In the dynamic landscape of Cambodian real estate, a recent statement by Prime Minister Hun Manet has sparked renewed interest in the concept of perpetual leases. While emphasising Cambodia’s stance against foreign land ownership, the Prime Minister highlighted perpetual leases as a viable alternative for securing land rights. 

Contrary to some media portrayals suggesting this as a new development, perpetual leases have been entrenched in Cambodia’s legal system since the Civil Code’s enactment (2011), continuing a tradition from the earlier “long-term leases” of the Land Law. However, despite their longstanding presence, these leases are often misunderstood, leading to problematic interpretations and applications.

Perpetual leases in Cambodia are intended to be more than mere contractual agreements; they create rights in rem, akin to a title, and are registered with the Cadastral authorities. This classification is significant, yet it frequently gets overlooked in the practical realm of contractual dealings. Often, these leases are terminated in ways that contradict their intended permanence and stability. This prevailing misinterpretation not only undermines the security these leases are meant to provide but also affects the broader investment climate.

In civil law jurisdictions like Japan, provisions relating to real property, unless expressly identified as optional, are regarded as mandatory (jus cogens), meaning they cannot be overridden by individual agreements. This distinction between mandatory and optional provisions is crucial in understanding Cambodia’s legal framework governing perpetual leases. 

The Civil Code’s provisions on perpetual leases are meant to be binding, not subject to alteration through private contracts. However, the misinterpretation of Article 255 of the Civil Code, which implies that ordinary lease provisions apply to areas not covered under the chapter on perpetual leases, has led to a precarious legal situation where many interpret this as allowing contractual clauses to override the Civil Code’s protections. This practice is contrary to the principle of mandatory provisions in real property law (Article 131 and 354).

The economic and legal implications of this situation are significant. It deters foreign investment and disrupts the stability of the real estate market. For Cambodia to maintain a predictable and investor-friendly environment, it is essential for the authorities to issue clear guidelines. These guidelines should reaffirm the nature of perpetual leases as real rights and underscore the supremacy of the Civil Code over individual contractual arrangements, aligning with the principles of mandatory provisions in civil law.

Given the influence of foreign legal systems, particularly Japan’s, on Cambodia’s legal framework, there is merit in looking towards these systems for guidance. Clarity and predictability in property rights, as seen in these countries, can offer valuable lessons for Cambodia in refining its approach to perpetual leases.

As Cambodia continues to evolve its legal and economic landscape, the need for clarity in the interpretation and application of perpetual leases has never been more critical. A definitive stance from the authorities, in line with the principles of mandatory provisions in civil law, will enhance legal certainty. This, in turn, will strengthen investor confidence and pave the way for a more robust and equitable real estate sector in Cambodia.

Anirudh Singh Bhati is a legal researcher based in Cambodia.

The views expressed in this article are solely his own.