Regulatory Framework for the Land System in Cambodia

Land

1.   Regulatory Framework for the Land System in Cambodia

Land Law was first promulgated in 1992 and was amended in August 2001 (2001 Land Law).  The 2001 Amendment to the Land Law especially aims to determine the regime of ownership for immovable properties in Cambodia for the purpose of guaranteeing the rights of ownership and other rights related to immovable properties. It also intends to establish a modern system of land registration that guarantees the rights of people to own land.

Land Law appointed the Ministry of Land Management, Urban Planning and Construction (MLMUPC) to be responsible for issuing titles related to the immovable properties and managing the cadastral administration of immovable properties belonging to the State.

During the civil war era, the Cambodian land system had been damaged severely and many of the land ownership titles and plots register had been lost. There are still many disputes over land ownership in Cambodia and, therefore, it is very vital for investors to verify the land ownership of landowner before they go into contract regarding land use, lease or sharing proportional interest of land ownership through Cambodian companies.

Many provisions of Land Law have been modified or deleted by Civil Code which came into effect on 20 December 2011 following the implementation of Law on the Implementation of Civil Code. It became very vital for the investors to refer the provisions of Civil Code regarding the sale, purchase, transfer of ownership, land lease right, and/or setting of mortgage on land.

2.Component of a land

Civil Code stipulates that things attached to land or comprising a part thereof, particularly buildings or structures immovably constructed on land, etc. are components of the land unless they are severed from the land, and may not, except as otherwise provided by law, be the subject of rights separate from those applicable to the land (Civil Code Article 122). However, as exceptional rule, it also stipulates that where the holder of a right [to occupy or use] a land of another has constructed buildings or structures, etc. on the land in the course of exercising such right, those constructed, etc. shall not become components of the land. The same shall apply to those things that are attached on the land for a purpose of temporary nature (Civil Code Article 123) and these buildings and other structures built on land by a right-holder, etc. shall be deemed components of the right [to occupy or use] the land of another (Civil Code Article 124).

3.   Ownership

It is prohibited for any foreigner, either a natural person or legal entity, to own land. The Constitution stipulates that “All persons, individually or collectively, shall have the right to ownership. Only Khmer legal entities and citizens of Khmer nationality shall have the right to own land (Article 44)”.  The 2001 Land Law also says that only natural or legal entities of Khmer nationality have the right to ownership of land in Cambodia and a foreigner who falsifies national identity to become an owner of land in Cambodia shall be punished (Article 8). In this regard, the legal entities of Cambodian nationality mean the companies of which 51% or more of share are owned by Cambodians or Cambodian companies.

Furthermore, the 2001 Land Law states that “No person may be deprived of his ownership, unless it is in the public interest”. An ownership deprivation shall be carried out in accordance with the forms and procedures provided by the law and regulations and after fair just compensation in advance” (Article 5).

The major provisions of 2001 Land Law regarding immovable properties ownership, which may be of the keen interest to prospective investors, are as follows:

・  Any regime of ownership of immovable property prior to 1979 shall not be recognized (Article 7).

・  Any entering into possession of properties in the public and private property of the State, through any means, that occurs after this Law comes into effect, is null and void (Article 18).

・  Possession of immovable property, which was recognized since 1989, may constitute a right in rem over immovable property and may lead to the acquisition of ownership by the holder of the property (Article 29).

・  Any person who, for no less than five (5) years prior to the promulgation of the Law, enjoyed peaceful, uncontested possession of immovable property that can lawfully be privately possessed, has the right to request a definitive title of ownership (Article 30).

・  After the Law comes into force, any new occupant without title to an immovable property shall be considered as an illegal occupant (Article 34).

・  In order to transform into ownership of immovable property, the possession shall be unambiguous, non-violent, notorious to the public, continuous and in good faith (Article 38).

・  While waiting for the possession to be transformed into full ownership, possession in compliance with the Law constitutes a right in rem over the immovable property. The title is evidence of possession but is not in itself a title of ownership and is not indisputable. The titles of possession shall only constitute definitive and indisputable title of ownership of the property in the absence of any dispute as to the ownership of the property at the time of the land register is created. In case of a disputed claim, the determination of the lawful possessor of the property shall be based on the additional investigation of all relevant evidence. A title of possession to a property is one kind of evidence but is not in itself determinative (Article 40).

The Civil Code stipulates the positive prescription of land ownership as follows (Civil Code Article 162).

・  A person can acquire ownership of immovable property through peaceful and open possession of the immovable property for a period of 20 years with the intention of ownership.

・  Ownership of immovable property can be acquired after 10 years if the peaceful and open possession of the immovable property is commenced in good faith and without negligence.

It also introduced the concept of co-ownership. Co-ownership is defined as ownership of a single thing by multiple persons. Each owner’s interest is limited to their own share (Civil Code Article 202). Indivisible joint ownership occurs when there is a partition, such as a wall, moat or hedge distinguishing ownership of adjacent land or buildings and both parties jointly own the partition. While the joint owners have a shared duty, limited to their own share, to preserve, maintain and repair the jointly owned partition they also share a right of use (Civil Code Article 215 and 217). Various provisions relating to the possessory rights are also provided in Article 227 to Article 243.

4.Acquisition of ownership over immovable properties

Ownership over an immovable may be acquired not only via contract, inheritance or other causes set forth in this Section IV but also based on the provisions set forth in Clause 4, Chapter2, Book Three of Civil Code, other provisions of Civil Code and other laws (Civil Code Article 160).

5.Effect of Real Rights Existing Prior to the Date of Application of Civil Code

A long-term lease, usufruct, right of use, right of residence, or easement arisen from an agreement based on Land Law 2001 before its amendment according to Article 80 (Amendments on certain provisions of Land Law 2001) of this law shall be deemed as perpetual lease, usufruct, right of use, right of residence, or easement based on the Civil Code from the Date of Application. In this case, duration of existence of these rights shall be calculated from the date that such rights were created based on the Land Law 2001 (Law on the Implementation of Civil Code Article 38-2).

6.Land leases

The term of a perpetual lease may not exceed 50 years. If a perpetual lease is established with a term exceeding 50 years, it shall be shortened to 50 years. A perpetual lease may be renewed; provided that the renewed term may not exceed 50 years counting from the date of renewal (Civil Code Article 247).

If the perpetual lessee fails to pay the stipulated rental for three years, the perpetual lessor may cancel the perpetual lease (Civil Code Article 250).

Perpetual leases may be assigned with or without consideration, or otherwise disposed. The perpetual lessee may sublease the subject of the perpetual lease and may be inherited (Civil Code Article 252).

Upon termination of a perpetual lease, the perpetual lessor cannot demand that the perpetual lessee restore the immovable to its original condition unless the perpetual lessee has destroyed the immovable or fundamentally changed its nature. Upon termination of a perpetual lease, the lessor shall acquire the ownership over any improvements and any structures installed on the immovable by the perpetual lessee without having to pay compensation to the perpetual lessee (Civil Code Article 254).

With regard to long-term lease created prior to the Date of Application relied upon the Land Law 2001, when the remaining period of such a lease exceeds 50 (fifty) years on the Date of Application of Civil Code, such right shall remain in existence during the stipulated period of the agreement although there is a provision of Article 247 (Term of perpetual lease) of the Civil Code. Nevertheless, a long-term lease with a remaining period of more than 99 (ninety nine) years, existence of such a right shall be deemed to remain at 99 (ninety nine) years from the Date of Application (Law on the Implementation of Civil Code Article 41).

If the right of use or right of residence, which is created based on Land Law 2001, is registered according to provision of paragraph 3 of Article 120 of Land Law 2001 such provision shall govern the registration with the reference to provision of Article 139 of the same law even though Article 277 (Requirements for perfection of rights of use and rights of residence) of the Civil Code stipulates that it cannot be held up against third parties unless the holder of a right of use or right of residence actually uses his/her right, and even the holder of a right of use or right of residence does not use or profit as the matter of fact, this right can be asserted against third parties (Law on the Implementation of Civil Code Article 43).

7.Mortgage

Nature of hypothec: A hypothee shall have the right to receive the performance of his/her claim prior to other obligee out of the immovable properties that the obligor or a third party provided to secure the obligation without transferring possession. A perpetual lease or usufruct may also be made the object of a hypothec (Civil Code Article 843).

Asserting hypothec: A hypothee may not assert the hypothec against a third party who is not the hypothecator unless the instrument creating a hypothec is notarized and registered in the land registry (Civil Code Article 845).

Scope of effect of hypothec: [The effect of] a hypothec shall extend to all things that are attached to and form part of the land comprising the object of the hypothec when the hypothec is created, including buildings residing thereon. It also extends to things that attach to the land after the hypothec is created (Civil Code Article 846).

Effect of hypothec on land over building owned by third party: Where based on a perpetual lease, usufruct or leasehold a third party owns a building on the land comprising the object of the hypothec [when the hypothec is created], [the effect of] the hypothec does not extend to the building (Civil Code Article 847).

Order of priority of hypothecs: Where multiple hypothecs have been created on an immovable in order to secure multiple debts, the order of their priority shall be based on the order of their registration (Civil CodeArticle 851).

8.   Land Concessions

A land concession is a legal right established by a legal document issued under the discretion of the competent authority, given to any natural person or legal entity or group of persons to occupy a land and to exercise thereon the rights set forth by this law (Land Law Article 48).

In Cambodia, there three types of concessions: Social Concessions, Economic Concessions and Use, Development or Exploitation Concessions. In case of Social Concessions, beneficiaries can build residential constructions and/or cultivate State lands for their subsistence. In Economic Concessions, the beneficiaries can clear land for industrial or agricultural exploitation. Use, Development or Exploitation Concessions include mining concessions, port concessions, airport concessions, industrial development concessions, fishing concessions but they are not regulated by the 2001 Land Law (Land Law Article 49 and 50). For Use, Development or Exploitation Concessions, Law on Concession was promulgated on October 19, 2007.

Land concessions may only create rights for the time fixed by the concession contract (Land Law Article 52) and can never result from a de factor occupation of the land. The land concession must be based on a specific legal document, issued prior to the occupation of the land by such competent authority as the State or a public territorial collectives or a public institution that is the owner of the land on which the concession is being granted. The concession must be registered with the MLMUPC (Land Law Article 53).

Land concession is revocable through government decision when its legal requirements are not complied with (Land Law Article 55). Land concessions areas shall not be more than 10,000 hectares and the maximum duration is limited to 99 (Land Law Article 59 & 61).

The provisions of the Civil Code relating to perpetual leases shall apply mutatis mutandis to land rights created by concession, within the scope of the conditions applying to such concession, except where otherwise provided by special law (Civil Code Article 307).

9.   Economic Land Concession (ELC)

Regulatory Framework for ELC

“Sub-Decree (RGC) No. 146 ANK/BK on Economic Land Concessions (SD-ELC)” was issued on December 27, 2005 to determine the criteria, procedures, mechanisms and institutional arrangements for initiating and granting new economic land concessions, for monitoring the performance of all economic land concession contracts, and for reviewing economic land concessions entered into prior to the effective date of this sub decree for compliance with the Land Law of 2001.

Purposes for ELC

Economic land concessions may be granted to achieve the following purposes (SD-ELC Article 3)

-     To develop intensive agricultural and industrial-agricultural activities that requires a high rate and appropriate level of initial capital investment.

-     To achieve a specific set of agreements from the investor for developing the land in an appropriate and perpetual manner based on a land use plan for the area.

-     To increase employment in rural areas within a framework of intensification and diversification of livelihood opportunities and within a framework of natural resource management based on appropriate ecological system,

-     To encourage small as well as large investments in economic land concession projects, and

-     To generate state revenues or the provincial or communal revenues through economic land use fees, taxation and related services charges.

Conditions for Granting ELC

An economic land concession may be granted only on a land that meets all of the following five criteria (SD-ELC Article 4).

a.    The land has been registered and classified as state private land in accordance with the Sub decree on State Land Management and the Sub decree on Procedures for Establishing Cadastral Maps and Land Register or the Sub decree on Sporadic Registration.

b.   Land use plan for the land has been adopted by the Provincial-Municipal State Land Management Committee and the land use is consistent with the plan.

c.    Environmental and social impact assessments have been completed with respect to the land use and development plan for economic land concession projects.

d.   Land that has solutions for resettlement issues, in accordance with the existing legal framework and procedures. The Contracting Authority shall ensure that there will not be involuntary resettlement by lawful land holders and that access to private land shall be respected.

e.    Land for which there have been public consultations, with regard to economic land concession projects or proposals, with territorial authorities and residents of the locality.

Evaluating Economic Land Concession proposals shall be based on the following criteria (SD-ELC Article 5):

-     Increase in agricultural and industrial-agricultural production by using modern technology;

-     Creation of increasing employment;

-     Promotion of living standards of the people;

-     Perpetual environmental protection and natural resources management;

-     Avoidance or minimizing of adverse social impacts;

-     Any linkages and mutual support between social land concessions and economic land concessions;

-     Processing of raw agricultural materials, to be specified in the concession contract.

Mechanism for Administration and Implementation Of ELC

The economic land concession mechanism shall be the following (SD-ELC Article 28).

-     Contracting Authority

-     Technical Secretariat

-     Provincial/Municipal State Land Management Committee

-     District/Khan State Land Working Group

-     Commune-Sangkat Councils

The Minister of Agriculture, Forestry and Fisheries is authorized and responsible for granting economic land concessions with a total investment value of more than 10,000,000 (ten million) Riels or more; or a total concession land area of 1,000 (one thousand) hectares or more.

Mortgage and Transfer of Right over ELC

“Sub-Decree #114 (RGC) ANKr.BK on the Mortgage and Transfer of the Rights over a Long -Term Lease or an Economic Land Concession” was issued on August 29, 2007 to determine principles and terms and conditions for granting rights to investors to put up as security and transfer of rights over a long-term lease or an economic land concession.

・  Only immovable property registered in the Master Land Register can be subject of a concession (Sub-Decree #114 Article 5).

・  The land concession shall be mentioned on the land title certificate at the MLMUPC and the MLMUPC shall issue a “Certificate of Economic Land Concession” (Sub-Decree #114 Article 6).

・  The concessionaire shall have the right to mortgage or transfer his/her right over the land concession as well as the buildings and/or other immovable properties that he/she has constructed on the land except as otherwise specified in the economic land concession agreement or as restricted by law (Sub-Decree #114 Article 7)

・  In all cases, the creditor cannot become owner and has no right to claim ownership of the immovable property rented by or conceded to his debtor who has used his right over the concession as security. The creditor shall not have the rights to claim the right to dispose of the immovable property possessed through a concession by his/her debtor (Sub-Decree #114 Article 9).

・  The certificates of economic land concession shall clearly specify the category of immovable property, its size, location, the identity of the owner of the land, the identity of the concessionaire as well as the duration of the concession (Sub-Decree #114 Article 10).

10.   The Cadastral Committee

The Cadastral Committee was established under 2001 Land Law in order to settle the dispute over unregistered land and to recognize officially the legal ownership.

Article 47 of the 2001 Land Law stipulates the Cadastral Committee shall make decisions on disputes over an immovable property between possessors so that the Committee’s decision shall be deemed final. Ownership of immovable property shall be guaranteed by the State and, for this purpose, the Cadastral Administration under the supervision of the MLMUPC shall have the competence to identify properties, establish cadastral index maps, issue ownership titles, register lands and inform all persons as to the status of a parcel of land in relation to its nature, size, owner and any relevant encumbrances over such parcel (Land Law Article 226).

11.   Limitations on Land Use

“Law on Land Use Planning, Urbanization and Construction” of 1994 regulates land use nationwide in Cambodia. In reality, this Law and various land use plans are very much general so that the investors must check carefully the actual zoning rules before they proceed with the investment projects.