Legal and Tax Updates

Issue: No.028P/21 – 23 July 2021

Real estate sector is one of the fastest growing sectors in Cambodia proving by sharp rise transactions including but not limited to buying, selling, leasing and financing of real properties in which could eventually come up with some risks. Therefore, it is important to ensure that the risks associated with the property are identified and minimized by conducting a legal investigation also known as “legal due diligence or title search”. This legal due diligence is primarily to gather all necessary information related to the property in order to consider before entering into an agreement.

Different types of property ownership require different focus during the due diligence investigation. In this article, we would like to elaborate some aspects of due diligence process of the land with hard title of a prospective purchase for co-owned building development. In such a case of legal due diligence is to verify not only the ownership of title and any encumbrance over the property but also the restriction regarding the construction of co-owned building.

Following are the key points of such legal due diligence:

• Cadastral information certificate. Obtaining cadastral information certificate shall be the main part of due diligence process. Thus, it is advised to request for cadastral information ​​certificate from Department of Land Management Urban Planning, Construction and Cadastre in order to verify the validity of the title and to be absolutely clear that the person claiming ownership is exactly the legal owner of the property. Moreover, we can also verify such certificate whether or not the property is free and clear of encumbrances including liens, mortgage, hypothecs, lease, pledge and subject to any pending dispute in courts.
• Field investigation. Field investigation is crucial to check whether or not there are any occupants over the property.
• Classification of Land. We should check whether the land is residential land. Normally, only residential land can be used for construction purpose. In case that the property is originally allotted as agricultural land, it must have been converted to residential land first before any construction.
• Land use zoning. To know where the property is located could also help us to decide carefully on the transaction because the property might be sometimes situated in restricted zoning area by which it could block any application for a construction permit or have any restriction related to the height of the building.
• Land consolidation. A parcel to construct a co-owned building shall be a single parcel. Thus, the intending purchaser must make sure about this or seek for the land consolidation in case the property consists of two or more parcels.

Disclaimer

The article is merely for general information purposes. It does not constitute a legal advice on the subject matter. If you have any question or need any assistance, please feel free to contact us at contact@sithisak-lawoffice.com or (+855) 23 6373 168.

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