Board of Regulators in Co-Owned Properties REF#6142

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. 

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.