Charge Collection in Co-Owned Buildings REF#6137

Since Cambodia’s real estate market was partly opened to foreign investment following the promulgation of the Law on Providing Foreigners with Ownership Rights in Private Units of Co-Owned Buildings (Law on Foreign Ownership) in 2010, condominium developments have skyrocketed across Cambodia, particularly in Phnom Penh. Condominiums provide an attractive investment opportunity for foreign buyers due to their relatively low price and centralised location, enabling their owners to contribute to and benefit from Cambodia’s rapid economic progress. 

Due to the overall size of condominium developments and the shared nature of their facilities and amenities, condominiums require a significant level of maintenance and management to ensure their condition does not deteriorate. Such properties often require professional management of the co-owned areas and components so that they retain their aesthetics, safety, and function by ensuring maintenance is completed, staff are managed, and fees are collected. These fees can include service charges or maintenance fees which provide for the costs of cleaning, security, and services. In most markets, owners are also required to contribute to a sinking fund for long-term structural upkeep. Sub-Decree No.126 on the Management and Use of Co-Owned Buildings issued in 2009, paved the way for the Law on Foreign Ownership by providing initial guidance on the management of shared buildings.  

Although it is enshrined in co-owned buildings Internal Regulations (IR) and outlined in Sub-Decree No.126 on the Management and Use of Co-Owned Buildings (specifically Article 8, 13 and 14), co-owners frequently neglect, dispute, or refuse to pay building management charges.  

Upon neglect, disputes, or refusal to pay building management charges, there are no legal or regulatory mechanisms to govern how building managers act in response. 

When building management of co-owned buildings cannot collect management charges from co-owners, the building management budget is reduced, meaning costs must be saved. Firefighting and safety systems, elevators, firefighting pumps, and alarms are often selected as areas to save costs because they are less visible to co-owners. However, this compromises the safety of co-owned buildings. 

In the medium to long term, as building management budgets become constrained by non-payment of building management charges, the overall quality and safety of the building declines and co-owned property depreciates in value. This leads to an overall lack of confidence in co-ownership buildings and properties and buyers’ interests are not adequately protected.  This in turn negatively impacts the construction and real estate sectors.

Non-payment of building management charges is widespread.  Local and overseas buyers consider such payment as optional citing any number of reasons to avoid payment.  There is no legal recourse, system, or regulatory mechanism for building management in the cases of non-payment, leading to risks in developing a healthy, fair, and safe co-owned building sector in Cambodia.