A.    Objective: Why is it important to know your own objective? 
At a very outset of your due diligence (“DD”) process, it is of imperative that you know your objective. Having concrete knowledge about your objective assists you in identifying your scope of work and set a clear direction of your activities. It allows you to be able to build your focus on the whole DD project. Without a clear idea of your goal, you might end up concentrating on aspects that are not of importance or even irrelevance to your ultimate purpose. 

B.    Types of Property Due Diligence
There are two types of DD on properties:
•    Pre-transfer DD
Before making a commercial decision, the prospective purchaser generally needs to be absolutely clear that the owner is the legal owner of the property fully recognized by relevant authorities, either through ownership or possessory rights under the land law. The property needs to be free and clear of all different types of encumbrances which include liens, mortgages, hypothecs, leases, pledge. Also, it is also equally important to stretch the investigation to formulate information on whether the property is under pending dispute at the courts or any unresolved inheritance problems or situated in any governmental zoning restriction area. 

This type of DD requires very thorough examinations of all aspects of property because its finding generally critically shapes the decision of the buyers on that particular transaction. They might choose to give up their intention to acquire the properties if findings reveal some potential problems that affect the current or even the future status of the properties. 

•    Post-transfer DD
This type of DD generally is to ensure that the property has been properly transferred according to the law to the intended recipient of the land. The buyers of the property generally undertake this DD before they make the final payment to the sellers. This DD is mostly involved in inquiry with the local, cadastral, and even tax authorities as they are involved in the transfer process.  

C.    Reviewing of Documents: 
Whether they are soft or hard title, following information needs to be verified on the titles:
•    Truth of the title, signatures (maybe initials) and the stamps affixed thereon;
•    Whether the copy of the title that we have in hand reflect the current status of title;  
•    Type of land, (it is relevant because you want to know whether conversion is possible);
•    Encumbrance on the title (long-term lease, mortgage, servitude);
•    Any zoning or other restrictions in the area which could block any application for a construction permit or a transfer of title. 

D.    Inquiry
Inquiry is an essential part of DD process. It allows you to confirm some information stipulated in the document as true and up-to-date, to verify some inconsistencies, and to fill in some missing information that has not been previously provided. Inquiry is made through conducting interviews with local and cadastral authorities. 
© Sciaroni & Associates 2017

About the Author:

Sereyrath Kiri, Legal Advisor at Sciaroni & Associates. Sereyrath has legal experience in Cambodia and the USA. He is currently a legal advisor at Sciaroni and Associates, a leading international law firm based in Phnom Penh. He was a member of the first Cambodian team to join the Willem C. Vis Moot International Commercial Arbitration in Austria. A member of New York State Bar, Sereyrath holds a master degree of laws (LL.M.) on Asian Law, Global Business Law, and Sustainable International Development Law from University of Washington School of Law, Seattle. He speaks Khmer, English, Mandarin, and basic Thai.

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