How safe is it to buy a property in Cambodia as foreigner?
You’re neither a Khmer nor a citizen in Cambodia, but you wanted to invest in real estate here. Is it possible and safe? What are the restrictions and legal ways you can buy property as a foreigner in Cambodia? In this article, you’ll learn about foreign property ownership regulations, property options available, where you should buy property, and more.
Can foreigners buy property in Cambodia?
The rule is simple, foreigners can own a property as long as it’s not on the ground floor or underground floor. This was stated under the 2010 Law on Foreign Ownership whereas “legally qualified foreigners have ownership rights in private units of co-owned buildings and rights to use and enjoy the benefits of the common areas.”
To be considered legally qualified foreigner, especially those who are either currently residing or have found a reason to stay longer in Cambodia, one must obtain a Cambodian Visa. By having any of the Cambodian Visas, you’re legally permitted to apply for any job opportunities, as well as buy your own property.
However, as mentioned, foreign property ownership rights are limited to co-owned buildings, which are normally owned through a strata title; a type of property title that only applies to building built 2010 onwards.
According to the Sub-Decree on Co-owned Buildings, categories that fall under “co-owned buildings” are the following, but not limited to, detached buildings, semi-detached buildings, attached houses (that have several attached units and floors), and condominiums. This means that foreigners can fully own private units in such buildings, from the first floor and above, to no more than 70% of the total units in a single building.
Does that mean foreigner cannot own a land in Cambodia?
Although foreigners are prohibited from owning a land in Cambodia, there are ways for a foreigner to own or have rights to land property such as long-term lease of up to 50 years (renewable for another 50 years), forming a landholding company or taking the minority stake, marrying a Cambodian, acquiring a Cambodian citizenship, investing through land concession, or buying through a nominee.
In our case, 95 percent of our foreign clients have purchased properties through our nominee structure. Under this structure, foreign investors would need to “nominate” a Cambodian to be the legal owner of the land. For security, both parties would need to sign a ‘trust agreement’ to which both agrees that the property title will be held in the nominee’s name and that the buyer has all the rights to property.
Nominee structure is highly discouraged if you’re about to approach a relative, a spouse, or a friend as a nominee. It’s advisable to use a professional nominee from a trusted service provider, like IPS-Cambodia, to keep everything purely professional. Meanwhile, if you want lesser risk, you have plenty of other options like long term lease, being the safest and most secure method.
Given the conditions, what can foreigners hold to legally protect their ownership?
Generally, the strongest proof of ownership is a property title under your name. With locals, the most secured type of title they can hold onto is a hard title. Compared to soft title which is only registered and recognized at a local government level, hard title is recognized by the Ministry of Land and the cadastral office at a national scale and is provided by the Land Management and Planning Office.
Under the hard title category, lies the LMAP title and Strata title. For foreigners, only strata titled properties can be owned under their name. Once the purchase is done, foreigners will be given the original copy of the title and will be 100% entitled for the rights and obligations to the property.
Under the nominee structure of IPS Cambodia, besides holding the original title, foreigners are also provided with four nominee documents to secure their ownership:
- Mortgage Agreement – states that the nominee can’t sell or transfer the property without the permission of the foreign property owner
- Loan Agreement – sets out the terms and conditions of a proxy loan made between the nominee and the investor with the investor taking the position of the bank or lender and the nominee being the borrower
- Lease Agreement – allows foreign property owner to access the property
- Security Agreement – sets out all the basic details of the nominee, the property buyer, the property, and all other important aspects including the loan, lease, and mortgage
Long-term Lease Agreement
Should a foreigner opted to lease a land for 15 to 50 years, it is important to obtain a leasehold agreement with the following information:
- Lessee’s rights to control the property
- Lessee’s rights to sell or rent out the property
- If there are any encumbrances or mortgages since previous ownership
Due to the recent change in property ownership, a long-term agreement is now recognized as a form of hard title. This is also a good step towards setting up a Land Holding Company or LHC.
So, is it safe to buy property in Cambodia?
The answer is YES. However buying a property, whether it’d be through a nominee or lease agreement, the process is much safer and easy if you do it with a trusted real estate agency like IPS Cambodia. All paper works needed for the purchase or ownership will be done by IPS Cambodia, which leaves you with lesser work. Plus, you’ll also be able to avoid scams, fraud, overcharging fees, and dealing with authorities that may not be fluent in English. IPS Cambodia also provide due diligence service to verify the property’s papers are all legal, and the property’s not subject to mortgage, liens or encumbrances record.