When it comes to titles for property, Cambodia uses a multi-tiered system, with different land titles holding different levels of authority, and hence security. The main difference between these are the level of government at which your property is registered.
Soft titles are the most common form of ownership in the Kingdom. They are issued by the local Sangkat (commune) or Khan (district) office, and, as such, are not registered at the national level, which makes them less secure. However, most property transactions in Cambodia are still carried out with soft titles, partially because they allow those involved to avoid ownership taxes and related fees. It is still, however, illegal for foreigners to purchase soft title properties under their own name, as will be explained below.
A hard title is the strongest form of property ownership available in the Kingdom. Hard titles are recognised at the national level and certified by the Ministry of Land Management, Urban Planning and Construction. When a transaction is conducted with a hard title, a transfer tax of 4% applies, and additional fees may be payable to the land office.
Strata titles are the newest form of ownership and the only ones that allow foreigners to legally own property. They came into effect as a product of the “Law on Foreign Ownership”, which was promulgated in 2010. Under the law, foreigners may directly own units within co-owned buildings (otherwise known as condominiums), excluding the ground floor. Foreign ownership also must not exceed 70% of the total value of the property.
Land Management and Administration Project (LMAP) titles are another option. The LMAP registration system was implemented in Cambodia with assistance from the World Bank to help locals secure land titles. “An LMAP title gives you the exact coordinates and ensures peace of mind for the buyer,” says Nigel Doughan, the commercial leasing manager at IPS Cambodia . “Properties held at the national level, with hard or LMAP titles, are the most detailed and accurate forms of ownership,” he says.
Simon Griffiths, the associate director at CBRE Cambodia, asserts that “there is no one size fits all” when it comes to titles, believing that different situations warrant different strategies. Although he acknowledges there are benefits to soft titles, he recommends would-be investors to play it safe and opt for hard or LMAP titles if given the choice.
A notification by Phnom Penh’s Municipal Department of Land Management, Urban Planning and Construction issued in May this year has changed the rules of the game for some. Essentially, the notification prohibits foreigners from having any soft-titled property to their name, unless such property is held under a strata title. According to the new order, foreigners are eligible to obtain titles in their name only in buildings that have been pre-approved for co-ownership. In other words, they can only own property within a condominium building.
Despite the restrictiveness of this law, there are a number of tried and tested mechanisms for foreigners to gain ownership of property. For soft-titled property, one of the most effective is the nominee structure, under which the foreign buyer engages a Khmer national to hold the property in their name. Another mechanism involves forming a landholding company (LDH) with a Cambodian national in which the Cambodian party holds a majority of the shares.
For more on these and other mechanisms for foreign ownership of property in Cambodia, click here.