Board of Regulators in Co-Owned Properties REF#6142

22 Sep 2023 | Real Estate & Construction Issue Tackled

Last modified date: 22 Sep 2023

Issue Description

Sub-Decree No.126 on the Management and Use of Co-Owned Buildings issued in 2009 requires co-owned building to implement internal regulations and establish an executive committee to oversee property matters. However, there is a legal quagmire when it comes to the legal status of the ‘Management Board’ or ‘Executive Committee’. They are a non-profit organisation and building management funds are used to for the maintenance and upkeep of the co-owned building.  There is no dividend or profit.   

However, Prakas No.636 on the Business Management of Evaluation Service Provision and Immovable Property Service requires a property management company to apply for a Property Management Licence. 

Currently, this “Management Board” or “Executive Committee” has no applicable legal status.  They are rejected as non-profit organisations. They are not a “for-profit property management company”.  If they apply to become a “property management company” they are faced with profit tax and regulatory and licencing costs. They are also subjected to many of the same requirements as a “for-profit” company, although they are not. 

Impact on business

The lack of an applicable legal status for “Management Boards” / “Executive Committees” creates a grey market. “Management Boards” or “Executive Committees” often choose to face the legal consequences of not registering instead of being faced with profit taxes and regulatory and licence costs.

The principal risk is these “Management Boards” or “Executive Committees” may at times be responsible for large sums of money required for co-owned building maintenance and upkeep.  Without an applicable legal status to regulate these bodies, risk from theft from building management funds heightens which could negatively impact the co-owned building real-estate and construction sectors and heighten a perception of risk in investing in co-owned properties in Cambodia. 

Recommendation

  • Create an applicable legal status for boards of regulators in co-owned buildings.

We recommend that the Royal Government of Cambodia create an applicable legal, licence and tax status for “Management Boards” or “Executive Committees” that reflects their status as not-for-profit organisations and not “for profit” property management agencies/companies.  This would increase the registration of such “Management Boards” or “Executive Committees”, strengthen the regulatory environment, provide greater confidence and reduce risk.

Dialogue with

Royal government of Cambodia

Initiative from Eurocham: The issue has been raised by the Real Estate & Construction Committee within The White Book edition 2024 in the Recommendation No. 56.

No response from the Royal Government of Cambodia

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