How to Avoid Buying a Cambodian Condominium Apartment with Outstanding Debts

Prepared by the NovAsia Editorial Team

A completed resale apartment can appear straightforward. The individual title has been issued, the seller holds the keys, the previous tenant has moved out and the furniture is included. The buyer checks the price, ownership record and physical condition.

After completion, the condominium management may report USD 4,800 of unpaid service charges, another USD 2,000 for an approved special assessment, an outstanding parking account and a tenant deposit that was never transferred. A month later, the new owner receives a façade-repair invoice arising from a decision made before the sale.

Some of these obligations may legally remain the seller's personal debt. In practice, the buyer owns an apartment inside a system that records charges by unit number, controls access, maintains the owner register and enforces internal rules.

Title due diligence is therefore necessary but not sufficient. A completed condominium apartment also needs an operational and financial clearance review at a clearly defined date.

The central closing principle is simple: no known liability should remain undefined between the parties. It should be paid by the seller, deducted or credited in the price, covered by a holdback, or expressly accepted by the buyer.

The Buyer Enters the Building's Existing Governance System

The internal regulations for a co-owned building form part of the framework that governs each private unit and its relationship with the common property. A new owner acquires more than walls and furniture. They also enter a system covering:

• maintenance of common property;
• contribution to expenses;
• voting;
• repairs;
• parking and facilities;
• access;
• restrictions;
• interaction with management.

The sale agreement should therefore address not only the seller's personal promises, but also the apartment's ledger, decisions already adopted by co-owners and current compliance requirements.

A general statement that "all seller debts remain with the seller" may not explain how the buyer will obtain a clean management account, access cards and registration with the building.

Separate the Different Types of Liability

Before closing, classify the amounts rather than relying on one broad statement that the apartment is debt-free.

Seller's Personal Liability

This may include an agent's commission, a fee owed to the seller's personal property manager or a penalty under a separate agreement. It may not pass to the buyer, but it can still delay documents, keys or money.

Apartment Ledger Charge

Service charges, parking fees, sub-metered utilities, access cards and some assessments are often accounted for by unit number. Management may expect the ledger to be cleared before registering the new owner.

Co-Owner Obligation

A special assessment, reserve contribution or decision of the owners may be allocated by reference to ownership on a stated date. The sale contract should distribute the economic burden expressly.

Government Tax or Registration Cost

Property tax, penalties, transfer-related tax and cadastral charges are governed separately and require current confirmation.

Tenant Liability

A security deposit, prepaid rent, outstanding repairs and an unresolved move-out do not normally appear in the condominium's clearance letter, but they may pass to the buyer economically.

One sentence stating that there are no debts does not cover all five categories.

Check the Full Ledger, Not the Latest Receipt

A seller may produce a recent receipt for USD 600. It proves one payment, not a zero balance.

Management may have allocated that payment to:

• the oldest arrears;
• late fees;
• utilities;
• parking;
• a special assessment;
• the current month;
• legal costs.

Request a complete owner ledger showing:

• apartment number and registered owner;
• opening balance;
• billing period;
• service-charge rate;
• area or share used in the calculation;
• all charges;
• payments;
• adjustments;
• penalties;
• assessments;
• credits;
• disputed items;
• closing balance;
• the date through which it is valid.

Payment allocation is important. A transfer labelled "June service charge" may still have been applied to older arrears under the building's accounting policy.

Establish One Clear Cut-Off Date

A resale transaction can involve several dates:

• signing;
• deposit payment;
• economic handover;
• key release;
• final payment;
• title registration;
• management registration;
• transfer of rent.

If different obligations use different dates, a gap or overlap can appear.

The sale documents and closing statement should allocate:

• service charges;
• utilities;
• rent;
• property tax;
• parking;
• special assessments;
• income and tenant deposits;
• risk of physical damage.

For example, the seller may remain responsible until 23:59 on the economic handover date and the buyer from the following day. If title registration occurs later, the contract should explain responsibility during the interim period.

A Prepaid Service Charge Is an Asset Only if Management Confirms It

A seller may have paid a year in advance and ask the buyer to reimburse the unused portion. That can be reasonable only if management confirms that the credit exists and will transfer to the new owner.

Check:

• exact amount;
• months covered;
• whether it is refundable;
• whether it remains with the apartment;
• deductions already made;
• any refund request by the seller;
• expected tariff change.

A screenshot of the seller's bank transfer does not prove a usable credit. The money may have been applied to old debt or another account.

Management's written confirmation should identify the amount that will remain available after the change of ownership.

An Approved Special Assessment May Not Yet Be Overdue

Suppose the owners approve major work in March, payable in four instalments from June to December. The seller completes the sale in May and says that the account has no arrears.

The current overdue balance may technically be zero, but the approved obligation already exists and affects value.

Ask about:

• approved assessments;
• proposed assessments;
• payment timetable;
• amount allocated to the apartment;
• scope of work;
• voting result;
• selected contractor;
• planned use of reserves;
• possible cost increases;
• related litigation;
• insurance recovery.

The contract should state whether an assessment approved before closing will be paid by the seller, accepted by the buyer, shared, credited in the price or secured by a holdback.

Proposed Capital Work Matters Even Before a Formal Invoice

A technical report may recommend USD 500,000 of waterproofing and an owner meeting may be scheduled for the following month. No assessment has yet been approved, so the seller may truthfully say that no debt exists.

Economically, the buyer faces a likely charge shortly after completion.

Due diligence should therefore include:

• recent meeting minutes;
• engineering reports;
• draft budgets;
• reserve information;
• contractor proposals;
• owner notices;
• insurance claims;
• developer defect claims;
• litigation or technical disputes.

A clearance letter is a snapshot of the unit account. It is not a substitute for examining the building's future capital risk.

The Reserve Contribution May Be Unpaid or the Reserve May Be Depleted

The seller may never have paid the initial reserve contribution. Alternatively, their own contribution may have been paid, while the building's reserve has already been consumed by major work.

Check:

• initial contribution allocated to the apartment;
• evidence of payment;
• annual reserve charges;
• present fund balance;
• arrears attributed to the unit;
• permitted uses;
• approved commitments;
• forthcoming work;
• developer contribution;
• bank statement;
• audit or financial report.

"Sinking fund paid" answers only one question. It does not establish that the money is still available or adequate.

Utilities Require Separate Reconciliation

Electricity and water may be billed:

• directly by a utility provider;
• through condominium submeters;
• by the developer;
• through the seller's personal property manager;
• as part of a rental package.

Collect:

• meter numbers;
• closing readings;
• dated photographs;
• current tariffs;
• deposits;
• arrears;
• connection charges;
• common utility allocations;
• account holder details;
• transfer procedure.

The seller may have paid the direct utility bill but still owe an internal condominium account. Management may also hold a utility deposit that should be transferred or refunded.

Parking, Cards, Keys and Violations Can Carry Balances

An apartment may have additional obligations for:

• parking;
• access-card deposits;
• replacement of a lost key or remote;
• unauthorised works;
• a retained renovation deposit;
• storage;
• damage to common property;
• contractor access;
• tenant registration.

A financial statement may show no cash balance while a technical requirement to restore an unauthorised alteration remains open.

Request written confirmation of both:

1. the account balance; and
2. unresolved rule breaches, restoration work or enforcement matters.

Parking itself may be a titled right, common allocation, lease, licence or management permit. "Parking included" should not be accepted without checking the legal and financial basis.

The Seller's Personal Manager Holds Separate Money

A seller may use a private property-management company that holds:

• rent;
• the tenant's deposit;
• prepaid rent;
• a repair reserve;
• keys;
• utility deposits;
• tax money.

The condominium management does not account for these sums.

Obtain a final statement and handover from the personal manager. If the buyer retains the same company, a new agreement should formally transfer balances, documents, authority and responsibility rather than relying on informal continuity.

A Tenant Deposit Is a Liability, Not Seller Income

Where the tenant remains, the security deposit should be transferred to the buyer or credited in the closing calculation. The new owner will have to return it when the tenancy ends, subject to valid deductions.

Check:

• tenancy agreement;
• deposit amount;
• person or company holding it;
• agreed deductions;
• evidence of any refund;
• move-out report if the tenant left;
• open dispute;
• prepaid rent;
• utility settlement.

A seller who has spent the deposit transfers a future cash obligation without transferring the corresponding money.

Tenant Arrears Are Not Automatically Worth Their Face Value

A tenant may owe the seller USD 1,200. The seller may suggest that the buyer can collect it later and treat the full amount as an asset.

A valid transfer may require:

• written assignment;
• notice to the tenant;
• supporting ledger;
• disclosure of disputes;
• price treatment.

The amount may be difficult to recover. The tenant could have a repair claim or dispute the calculation. Arrears should not be valued at face value without evidence and a clear legal transfer.

Check Property Tax and Transfer Costs Separately

The buyer should verify:

• registration of the apartment in the tax system;
• taxpayer or property reference;
• latest receipt;
• periods paid;
• accuracy of the property description;
• taxpayer name;
• penalties or arrears;
• current General Department of Taxation guidance;
• transfer-related tax treatment;
• any current concession;
• required filing documents.

Tax rules and temporary relief can change. A developer's old handover estimate does not replace a current check for a resale transaction.

The contract should allocate:

• transfer tax or stamp duty;
• cadastral charges;
• legal fees;
• translation;
• valuation;
• bank fees;
• management's owner-transfer charge;
• agent's commission;
• past property-tax arrears.

A government fee and the seller's private arrears are not the same thing, even if the parties negotiate who bears the economic cost.

Title Encumbrances and Building Debts Are Separate Reviews

A clean management clearance does not prove that the title is free from:

• a hypothec;
• attachment;
• ownership dispute;
• court restriction;
• corporate authority issue;
• registered lease or other burden.

Conversely, a clean cadastral search does not disclose:

• service-charge arrears;
• special assessments;
• parking;
• sub-metered utilities;
• renovation deposits;
• rule breaches;
• tenant obligations.

Both reviews are required:

1. ownership and registered encumbrances;
2. operational, tax and contractual balances.

Neither should be used as a substitute for the other.

The Clearance Letter Should Be Detailed and Recent

A useful letter from condominium management should identify:

• exact apartment;
• registered owner;
• accounting period;
• service-charge balance;
• utilities;
• parking;
• reserve contributions;
• special assessments;
• penalties;
• credits;
• unresolved violations;
• approved future payments;
• validity date;
• authorised signatory.

It should be updated immediately before completion. A month-old letter may omit a new bill, owner resolution or utility consumption.

The buyer or their lawyer should obtain confirmation directly from management rather than relying only on a forwarded document.

Use a Holdback for Genuine Uncertainty

Some amounts cannot be finalised on the completion date, including:

• the last utility bill;
• cost of rectifying damage;
• tax;
• an assessment variation;
• a tenant-deposit dispute;
• the outcome of a building audit.

A proportionate part of the price can be retained through a genuinely agreed and controlled mechanism.

The arrangement should state:

• amount;
• holder;
• release conditions;
• deadline;
• required evidence;
• dispute procedure;
• interest, if applicable;
• return of any unused balance.

This should not be called escrow unless an independent holding arrangement and release conditions genuinely exist. A contractual holdback managed by a lawyer or another agreed mechanism should be described accurately.

The Closing Statement Should Show Every Material Line

A practical summary may look like this:

The complete statement should also address utilities, rent, tax, transfer costs, parking, management balances and any holdback.

The allocation is negotiable. The value of the statement is that nothing material remains implicit.

Register the Buyer with Management Immediately

After completion, the buyer should receive:

• the internal regulations;
• owner-registration form;
• confirmation of their contribution share;
• voting information;
• payment details;
• management contacts;
• a fresh unit statement;
• current budget;
• approved assessment information.

Delayed registration can mean that notices continue to go to the seller and the buyer misses meetings, invoices and deadlines.

The objective is a documented opening balance of zero, subject only to liabilities expressly accepted in the contract.

Seller Warranties Should Survive Completion

The sale agreement may include representations that:

• no undisclosed arrears exist;
• all approved assessments have been disclosed;
• no unresolved rule breach exists;
• the tenant deposit is correctly stated;
• no undisclosed amount is owed to the personal manager;
• taxes are paid to the stated extent;
• no unauthorised works have been carried out;
• all open claims have been listed;
• supplied information is accurate.

The survival period and remedy matter. If a concealed invoice appears after completion, the buyer needs a contractual claim rather than only an argument about what the parties expected.

A broad "as is" clause without specific financial warranties materially weakens the buyer's position.

Agents Can Coordinate but Should Not Replace Direct Verification

An agent may gather documents, communicate with management and organise the closing. They will not ordinarily control:

• the condominium's accounting ledger;
• the tax file;
• the cadastral register;
• the tenant's deposit;
• the reserve bank account;
• board minutes.

Confirmation should come from the relevant primary source: condominium management, cadastral authority, tax administration, bank, tenant or personal manager.

This is not an accusation of dishonesty. The agent's role is to facilitate the transaction; the buyer and legal adviser must verify the risk.

Warning Signs

Pause and seek further evidence where:

• the seller shows only one receipt;
• management refuses a detailed ledger;
• the clearance predates closing by too long;
• meeting minutes are unavailable;
• major work is being discussed but "there is no assessment yet";
• prepaid charges are supported only by a bank screenshot;
• a tenant remains but the deposit is omitted;
• closing meter readings are not taken;
• payment is demanded before direct confirmation;
• unauthorised works remain unresolved;
• the parties use different cut-off dates;
• the contract contains no warranties or holdback mechanism.

One issue does not necessarily make the purchase unsafe. Several together indicate a high risk of hidden balances.

A Safer Closing Sequence

1. Verify the title and seller's authority.
2. Obtain the internal regulations.
3. Request the full apartment ledger.
4. Review recent minutes and future capital work.
5. Verify reserve and special assessments.
6. Reconcile utilities and deposits.
7. Resolve parking, cards and violations.
8. Review the tenancy and tenant deposit.
9. Obtain the personal manager's closing statement.
10. Check tax receipts.
11. Set the cut-off date.
12. Prepare an itemised closing statement.
13. Use a proportionate holdback where necessary.
14. Refresh confirmations immediately before payment.
15. Register the buyer and obtain a zero opening balance.

The sequence may change where a bank or title-registration process is involved, but the principle remains: material money should be released only after known liabilities have been allocated in writing.

The Practical Conclusion

A clean title is essential when buying a resale apartment, but it does not prove that the apartment has no service-charge, assessment, utility, tax, parking, management or tenant liabilities.

The latest receipt is not a ledger. A clearance letter does not reveal every future repair. A cadastral search does not show the tenant deposit.

A controlled closing uses one cut-off date, direct and recent confirmation, a detailed settlement statement, seller warranties and a proportionate holdback for unresolved sums.

The buyer should begin their relationship with condominium management with a confirmed opening balance, the current budget, the internal regulations and knowledge of all approved decisions.

This article is for general information and is not legal, tax or accounting advice. Title, taxes, building liabilities and the sale agreement should be reviewed for the specific apartment and transaction date.

Sources

1. Royal Government of Cambodia — Sub-Decree No. 126 on the Management and Use of Co-Owned Buildings.
2. Royal Government of Cambodia — Annex to Sub-Decree No. 126 containing model internal regulations.
3. General Department of Taxation of Cambodia — current guidance on tax on immovable property and transfer-related tax or stamp duty.
4. EuroCham Cambodia — materials on collection difficulties and practical condominium-management issues.
5. RICS — professional principles for residential service-charge management, used as comparative guidance rather than Cambodian law.

Frequently asked

Is a management clearance letter enough?

No. It confirms only the categories and date stated in the letter. The buyer should also check forthcoming assessments, meeting minutes, reserve funding, taxes, utilities, the tenancy and title encumbrances.

Who pays a special assessment approved before sale but due afterwards?

The sale agreement should allocate it expressly. An approved assessment affects the economics of the apartment even before its payment date, so the parties may agree seller payment, a price credit, a holdback or an informed buyer assumption.

Can the buyer reimburse the seller for prepaid service charges?

Yes, but only after the condominium management confirms in writing that the credit exists, remains attached to the apartment and will be available to the new owner.

What happens to the deposit of a tenant who remains in the apartment?

The money should be transferred to the buyer or credited in the closing statement because the new landlord assumes the future obligation to return it, subject to the tenancy terms.

Why might part of the purchase price be retained temporarily?

A proportionate holdback can protect the buyer where a final utility bill, tax, repair cost, assessment variation or tenant dispute cannot be resolved on the closing date. Release conditions should be defined in writing.