the Sangkat office.
3.  The Cadastral officer internally verifies the Vente Definitive and other submitted documents (between 1-2 weeks).
4.  The Cadastral officer contacts the person who engaged the officer and notifies that person that the transfer application documents are ready to be picked up and taken to the General Department of Taxation (“GDT”).
5. The application documents received from the Cadastral Authority are submitted to the GDT and a GDT officer is assigned to the matter.  The GDT officer inspects the land/ property to be transferred and determines the transfer tax amount based on the assessed value of the land (according to the GDT officer).
6.   Within 1-2 weeks, the GDT officer assigned to the matter may be contacted for the amount of transfer tax owed.
7.  The amount of transfer tax owed is paid to the National Bank by the designated party and a receipt is issued to the paying party (the buyer is obligated under law to pay transfer tax but the usual practice is that the seller pays the tax).
8.  All approved documents including evidence of transfer tax payment and Vente Definitive are brought to the Cadastral Authority office at the Ministry of Land Management, Urban Planning and Construction and new title ownership is recorded in the records of the Cadastral Authority and registered at the national level – at the General Department of Cadastre and Geography of the Ministry of Land Management, Urban Planning and Construction (between 1-2 weeks).
9.  The original title in the name of the new owner is issued by the Cadastral Authority and the relevant Cadastral Authority officer will notify the person who first engaged the officer that the transfer is complete and the original title is available to be picked up.

Transfer of soft titles (which are only registered with local authorities) can be effected very quickly, often within several days. Both parties will be required to thumb-print the soft title transfer documentation before the relevant local authorities.

8. Stamp Duty Tax

For transfer application, a 4% (four percent) transfer tax of the Government-assessed value of the land has to be paid as well as any unused land tax (charged on all unused portions of land over a standard size residential block) and any unpaid annual property tax before the authorities will issue the updated title deed. At law, the transfer tax is for the account of the buyer, but in practice it is commonly paid by the seller (who often uses the deposit monies received from the buyer for this purposes).