The Cambodian legislature recently approved a sub-decree that will allow foreigners to own 70% of co-owned buildings. This new policy compliments the recent repeal of the prohibition against any foreign ownership of private units above the ground floor, under the hope that such changes will spur foreign investment. Given these new circumstances, it might behoove the aspiring non-Cambodian property mogul to review his or her rights of co-ownership and to consider a few tips.
The rights of co-ownership embraced by the 2009 Law on the Management and Use of Co-Owned Buildings are similar to those of Thailand, Australia, and the UK, as well as many other jurisdictions. Co-owners receive an ownership right to their private unit and have ‘use rights’ to common areas, meaning that co-owners share the benefits and maintenance costs of the common areas. Common areas include courtyards, stairs, shared walls, entrance ways, etc…
This split system of ownership also means that a co-owner’s rights are limited in several respects. The 2009 law requires any building with five or more co-owners to have a management board composed of co-owners that must establish and follow a set of internal regulations for the building’s occupants. Any change in established regulations requires an absolute majority approval from all co-owners. The law provides an example of acceptable, minimum standard, regulations. Constraints placed upon co-owners, generally fall into two categories. The first, use, deals with what the co-owner can and cannot do in their private units, e.g. the co-owner can’t modify their unit in a way that will damage the structure of the building. The second, alienation, deals with how a co-owner may transfer his or her interests; e.g. the co-owner’s right to lease (or not), and the duties of the transferee to pay association fees.
Although the 2009 law is similar to the laws seen in other jurisdictions, it lacks definition on certain rights that have been established elsewhere. For instance, the law fails to mention a co-owner’s right to information. Such a right would be useful in verifying the building’s financial stability or insurance policy. The 2009 law also fails to discuss the co-owner’s right to be free from nuisance or discrimination.
Furthermore, before a purchaser rushes out to buy up property in a co-owned building, the purchaser should ask five questions.
First, is the building’s management board functioning properly? A good management board will collect maintenance fees on time to ensure proper maintenance of common areas and will ensure compliance with internal regulations from other co-owners.
Second, is the building’s maintenance reserve fund adequate? A building with an adequate reserve fund will have common areas kept in good condition and will not need to make special assessments often.
Third, are the building’s internal regulations something by which you can live?
Fourth, is the building adequately insured? A good policy should cover the estimated cost of rebuilding and bringing the building up to code if necessary.
Finally, are the owners satisfied? Simply talking with the owners can give you a good feel for whether that building is right for you.
The flood gates are open. Non-Cambodians can now privately own significant portions of co-owned buildings in Cambodia. However, although the system of co-ownership seems similar to those in several countries, there are still gray areas where a co-owner’s rights aren’t so certain. And in general, prospective buyers would be wise to follow the old adage: Look before you leap.