Land Investment Alert in Cambodia

• 29 March 2019
• Local News
• 3893 Views

Since Cambodia has enjoyed stability, the country has gained a large volume of foreign direct investments, one area of which is land investment. Recently, the numbers of condominium buildings are increasing in the cities of Phnom Penh, Sihanoukville, Siem Reap etc. The most predominant location is in the capital city Phnom Penh where the majority of businesses and head offices are located.

Our Cambodian constitution and laws do not allow foreign ownership over immovable property. This restriction applies to all foreign individuals or investors in Cambodia except for the law on co-ownership buildings which are open to foreign ownership over strata title from the second floor for up to 70% of the total building space.

Regardless of foreign ownership restriction over land, many investors hold land through a landholding company utilising nominee structures. A nominee structure is somewhat of a grey area under Cambodian law; however, to date in our experience, it is generally enforced by the courts. While most investors choose a nominee structure as it is fast and straightforward, there are risks if such a structure has not been advised on or properly prepared by a competent legal expert. It is not uncommon for these structures to end up with litigation against the nominee. The main reasons that lead to this litigation come from 1.) Cost-savings as the buyer may think it is too costly to engage a legal adviser, 2.) Trusting their local friends; some foreign investors who come and live in Cambodia have some local friends who they trust, and 3.) they might think it is not necessary to seek A legal adviser for such a simple transaction.

It is likely to be true that the transaction is simple if the structure and agreement are made properly and validly. However, if we look at the common issues, such as the language of the agreement, the validity of the agreement and other legal issues that might be associated with the transaction, then the transaction is not so simple anymore. In such cases, the arrangement or deal may turn sour and end up with litigation against each other, with the litigation cost outweighing the legal adviser’s costs. As the Cambodian proverb says “Until the cattle are lost, building the fence is not thought about”.

To avoid such incidents, it is strongly advised that one should seek a legal adviser who is knowledgeable in the area to advise and to prepare all related documents and to safeguard the transaction and investment.

Porchhay has more than ten years’ experience of advising in relation to real estate and construction. He has advised global real estate developers, construction companies and foreign investors on their investments and projects in Cambodia. His areas of practice are corporate and real estate acquisition, lease, concession and hypothec, due diligence, construction contracts and other related commercial transactions. He obtained a Master of Commercial Law from the University of Melbourne in 2015. Porchhay speaks English and Khmer.

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