How to avoid disputes in property sale and purchase transaction

• 14 August 2020
• Local News
• 9048 Views

The real estate sector in Cambodia is growing steadily. The Cambodian government has thus far closely monitored and issued regulations to ensure that all types of land transactions being done legally. Despite the government’s attempt, there are still some loopholes which leads to disputes while making sale and purchase transaction of the property. Therefore, to avoid disputes, buyers should understand the essential information as follow:

What must be done before signing a contract?

Before signing the contract, buyers must consider four critical points as follow:

1. Type of ownership title

The buyer must check what kind of ownership titles the seller is holding. Is seller holding a Title of Possessory Right over Immovable Property (hard title) or a Letter of Transference of Possessory Right over Unregistered Property (soft title)? If the seller is holding a hard title, the buyer can check the location, size of land, and name of the owner on that document. The hard title can also be verified at the Cadastral Department. On the contrary, if the seller is holding a soft title, the seller is only considered as the legal occupant. According to the law, he/she does not have full rights on the property yet, but he/she can sell the land. Most importantly, the buyer must check whether the land has been transferred legally from one owner to another. Such verification can avoid the issue of overlapped multiple owners in the future.

2. Land condition

The buyer must also check the condition of the land whether or not it is surrounded by other land plots. If so, is there a proper fence/sign determining the land border? If it is not clear, then the land shall be measured again in the presence of the cadastral authorities.

3. Charges on the land

The buyer must check whether or not the property is used as collateral or rented out. Besides, the buyer must also investigate whether or not the land is subjected to foreclosure proceedings. If so, the land should be cleared before signing a sale and purchase contract.

4. Land location

The buyer must observe whether or not the land is a part of the road or located in any state development projects. Some lands might locate in APSARA area or any conservation areas determined by the government. Thus, buyers must be fully aware of the location as well.

How to legally make a real estate sale and purchase contract?

The procedure of sale and purchase contract of land with the hard title and with the soft title is different. Both seller and buyer must sign a unique contract, unlike other private personal contracts. Property Sale and Purchase contract is a form of authentication contract, which has to be done in accordance with the formalities and procedures stated by law, in the presence of relevant authority.

Title of Possessory Right over Immovable Property or Hard Title

The contract is made with the unique form of the Ministry of Land Management, Urban Planning and Construction called “Vente Definitive”. In the contract, the fingerprint of the seller, the buyer, and the witness are required, in accordance with the law in the presence of the municipality or district administration authorities. Then, the signed contract must be brought to the Cadastral Department for ownership transfer. Before transferring, the buyer must pay a 4% stamp duty tax. Later on, the buyer will obtain the tax receipt, and the cadastral officer then insisted that the buyer be the owner of the land from now on. (Read more)

Letter of Transference of Possessory Right over Unregistered Property or Soft Tile

When buying and selling land/property with soft title, there is no need to transfer ownership at the Department of Cadastral as the land has not been legally registered. The process of sale and purchase can be done at the commune or Sangkat administration. In some places, such a contract is passed on to the municipality, or district administration to guarantee the greater legal leverage.

Both buyers and sellers can a physical person or a legal entity (company or organization). If the seller is a physical person, the buyer must check that the land he/she is selling is his/her private land or a co-owned property. For such a joint property, the owner could not enter into the contract unless he/she had a sale agreement with the other owners. For a legal entity, the contractor must first obtain proper authority from the board of directors or shareholders.
Meanwhile, the seller must also observe whether or not the buyer has Khmer nationality, as, under Cambodian law, a foreigner cannot own the land.

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