The 1993 Cambodian Constitution states that only persons or legal entities of Khmer nationality have the right to own land. However, this law does not prohibit foreigners from investing in land in Cambodia. So, foreigners can buy land in Cambodia as the followings;
1. Foreign Ownership through Land Holding Company
A foreigner may form a Land Holding Company (LHC) through a joint venture where the majority stake is a Cambodian and the minority stake of up to 49% is a foreigner. An LHC is legally able to purchase land and property in Cambodia.
The 51% Cambodian shareholding can be held by 1 or more nominees who may, through a Power of Attorney and other legal instruments, give control of their 51% shareholding to the 49% minority foreign shareholder. Meaning to say, in setting up an LHC, the minority shareholder (which is the foreigner) has 100% of the rights to make the actions and decisions within the company.
It is one of the lowest-risk options because the company and its assets can be configured to provide layers of security to the foreign shareholder or its lender. However, this approach carries the high registration fees, annual admin costs, and a potentially high tax burden when later disposing of the property asset.
2. Foreign Ownership through National Nominee Structure
Purchasing land through a Cambodian nominee, also known as a nominee structure, has historically been the most common system used, due to its simplicity and low cost.
Under this structure, foreign investors would need to “nominate” a Cambodian national to be the legal owner of the land being purchased and sign a ‘trust agreement’ with them in which they agree to hold the land in their name. However, the risk lies on whether you are approaching a trusted nominee or not, so it’s advisable to use a professional nominee from a trusted service provider to keep everything purely professional.
It is recommended that in addition to the trust agreements, the property being purchased is mortgaged, using the foreigners’ name as the loan provider. Documents registering this mortgage are placed at relevant land offices making the sale of the land and its title, or its use as collateral for another loan, not possible unless the foreigner first instructs the relevant land offices to release the mortgage that has been placed on the property and its title.
3. Investing in Land through a long-Term Lease
Foreigners or foreign entities are permitted to acquire control over Cambodian-owned property through a lease agreement. Entering into long-term leases will guarantee rights over property to foreign individuals and entities.
Property lease agreements in the country may be termed for a minimum of 15 years up to a maximum of 50 years. The term of the lease can be extended for consecutive periods of 50 years . The lease contract can include a provision that the land would not be sold to anyone else without the lessee’s consent. This method is the simplest and provides some protection stating the foreigner’s legal rights to land property.
A perpetual lease may be registered against the title to the land being leased. Registration of the long-term lease with the relevant Land Office is not a condition of lease validity and there is no legal mandatory requirement to register the lease. Nonetheless, to help secure the foreigners’ land tenure and enforceability against third parties, perpetual leases should be registered against the title of the land with the relevant Land Office. Once registered, the relevant Land Office will issue a lease certificate to the lessee. The lease gives the lessee all the necessary rights to develop the land.
Moreover, a foreign bank or foreign entity can take security over real estate in Cambodia. In fact, it is very common for foreign lenders to set up a structure of securities in Cambodia, including security over real estate in order to guarantee payments. A borrower (local or foreign) can grant hypothecation over a long-term lease and such act can be recorded in the certificate of the long-term lease to serve as security for the payment of the borrower’s debt.
4. Foreign Ownership through Trust Company
Trusts offer an alternative to direct investment and a risk-mitigation mechanism but also allow foreigners to own land legally. Whereas Cambodian citizens have the right to own land and property without restrictions, foreigners are prohibited from owning land in Cambodia directly.
Foreigners can own condominiums and apartments in Cambodia (excluding the ground floor, which is attached to the land) but under the Trust Law, a foreigner may indirectly manage the real estate by providing a trustee with the right to hold the title and manage the real estate for the benefit of the foreigner (Trustor) or the beneficiary of the trustor. Read our article, “Cambodia’s Trusts: Harnessing Foreign Investment for the Future” for understanding more about Cambodia’s Trusts.
In essence, this allows foreigners to profit from land price appreciation without owning the land in their name, while the trustee manages and protects the property for the trust’s beneficiary.
A Trust is thus professionally managed and provides investors such as foreigners in Cambodia an opportunity and solution to invest in or hold ownership of a property which was not previously an option.
5. Investing in Land through Concessions
Allowing a person or legal entity to occupy, utilize, and have rights over land property is called “land concession,” which is established under an agreement issued by government authorities.
The most sought-after concessions are ELCs or Economic Land Concessions that are generally allocated for agricultural developments. Additionally, ELCs allow investors to clear land for industrial purposes. However, concessions are only limited to lands that are no more than 10,000 hectares. But likewise with the long-term lease, this method is granted through a 50-year concession and is subject to renewals.
Application of such might take some time since the investors must apply for their rights to the land property through the Ministry of Agriculture. Thereafter, the Council for the Development of Cambodia, and representatives from the Ministry of Agriculture, and some relevant provincial government authorities will then need to approve the application, considering any potential social and environmental effects of the concession.
After these departments have approved the concession, the office of the Prime Minister must sign and authorize the Ministry of Agriculture to formally conclude the concession agreement. The approximate timeframe to complete the process and grant the concession is usually between six and nine months.
6. Becoming Cambodian Citizen
Under Cambodian Law, only Cambodians have the right to own a land in the country. Therefore, acquiring a Cambodian citizenship would earn a foreigner the right to own a land completely without having to partner with a majority Cambodian stakeholder, lease, or undergo a nominee structure.
Hence in practice, it is quite difficult to obtain citizenship and would only really be a possibility for investors or donors putting greatest amounts of capital into the country for investments or donations which helps develop Cambodia as a country.
7. MARRYING A CAMBODIAN
Similar to the nominee structure, when a foreigner is married to a Cambodian citizen, they are permitted to buy a land property under the name of their spouse on the title deed.
It should be noted that under the Cambodian Law, a foreigner married to a Cambodian, but is not a citizen of Cambodia, is not permitted to be registered on a land title. However, if a foreigner has been granted citizenship, both the spouse and the foreigner’s name are allowed to be registered on a land title.