INTRODUCTION TO CAMBODIAN OWNERSHIP LAWS
In Cambodia, all land title records were destroyed between the years 1975 and 1979. Due to this, after the Cambodia civil war, proving the land ownership in the country was almost impossible. New laws and regulations were passed in the year 1989 for private ownership of land. The 2001 Land Law was created to allow issuing land titles, and it still remains in place today.
Over 2 million land titles have been issued to the citizens since 2001. The ownership of property in Cambodia can be proved in four different ways: soft title, hard title, LMAP title, strata title. If you are planning to buy any property, it is advisable to get professional legal assistance.
In Cambodia, the official recognition of property ownership is the Land Department of the Ministry of Land Management, Urban Planning, and Construction (MLMUPC). MLMUPC provides the hard titles of ownership certificates in Cambodia.
The hard title includes all the information regarding the ownership of the property. The Ministry of Land Management passes it. Also, it is illegal for foreign citizens to own property under the hard title. This title is only for Cambodian citizens.
The timing for transfer of hard title ownership is around four to six weeks. According to the criteria, the transfer can cost you around a 4% tax.
This is another ownership title for the property in Cambodia. Just like the hard title, this title is also for Cambodian citizens only; foreign people can’t own property under this title. A soft title is a form of customary ownership in Cambodia. You will note that the majority of soft titles are ultimately being converted into hard titles.
This form of property title is issued at a district or commute level, and not at the national level. Issuing soft titles takes somewhere between 5 to 10 working days.
Just because this title is not registered at the national level doesn’t mean it does not provide the right to land. Through this title, you will have possessory right to land. Just like hard titles, the transfer tax for soft titles is also 4%.
LAND MANAGEMENT AND ADMINISTRATION PROJECT (LMAP) TITLES
This one is the latest property ownership title in Cambodia. The good thing is this is the most secure form of hard title in Cambodia.
It becomes very secure due to GPS information. The traditional property titles do not have any GPS information for the registered properties. Hence, traditional titles can create more property ownership disputes.
The Land Management and Administration Project was introduced in the year 2002 by the World Bank with approval from the government. Now, the question may arise, what was the need for LMAP? The goal of introducing LMAP in the country was to enhance land tenure security through registration and providing titles. The Ministry of Land Management played a crucial role in implementing it.
Benefits of an LMAP title
If your Cambodia property has LMAP title, it ensures more security and safety.
Before the LMAP title came into existence, the Ministry of Land Management spent much of its time in resolving the land disputes because of lack of charity over boundaries. For increasing the safety, the ministry has put a reliable system.
Now, what does holding the LMAP title mean? It means officials and the borders have measured the land have been agreed upon as the document includes the exact GPS. As LMAP title provides the property owner with a certainly regarding size and boundaries of the land, it can also be used for avoiding land conflicts with other landowners. This title will have better value as compared to other land titles.
Process of obtaining an LMAP title
It is a good idea to obtain an LMAP title for the property as we have seen this title is more reliable than other titles. For getting LMAP title, you have to directly communicate with the Ministry of Land Management and other relevant officials.
The time it will take to obtain an LMAP title is quite longer than hard and soft titles. It will take around six to twelve months to receive this title for the property. The good thing is there are no particular fees charged for this title.
The process of obtaining an LMAP title starts with document submission. First, the landowner submits correct documents to the Ministry of Land Management. The supplementary documents will be any receipts, letters, or agreements that prove the ownership for the property. Hard or soft titles can also be elevated to an LMAP along with a purchase agreement.
Some other documents you will be required to submit are identity cards, family books, birth certificates, and marriage certificates.
Your application will be checked by the Ministry of Land Management and other officials. The ministry will take into account different factors and check out whether the land is eligible. If there are any conflicts with the land, the ministry can resolve the dispute.
The LMAP titling process is not yet implemented throughout Cambodia. On some parts, it is, however, to be surveyed with GPS. Here are some things you need to keep in mind about LMAP title:
- If the titling process conducted by the Ministry of Land Management in a village or the place where the property in question is located, the local authorities must instruct property holders that they are able to register for LMAP titling.
- When the LMAP titling is completed in the area where the property is located, the property owner may apply directly to the Ministry of Land Management.
- Another essential thing to keep in mind is if a particular property in question is not undergone LMAP titling, then the property owner will not be able to apply for an LMAP title. Although, the property owner can apply for hard titles and upgrade it to LMAP title.
To know whether the LMAP title is available in your area, you can check with local authorities like the village or commune chief.
STRATA TITLES (FOREIGN OWNERSHIP OF CO-OWNED BUILDINGS)
Strata is another land title for Cambodia properties. Here’s everything you need to know:
About Strata Title
Strata titles were introduced in 2009. This title allows foreigner nationals to own private units of co-owned buildings in the country entirely. Strata title was implemented in Cambodia to encourage foreign investment in the local property market and also to accommodate people looking for ownership over residential and commercial properties in the country.
The strata title is an ownership certificate of an individual unit in a co-owned building. It could be a residential or commercial property.
Now, what co-owned buildings? Co-owned buildings are where several owners reside. The co-owned building space is exclusively owned by the particular owner.
In order to get the strata title for any building or property, there are certain things you need to keep in mind. Note that the strata title allow foreign ownership of up to 70% of co-owned buildings. The foreign citizen can’t own 100% of the building. Also, note that foreigners cannot own ground floor units in co-owned buildings. It must be on the first floor or above. The minimum of 30% of co-owned buildings must be owned by Cambodian nationals.
These strata title rules apply to properties owned after the 2009 year.
PURCHASING PART OF A STRATA TITLE DEVELOPMENT
Strata Title Creation
First of all, the developer acquires the land with a hard title in the development company name.
Then from the original hard title, the developer needs to divide the property into a collection of hard titles for each buyer. This division of hard titles refers to ownership within the project.
After that, the Ministry of Land Management will examine the common area situation. The property developer needs to submit the construction permit with the structural plan of the land. After doing this, the strata titles will be issued.
Once the development company receives the strata title, it can distribute it among its buyers. Note that the final strata titles are officially applied after at least 80% of construction is completed.
How to ensure a project has a legitimate strata title?
As a buyer, you wan to make sure the project you are planning to invest in has a legitimate strata title. As we know, the strata titles are registered authoritative government ministry for title registration, which is the Ministry of Land Management. As a buyer, if you want to verify the legality before purchase, you need to check out the developer’s hard title and the master development plan. You need to cross check these documents with the ministries. With these documents, you will get information about the owner, property, and title classification.
The sales and purchase agreements also include the information and details regarding strata title and co-ownership. If you find no mention of these documents in the sales and purchase agreement, then this is the sign to avoid investment in that property.
It is always advisable to get professional legal assistance before purchasing or investing money in any property. If you want legal assistance for real assistance in Sihanoukville, Cambodia, Dragon Real Estate is the best choice.
APPLICABLE FEES AND TAXES FOR OBTAINING A STRATA TITLE
You need to pay a certain amount of fee if you want to convert a hard title into a strata title. There is also a public service fee when you transfer individual strata title to a buyer. Apart from this, the transfer tax will also be applicable when transferring a strata title. After the Ministry of Land Management reviews and accepts the certified documents, the same certified documents along with a few supplementary forms will be submitted to the General Department of Taxation.
Now, the amount of transfer tax will be paid. It is calculated at the rate of 4% of the condominium’s value. Its value will be considered when applying the 4% is higher between the consideration paid for the condominium in the underlying sale and purchase agreement or the value of the condo through prescribed rates issued by the Ministry of Economics and Finance.
Once the tax payment is approved by the General Department of Taxation, the Ministry of Land Management will finalize the title transfer.
For the final title transfer to be approved, the developer and buyer need to be present at the Ministry of Land Management. Hence, off-plan buyers need to return to Cambodia to continue final processing and handover the strata titles after they are eligible.
FOREIGN OWNERSHIP VIA COMPANY STRUCTURE
If you are a foreigner willing to own property in Cambodia, you can do this through a locally incorporated company. If we take into account ongoing tax and administrative costs, the costs of creating a landholding company can be higher than other types of companies. For some large-scale investor or developer, the involvement of these costs may not be significant based on the benefits they will get by purchasing land in Cambodia.
A foreign entity can purchase land through a company, however, 51% of the company must be owned by a Cambodian entity. Foreign nationals can also protect their investments by forming two companies. The Law of Investment allows investors to use and take out long-term leases of up to 50 years. The lease can be renewed. The property acquired by one company can be leased to the second one.
Through the lease of the property, the foreign party can get long-term control over the land. The lessor cannot sell the land. It can be sold after the consent of both lessor and lessee.
However, many people still prefer acquiring property through an established company. By acquiring through an established company, the foreign investor gets management control over the company.
FOREIGN OWNERSHIP THROUGH NOMINEE STRUCTURE
Note that nominee structures are not recognized under Cambodian law and they are not valid under legal structures. If you are confused about foreign ownership through nominee structure in Cambodia, it is advisable to get professional legal assistance.
FOREIGN OWNERSHIP THROUGH THROUGH CAMBODIAN CITIZENSHIP
In the year 1996, it became possible for foreigners to apply for Cambodian citizenship based on the amount they invested in the country.
Applying for citizenship as an investor will outlaw the conventional citizenship eligibility process. It includes maintaining the residency for 7 years. It will be 3 years if the person is born in Cambodia, Apart from this, the person should also be knowing Khmer history, traditions, and language.
If you don’t want to wait 7 years of residency, it can be waived off by donating $330,000 to the state treasury. Except for this, it is compulsory to fulfil other requirements. After the citizenship will be granted to the foreigner, he/she can own land in the country in his/her name. After getting citizenship, the foreigner can also apply for certain concessions that are only available to Cambodian citizens.
With so many benefits of getting Cambodian citizenship, it has been common practice for international companies to send their representatives for citizenship. This way, it has been easy for international companies to own land or property in the country. Due to this, at present, Legislation on Cambodian citizenship laws is being revised by authorities.
INVESTING IN LAND THROUGH A LONG-TERM LEASE
One of the best and stress-free options available to foreigners for investing in land in Cambodia is leasing. Under this option, the land ownership will remain in possession of a Cambodian citizen. Also, this option does not allow the foreigner to resell the property.
If the lease is longer than 15 years, then it must be registered at the relevant land office. The long-term lease could be of up to 50 years. And, depending on the agreement, the long-term lease may include the right to develop the land.
INVESTING IN LAND THROUGH CONCESSIONS
This is another way to invest in land as a foreign investor. With a land concession, a person or legal entity occupy, use, and exercise rights over the land. Concessions are issued by government authorities or they are established by a contract.
Economic Land Concessions (ELCs) are the most desirable concessions and they are usually allocated for agricultural projects. As we have seen, concessions allow investors to get rights over the land. Due to this, after getting concessions, the foreign investor can clear land for industrial purposes. This is permitted through a 50-year concession, and they are also subject to renewals. Also, concessions can be eligible for the plot of 10,000 hectares or less.
The investor needs to apply through the Ministry of Agriculture to get rights to the plot. Apart from this, the representatives from the Ministry of Agriculture, the Council for the Development of Cambodia, and the relevant provincial authorities are also required to approve the application. They will approve it after considering different factors like social and environmental effects of the concession.
Once these departments approve the concession, the concession will be signed by the office of the Prime Minister. After that, it will authorize the Ministry of Agriculture to conclude the concession agreement formally. The time it will take to complete the process and grant the concession is between six and nine months.
There are specific criteria set for the eligibility of land concession. To become eligible for the economic land concession as a foreign investor, these are criteria to be fulfilled:
- Currently reside in Cambodia to apply for the concession.
- The foreign investor must have a registered company in the country.
- He/she must have a valid tax identification number.
- He/she must have a local bank account.