The act of selling and purchasing houses and condominiums in Cambodia continue to throw up challenges, partially due to complicated co-ownership laws which were introduced in 2010.

When purchasing a condo unit, some Cambodian citizens practise the transference of co-owned property through the local authority to avoid paying a four per cent tax on the price of house they have purchased.

This spurs a conflict between the buyer and the seller, as the buyer needs a hard title certificate, which they are unable to obtain because it has been mortgaged by the developer.

Michael Nhim, former manager of The Bay condo, said the Cambodian government had encouraged and attracted investors to Cambodia by permitting projects to be sold before their construction.

Nhim continued, suggesting the government should require investors to hold 70 per cent capital of their total investment outlay, as one year of pre-selling could earn them anywhere from 30 to 60 per cent of the budget costs.

Therefore, if they mortgage their hard title certificate to the bank for 30 per cent of the investment, they will be able to get the certificate back, and transfer the ownership to their clients when the project is finished.

He added, “The government should strengthen this case. However, this problem is not a new one. Vietnam also faced similar problems, but they are one step ahead of us.”

Seng Lot, a spokesman for the Ministry of Land Management, Urban Planning, and Construction, said the land administration’s job is to require developers to divide each unit in a co-owned building and to pay a four per cent tax on it.

As for the land for any condominium, it is a co-ownership land. The ownership must be divided according to the price of each unit, Lot said.

He added, “The local authority does not have the authority to transfer any residence in any co-owned property or real estate property.”

“The government has decided through Sor Chor Nor (sub-decree) number 134 which states that purchasing, selling or transferring of any ownership is to be done through the Land Administration with a 4 per cent tax.”

CEO of Focus Property, Po Eavkong said he has talked about this problem in the past, dating back even before the 2008 Global Financial Crisis.

“The development system is complicated,” he said, adding that some co-owned property purchasers do not want to deal with the specialised authority because they do not want to pay for the four per cent tax.

He continued, “Cambodia has a sub-decree dealing with boreys and condominiums which requires that developers must abide by construction standards. However, that sub-decree states that ‘condominium and borey owners have the rights to alter their project without informing the ministry or authority’.”

“We are living in transitional times because if a developer mortgages their property ownership certificate, then puts their project up for sale, that means it’s duplicated. This is a point of catastrophe,” said Eavkong.

He also noted that some borey and condo developers do have the hard title certificate in hand, but they would rather issue out soft-titled certificates that are only signed by local authority to their clients.

“If you buy a borey or condo, you must have a hard title certificate. Sellers must provide hard title certificates to their clients to avoid further complication.”

Kim Heang, president of the Cambodian Valuers and Estate Agents Association said this was not a new problem for condos.

Heang said that if you have 200 units, you must issue 200 hard title certificates to your clients.

However, the current trend is that developers only issue out certificates to their clients that are signed by the local authority, as issuing hard titles is expensive.

“It’s a disease that needs to be cured because it cannot be left in this situation anymore. Condo developers must pay the bank to issue out hard title certificates to their clients,” Heang said.

“The thing is some developers are aware of this problem, but they pretend to not know about it. We don’t know how the ministry will deal with this issue.”