Cambodia Land Lease

[Sheryl]

Can anyone recommend a reputable lawyer or other resource person to help draw up and above all file documents for a long term land lease in Phnom Penh?

I've already approached the major international law firms who quoted unbeleivable prices merely to draft the document. That part I can virtually do on my own. It is getting the necessary government office endorsements and registration that i have neither the time nor the stomach for so I want someone who can expedite all that.

Appreciate any suggestions, thanks

[dumball]

Hi Sheryl , did you check with the guys on kymer440 , there are some knowledgeable people on there who have lived here and run buisnesses for a long time in PP , they should know of some-one to approach .

I will check with some people my wife is friends with that have recently purchased properties etc and get back to you asap .

[Mobi]

Hi Sheryl,

I have a good friend currently working in Vietnam who has some good contacts in the legal world in PP. My friend also spends quite a bit of time with lawyers etc in Cambodia so I'm sure he could come come up with a name or two. I will ask him tonight and get back to you.

[Sabre]

Hi Sheryl,

I am a foreign lawyer working in Phnom Penh amongst other places.

Unfortunately, real estate transactions in Cambodia - compared to some other jurisdictions - are complicated and relatively expensive.

To register a long term lease you will need to have available the land title deed and you will need the owner's permission/cooperation. Registration of leases is a relatively new concept in Cambodia, and will require detailed negotiation/persuasion with the officials at the land department. It seems no two officials ever interpret the law in the same way

Have you done any due diligence on the land to confirm that the lessor is actually the owner of the land? It is extremely common for problems to arise in relation to this issue alone.

You say you can draft the lease yourself, and I don't doubt you, however I would recommend you at least have a lawyer review it.

Can you give any further details about the transaction? It may be possible to secure your rights as tenant more easily than through lease registration.

You should also note that the new Civil Code will become effective in Cambodia soon. This new code will radically alter the law as regards leases and lease registration, and it is not yet clear whether it will have a retroactive effect. Just something to be aware of, in case you are banking on the lease over the long term.

Send me a private message if you have any specific questions. And good luck .....

[Sheryl]

Hi Sheryl,

I am a foreign lawyer working in Phnom Penh amongst other places.

Unfortunately, real estate transactions in Cambodia - compared to some other jurisdictions - are complicated and relatively expensive.

To register a long term lease you will need to have available the land title deed and you will need the owner's permission/cooperation. Registration of leases is a relatively new concept in Cambodia, and will require detailed negotiation/persuasion with the officials at the land department. It seems no two officials ever interpret the law in the same way

Have you done any due diligence on the land to confirm that the lessor is actually the owner of the land? It is extremely common for problems to arise in relation to this issue alone.

You say you can draft the lease yourself, and I don't doubt you, however I would recommend you at least have a lawyer review it.

Can you give any further details about the transaction? It may be possible to secure your rights as tenant more easily than through lease registration.

You should also note that the new Civil Code will become effective in Cambodia soon. This new code will radically alter the law as regards leases and lease registration, and it is not yet clear whether it will have a retroactive effect. Just something to be aware of, in case you are banking on the lease over the long term.

Send me a private message if you have any specific questions. And good luck .....

There's no doubt about the ownership or the willingness of theo wners to enter into a land leade with me.

I (unofficially) co-own the land with my (also unofficially) adopted Cambodian family. They have owned a small plot of land in Kien Svay for decades, they have the sale paper for it but like many people have never been issued a "plan rung". A year or so ago (just before prices took a nose dive, my bad luck!) a very large swath of land adjacent to theirs came on the market. By itself not worth much as no direct road access, but annexed to theirs creates a large plot with road access in a rapidly developing area (Kien Svay). So I put up the money and they bought it, for that large swath they do have the "plan rung".

It is understood between us that we co-own this land and from the start intention has been to sell, reimburse the money I put in and then share the remaining profit. But it is looking like it may take a few years for real estate prices to come back up so just to be on the safe side I want to make a lease that insures it cannot be sold without my permission. I am not looking to live on the land, this is just a precaution. No-one lives there and it has nothing built on it. Land lease is to my knowledge the simplest way to achieve what I want (insurance that it can't be sold without my agreement) but I'm open to any other ideas you may have.

[Sabre]

Hi Sheryl,

I am a foreign lawyer working in Phnom Penh amongst other places.

Unfortunately, real estate transactions in Cambodia - compared to some other jurisdictions - are complicated and relatively expensive.

To register a long term lease you will need to have available the land title deed and you will need the owner's permission/cooperation. Registration of leases is a relatively new concept in Cambodia, and will require detailed negotiation/persuasion with the officials at the land department. It seems no two officials ever interpret the law in the same way

Have you done any due diligence on the land to confirm that the lessor is actually the owner of the land? It is extremely common for problems to arise in relation to this issue alone.

You say you can draft the lease yourself, and I don't doubt you, however I would recommend you at least have a lawyer review it.

Can you give any further details about the transaction? It may be possible to secure your rights as tenant more easily than through lease registration.

You should also note that the new Civil Code will become effective in Cambodia soon. This new code will radically alter the law as regards leases and lease registration, and it is not yet clear whether it will have a retroactive effect. Just something to be aware of, in case you are banking on the lease over the long term.

Send me a private message if you have any specific questions. And good luck .....

There's no doubt about the ownership or the willingness of theo wners to enter into a land leade with me.

I (unofficially) co-own the land with my (also unofficially) adopted Cambodian family. They have owned a small plot of land in Kien Svay for decades, they have the sale paper for it but like many people have never been issued a "plan rung". A year or so ago (just before prices took a nose dive, my bad luck!) a very large swath of land adjacent to theirs came on the market. By itself not worth much as no direct road access, but annexed to theirs creates a large plot with road access in a rapidly developing area (Kien Svay). So I put up the money and they bought it, for that large swath they do have the "plan rung".

It is understood between us that we co-own this land and from the start intention has been to sell, reimburse the money I put in and then share the remaining profit. But it is looking like it may take a few years for real estate prices to come back up so just to be on the safe side I want to make a lease that insures it cannot be sold without my permission. I am not looking to live on the land, this is just a precaution. No-one lives there and it has nothing built on it. Land lease is to my knowledge the simplest way to achieve what I want (insurance that it can't be sold without my agreement) but I'm open to any other ideas you may have.

Am I correct in assuming you are not a Cambodian citizen?

Can you give me an indication of what the land is worth? This will determine the commercial feasibility of various solutions that are available.

To keep it short and simple, if it is worth a lot, I would recomment you incorporate a Cambodian landholding company with the family as 51% shareholders and various other protection documents put into place as appropriate.

If the land is relatively inexpensive I would suggest you just take physical possession of the title deed/deeds. This is not foolproof as it is possible for them to get new ones issued if they report the deeds as lost or stolen, however it will make things more difficult for them if they try to sell the land.

Another option I might recommend is to actually formalise your loan to them and then register a mortgage (or other form of security) over the land, which will mean they cannot sell it without first discharging the security.

I do not like the idea of registering a lease because:

( a ) the tax department could decide it wants some tax paid on the rent; and

( b ) there is some question as to whether a registered lease will actually prohibit the sale of the land to a third party. It is possible that such a sale might be allowed in circumstances where the third party buyer promises to honour the terms of the lease.

You should also be aware that at some point you may have to pay unused land tax.

Sounds like you had rotten luck with the timing of this thing ... I think you're right, it may be a couple of years before the market gets back to a point where you could sell it for a profit. But you can take comfort in the fact that the market does seem to be rapidly picking up where it left off a year or two ago.

Edited September 12, 2010 by Sabre

[Sheryl]

Thanks for the above, very useful.

No, I do not have Cambodian citizenship.

At the time of purchase the land was worth about $250,000 and we'd like to get that, for sure won't sell for less than $200,000. This is the value of the total land, but as mentioned a small sized part of it (but the part with road access) they already owned for many years. I put up $50,000 to purchase the additional land. It is a bit hard to apportion value to their ownings versus mine as the value of both adjacent plots disproportionately increased when they became combined. Although pro-rationed I paid for 95% of the land area I'd be happy with my initial investment back plus say 50% of the remaining profit. (I forget what they originally paid for their portion but it was ages ago and virtually nothing). They have no problem with that. Actually I more or less support this family anyhow and have put/am putting all the kids through university, including one studying abroad, so my gain is also their gain. I expect when the time comes we'll be able to agree on all this amicably, including a consensus around what they do with their profit and the legalities won't matter, just want to have some insurance on it as I am not far from total retirement and need to secure my assets.

I don't like the idea of forming a company just for this, sounds very complicated and this will be the only transaction ever carried out, hopefully within not more than a few years time.

Formalizing the loan/issuing a mortgage sounds interesting but what does that entail? I'm not, obviously, a bank or a financial company, just a private individual.

What is "unused land tax" ?? I assume a tax for owning land not in use? Does it help that they are growing some fruit trees on it??

Appreciate your help.

[dumball]

I do not know the size of the property you mention , but that sure sounds like a lot of money to have paid in Cambodia , recently we sold a 3 acre property with a 3 bedroom house with full basement , a large store and a large workshop on a major highway for $200,000.00 in southern Ontario , Canada . I have noticed property prices tend to be somewhat high here because people are investing to make a profit in a rapid hurry to sell , so many apartments etc have been built in the past few years and the majority remain empty, could be forming a bubble all of its own .

[Sabre]

Thanks for the above, very useful.

No, I do not have Cambodian citizenship.

At the time of purchase the land was worth about $250,000 and we'd like to get that, for sure won't sell for less than $200,000. This is the value of the total land, but as mentioned a small sized part of it (but the part with road access) they already owned for many years. I put up $50,000 to purchase the additional land. It is a bit hard to apportion value to their ownings versus mine as the value of both adjacent plots disproportionately increased when they became combined. Although pro-rationed I paid for 95% of the land area I'd be happy with my initial investment back plus say 50% of the remaining profit. (I forget what they originally paid for their portion but it was ages ago and virtually nothing). They have no problem with that. Actually I more or less support this family anyhow and have put/am putting all the kids through university, including one studying abroad, so my gain is also their gain. I expect when the time comes we'll be able to agree on all this amicably, including a consensus around what they do with their profit and the legalities won't matter, just want to have some insurance on it as I am not far from total retirement and need to secure my assets.

I don't like the idea of forming a company just for this, sounds very complicated and this will be the only transaction ever carried out, hopefully within not more than a few years time.

Formalizing the loan/issuing a mortgage sounds interesting but what does that entail? I'm not, obviously, a bank or a financial company, just a private individual.

What is "unused land tax" ?? I assume a tax for owning land not in use? Does it help that they are growing some fruit trees on it??

Appreciate your help.

It is not that difficult to set up a company here, although I agree with you - for a 250,000 property it may not be worth the expense and hassle. It's probably a borderline case.

To formalise the loan you would just prepare a loan agreement, as well as a mortgage agreement or what is called an antichrese. You could then have the mortgage or antichrese registered at the land office so you could enforce it in case they default on the loan etc. It will also prevent them from selling the property.

Unused land tax is not always applied every year but generally the land department will want to see tax receipts at the time of transfer. They can chase you for this retrospectively. I am not sure if the fruit trees help.

Good luck with it.

[Sabre]

I do not know the size of the property you mention , but that sure sounds like a lot of money to have paid in Cambodia , recently we sold a 3 acre property with a 3 bedroom house with full basement , a large store and a large workshop on a major highway for $200,000.00 in southern Ontario , Canada . I have noticed property prices tend to be somewhat high here because people are investing to make a profit in a rapid hurry to sell , so many apartments etc have been built in the past few years and the majority remain empty, could be forming a bubble all of its own .

For the market here now, it isn't a huge amount of money. As you probably know, property prices have risen steadily over the past few years, however the market has been somewhat slow since the global financial crisis.

You are right, though, there is a lot of speculation.

[Sheryl]

Well I have now been in contact with several lawyers and there seems to be a consensus around doing a mortgage as the best approach. Which apparently in addition to a hefty legal fee will entail a $300 filing fee with the land bureau.

One wrinkle is that the land title is still in the former owner's name. We have the bill of sale and the new owners tried to get the registrtration transferred but were told they'd have to wait as no land titles were being issued for that village at present, they's all be issued at once. I've run into this before in other locations too, including a new development area where no-one has been able to get a "plan rung" yet even after living there for years.

Anyone have any insights into this? I think I can't file either a mortgage or a lease until the land title has been transferred.