Foreign Ownership of Pre-Condo Era Units: REALITY NOW?
On 29 July 2024, the land ministry issued Prakas 50 on the registration of titles to private units in co-owned buildings that were constructed before 19 December 1997.
What is a co-owned building?
A co-owned building refers to a building consisting of “private units” owned exclusively by each co-owner, and with “common areas” serving the common use of all of the co-owners of the private units. Co-owned buildings include apartments, flats with multiple rows and multiple storeys connected to each other, and other types of houses and buildings with connecting structures. In some jurisdictions, co-owned buildings are referred to as “strata-titled” buildings or “condominium-titled buildings.
What is new?
While the existing law and regulations permitting titling of private units in co-owned buildings included the possibility of private unit titles being issued for co-owned buildings that were constructed prior to 19 December 1997, in practice private titles were only issued starting from 2009. These were for buildings that were constructed in compliance with new co-owned building laws and regulations, being new multi-storey condominium projects.
Why 19 December 1997?
19 December 1997 is the date of the regulation introducing the legal compliance framework for building construction, including the necessity for architectural plans and designs, and official construction approvals. Buildings constructed prior to that date, including co-owned buildings, are unlikely to have any such plans, designs or construction approvals.
Who will benefit from this new regulation?
This regulation is a logical extension of the government’s program to systematically map and register all immovable properties in Cambodia. The government started with issuing new sporadic and systematic (“LMAP”) titles to plots of land. Then it started to issue private unit titles in new co-owned buildings such as condominiums. Now, people owning pre-condo units, such as you can see in the old parts of Phnom Penh, will be able to apply for the same private unit title as if it were a new condominium. In fact, the application process for the new private title under the new regulation is simpler than for a new condominium, because construction permits, architectural plans and internal regulations are not required by the regulation.
What are the implications for foreign investors?
While foreigners cannot own land in Cambodia, since 2010 foreigners have been granted ownership rights over private units in co-owned buildings. The logical outcome of the implementation of this regulation is that if a co-owned building private unit title is issued to the existing landowner of a pre-condo unit, then a foreigner may be able to subsequently purchase the title to that private unit in the foreigner’s own name.
Foreigners who have been using land-holding company structures or nominees to hold titles to pre-condo units, may be able to apply for the new private unit title in the name of the company or the nominee, and then subsequently transfer such title into the foreigner’s own name. If the foreigner wants to hold the private unit in a trust, the trustee company is more likely to do so if it is a co-owned private unit title, than an existing “soft” title.
Need for caution?
This regulation is brand new. It will be some time before we see how its implementation plays out in practice and whether the logical conclusion that foreigners will one day be able to purchase pre-condo co-owned building private units in their own names, becomes a reality. Foreign real estate investors who have been around for some time may recall that a decade or so ago the local authorities in some of the old parts of Phnom Penh were issuing “soft” titles to pre-condo units in the names of foreign buyers. In 2016 the land ministry put a firm stop to that. Let’s see whether this regulation opens that possibility up again.
If you have any queries on the real estate, please feel free to reach out to any of the contributing authors below:
Contributing Author:
Max HOWLETT
Foreign Advisor
+855 12 826 868
Vichet KHUN
Associate
+855 17 515 485
