Hypotec in Cambodia Under the Civil Code

• 4 March 2017
• Property Focus
• 13629 Views

Under the Civil Code of the Kingdom of Cambodia, a hypothec, a mortgage under Cambodian law, is created through an agreement reached between a creditor and a debtor or a third party that provides immovable property as security for an obligation. A hypothee shall have the right to receive the performance of his or her claim prior to other junior creditors from the sale of the immovable property that the debtor or the third party provided to secure their obligation. A perpetual lease or usufruct may also be used as security under a hypothec.

A hypothee may not assert the hypothec against a third party (i.e. a party who is not the hypothecator) unless the instrument creating a hypothec is in the form of an authentic deed and registered with the land registry. A right of hypothec may also be hypotheced in order to secure debt. This is referred to as ‘sub-hypothecation’.

A hypothec over land extends to all things that are attached to and form part of the land comprising the object of the hypothec at the time of its creation, including buildings thereon. It also extends to things that attach to the land after the hypothec is created. However, it does not extend to a building owned by a third party or to which the rights to which are held by a third party under a perpetual lease, usufruct or leasehold.

Where multiple hypothecs have been created on an immovable property in order to secure multiple debts, the order of their priority shall be based on the chronological order of their registration.

In the event of a failure to perform on a debt, a hypothee may apply to the court for compulsory sale of the hypothecated property. Where the hypothecator or a third party erects a building on land after it is hypothecated, and the hypothecator owns that building, the hypothee may demand the compulsory sale of the building together with the hypothecated land. However, if the price of the land together with the building thereon is less than the price of the land as a vacant plot, the hypothee may demand that the hypothecator remove the building prior to the compulsory sale of the land. A third party acquirer may purchase the property at the compulsory sale.

A third party who has acquired a perpetual lease or usufruct on the hypothecated immovable may pay a price to the hypothee at the request of the hypothee, and the hypothec will thereby extinguished for the benefit of that third party. No hypothec may be extinguished by prescription in relation to obligors and hypothecators unless it is extinguished simultaneously with the claim the hypothec secures. In the event that a person who is neither an obligor nor a hypothecator has possessed the hypothecated immovable property in complete conformity with the requirements for acquisitive prescription, the hypothec shall be extinguished thereby. However, this shall not apply where a third party acquirer of the hypothecated immovable property acquires the immovable with knowledge of the existence of the hypothec.

Regarding certification of hypothec agreements, a Joint Prakas between Ministry of Land Management, Urban Planning, and Construction and Ministry of Interior dated 15 June 2016 which amends Clause 9 of their previous Joint Prakas dated 09 September 2005, among other things, requires that hypothecs be certified by the chief of commune or Sangkat where the secured property is located.

Contact:

Sereyrath Kiri, Associate. Prior to joining the firm, Sereyrath associated with several legal research organisations in Cambodia – the ExtraordinaryChambers in the Courts of Cambodia and Royal University of Law and Economics. He earned a Masters in law from the University of Washington and a Bachelor of Arts in English from the Institute of Foreign Languages, Cambodia. He speaks English, Mandarin, Khmer and basic French.

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