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Brief legal background of Hypothec in Cambodia under Civil Code and a current update on registration
By Sereyrath Kiri
This article was first published in the January-February 2017 issue of Construction & Property Magazine
Under the Civil Code of the Kingdom of Cambodia, a hypothec, a mortgage under Cambodian law, is created through an agreement reached between a creditor and a debtor or a third party that provides immovable property as security for an obligation. A hypothee shall have the right to receive the performance of his or her claim prior to other junior creditors from the sale of the immovable property that the debtor or the third party provided to secure their obligation.
A hypothee may not assert the hypothec against a third party (i.e. a party who is not the hypothecator) unless the instrument creating a hypothec is in the form of an authentic deed and registered with the land registry. A right of hypothec may also be hypothecated in order to secure debt. This is referred to as 'sub-hypothecation'.
A hypothec over land extends to all things that are attached to and form part of the land comprising the object of the hypothec at the time of its creation, including buildings thereon. It also extends to things that attach to the land after the hypothec is created. However, it does not extend to a building owned by a third party on the hypothecated land.
Where multiple hypothecs have been created on an immovable property in order to secure multiple debts, the order of their priority shall be based on the chronological order of their registration.
In the event of a failure to perform on a debt, a hypothee may apply to the court for compulsory sale of the hypothecated property. Where the hypothecator or a third party erects a building on land after it is hypothecated, and the hypothecator owns that building, the hypothee may demand the compulsory sale of the building together with the hypothecated land.
Regarding certification of hypothec agreements, a Joint Prakas between Ministry of Land Management, Urban Planning, and Construction and Ministry of Interior dated 15 June 2016 which amends Clause 9 of their previous Joint Prakas dated 09 September 2005, among other things, requires that hypothecs be certified by the chief of commune or Sangkat where the secured property is located.
Sciaroni & Associates Real Estate Practice Group has decades of experience in providing advice to clients doing business in all aspects of the real estate and construction sectors in the Kingdom of Cambodia. We provide counseling on conveyances, including drafting of purchase and sales agreements, due diligence, long term lease registration, hypothecs registration, construction permit, title conversion, property transfer, property consolidation, economic land concession and real estate license. The firm also completes title searches and coordinates the filing of legal documents for all types of real estate transactions.
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Sciaroni & Associates is a leading professional and investment advisory firm doing business in Southeast Asia since 1993. Based in Cambodia with legal offices in Laos and Myanmar, we provide experienced advice and business insights to many of the world’s leading companies, governments, economic think tanks, global development funds, international NGOs and the Royal Government of Cambodia in accordance with strict international standards.
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