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Jan 25, 2018

Land Due Diligence Process


By Sereyrath Kiri

This article was first published in Issue No. 31 of Construction & Property Magazine


A. Objective: Why is it important to know your own objective?

At a very outset of your due diligence (“DD”) process, it is of imperative that you know your objective. Having concrete knowledge about your objective assists you in identifying your scope of work and set a clear direction of your activities. It allows you to be able to build your focus on the whole DD project. Without a clear idea of your goal, you might end up concentrating on aspects that are not of importance or even irrelevance to your ultimate purpose.

B. Types of Property Due Diligence

There are two types of DD on properties:

  • Pre-transfer DD

Before making a commercial decision, the prospective purchaser generally needs to be absolutely clear that the owner is the legal owner of the property fully recognized by relevant authorities, either through ownership or possessory rights under the land law. The property needs to be free and clear of all different types of encumbrances which include liens, mortgages, hypothecs, leases, pledge. Also, it is also equally important to stretch the investigation to formulate information on whether the property is under pending dispute at the courts or any unresolved inheritance problems or situated in any governmental zoning restriction area.

This type of DD requires very thorough examinations of all aspects of property because its finding generally critically shapes the decision of the buyers on that particular transaction. They might choose to give up their intention to acquire the properties if findings reveal some potential problems that affect the current or even the future status of the properties.

  • Post-transfer DD

This type of DD generally is to ensure that the property has been properly transferred according to the law to the intended recipient of the land. The buyers of the property generally undertake this DD before they make the final payment to the sellers. This DD is mostly involved in inquiry with the local, cadastral, and even tax authorities as they are involved in the transfer process.

C. Reviewing of Documents

Whether they are soft or hard title, following information needs to be verified on the titles:

  • Truth of the title, signatures (maybe initials) and the stamps affixed thereon;
  • Whether the copy of the title that we have in hand reflect the current status of title;
  • Type of land, (it is relevant because you want to know whether conversion is possible);
  • Encumbrance on the title (long-term lease, mortgage, servitude);
  • Any zoning or other restrictions in the area which could block any application for a construction permit or a transfer of title.

D. Inquiry

Inquiry is an essential part of DD process. It allows you to confirm some information stipulated in the document as true and up-to-date, to verify some inconsistencies, and to fill in some missing information that has not been previously provided. Inquiry is made through conducting interviews with local and cadastral authorities.

© Sciaroni & Associates 2018

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.

Sciaroni & Associates, one of Southeast Asia’s leading professional services and investment advisory firms, has been providing skilled counsel and knowledgeable business insights for over two decades. Based in Cambodia with legal offices in  Laos and Myanmar, our experienced team of advisors brings considerable general and sector-specific expertise to the challenges confronting companies doing business in emerging markets.  We are proud that our clients comprise many of the world’s premier companies, banks, financial institutions, governments and global development organizations.

For more information please visit www.sa-asia.com or contact us at info@sa-asia.com


 
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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.
© Sciaroni & Associates 2015
Street Address: No. 24, Street 462, Sangkat Tonle BassacKhan Chamkarmon, Phnom Penh, Cambodia
Mailing Address: P.O. Box 1153 Phnom Penh Cambodia
Telephone: +855 23 210 225 Facsimilie: +855 23 213 089 Email: info@sa-asia.com