Lease Renewal in Phnom Penh: Raise the Rent or Keep a Reliable Tenant?

Prepared by the NovAsia Editorial Team

Raising the rent appears to be the simplest way to improve an apartment's return. The tenant pays USD 700 and nearby listings show USD 750, so the owner appears to be losing USD 50 each month.

One empty month, however, absorbs fourteen months of that increase. Add agent commission, cleaning, minor repairs and a possible rent-free concession, and the financial advantage may disappear for two years or more.

A renewal decision is therefore not a negotiation about one number. The owner is comparing two strategies:

• retain predictable income from a known tenant; or
• return the apartment to a competitive Phnom Penh rental market.

The answer depends on achieved rent, tenant behaviour, apartment condition, genuine transactions in the same building and the complete cost of changing occupants.

Begin renewal discussions before the final weeks

Waiting until the lease is almost over creates both legal and commercial risk.

Cambodian Civil Code provisions on building leases include a three-month rule relevant to refusal of renewal, while leases without a fixed term can also involve a three-month termination period unless a validly agreed longer period applies. The exact effect depends on the executed contract, the facts and the authoritative Khmer text.

The practical lesson is simple: silence should not be treated as a reliable way to end or renew a lease.

Starting approximately 60–90 days before expiry usually gives enough time to:

• ask whether the tenant wishes to remain;
• collect evidence on comparable achieved rents;
• inspect the apartment;
• resolve repair requests;
• agree the new rent and term;
• begin marketing if no renewal is likely.

For an executive apartment, corporate lease or narrowly targeted unit, discussions may need to start even earlier.

The first conversation does not need to begin with an ultimatum. The owner or manager should first learn:

• whether the tenant intends to stay;
• the preferred term;
• whether the household has changed;
• whether repairs or building issues affect the decision;
• how quickly the tenant can commit.

A tenant already planning to move requires a different strategy from one ready to sign another twelve months immediately.

Neighbouring advertisements do not prove the new market rent

Owners often open listing portals, find higher asking rents and assume that the apartment is underpriced.

An advertised rent is an expectation, not proof of a completed deal. A competing unit may:

• remain vacant for months;
• include internet, cleaning or parking;
• offer a free month;
• have a better view, floor or fit-out;
• be a serviced apartment rather than a private condominium unit;
• be duplicated by several agents;
• already be unavailable.

Renewal evidence should be gathered in this order:

1. Recent new leases and renewals in the same building.
2. Units with the same layout, size, view and furnishing level.
3. Active listings supported by actual viewing and negotiation data.
4. Comparable buildings serving the same tenant segment.
5. Wider district ranges as background only.

Two apparently identical one-bedroom apartments may have different effective rents. One may lease for USD 750 without incentives. Another may advertise at USD 780 but include one free month, producing an effective twelve-month average of about USD 715 before costs.

Serviced apartments also require separate treatment because the rate may include reception, cleaning, linen, utilities and flexible terms.

A reliable tenant has measurable financial value

Payment history is not merely a personal characteristic. It affects the stability of cash flow and the amount of management work required.

A tenant who pays on time, looks after the property, reports leaks early and cooperates with reasonable inspections may be worth more than a replacement offering a slightly higher nominal rent.

The value is especially clear for an overseas owner. Tenant turnover can require:

• advertising and viewings;
• screening candidates;
• new inventory and handover records;
• cleaning and repairs;
• agent commission;
• vacancy;
• additional supervision of the manager.

Even where some tasks are included in a management fee, the financial exposure remains with the owner.

Assess the tenant using evidence:

• number of on-time and late payments;
• any arrears and how they were resolved;
• condition at the last inspection;
• unauthorised occupants, pets or subletting;
• quality of communication;
• access for repair and inspection;
• whether the payment structure matches the lease;
• willingness to sign a reasonable new fixed term.

A difficult tenant does not become valuable simply because the apartment is occupied. Repeated arrears, serious damage, unauthorised subletting or inability to gain lawful access may justify non-renewal even where vacancy is possible.

At the same time, repair requests should be assessed fairly. A tenant is not unreliable because the owner has failed for months to replace a poor mattress or repair a defective air-conditioner.

One vacant month can consume a small increase

A useful calculation is:

Payback period for the rent increase = turnover losses / monthly rent increase

Current rent: USD 700.

Proposed increase: USD 50.

One vacant month costs USD 700.

700 / 50 = 14 months

The owner needs fourteen months at the new rate merely to recover one month of vacancy.

Add other turnover costs:

At a USD 50 monthly increase, the replacement tenant must remain for 24 months before the extra rent only recovers the USD 1,200 turnover loss. Management fees, tax and future repair can extend the period.

If the current rent is genuinely far below achieved comparable rents, the calculation changes. An increase of USD 150 against the same USD 1,200 cost has a simple payback of approximately eight months.

The complete cost of changing tenants may include:

• vacancy;
• agent or letting commission;
• rent-free periods and concessions;
• cleaning, painting and repairs;
• furniture and appliance replacement;
• service charges and utilities during vacancy;
• additional manager visits;
• the risk of a weaker or short-lived replacement tenant.

The relevant figure is additional net income, not the increase written in the lease.

Renewal terms can be structured more flexibly than a yes-or-no rent demand

Moderate increase for a new fixed term

For example, rent increases by USD 25 and is fixed for another twelve months. The tenant receives certainty and the owner avoids remarketing risk.

Early renewal

The owner offers to confirm the next term two or three months early at the existing rate or with a nominal increase. The commercial benefit is certainty rather than maximum price.

Reallocation of included costs

Where the old rent includes internet, cleaning or unlimited utilities, the parties may keep the base rent close to its current level while moving variable expenses to transparent direct or metered payment.

Repair in place of a steep increase

A new mattress, blackout curtains or replacement of a noisy air-conditioner may preserve a good tenant and protect the apartment. The work should have a defined scope and completion date.

Stepped rent

The rent may remain unchanged for the first months of a weak period and rise later. The dates and amounts must be precise.

Longer term for a concession

A tenant may accept a smaller annual increase in exchange for an 18- or 24-month term, while the owner reduces turnover risk.

Fixed-term and open-ended structures serve different goals

A new fixed-term lease gives clearer income planning and an opportunity to reconfirm:

• rent and payment dates;
• authorised occupants;
• deposit;
• inventory;
• repair responsibilities;
• pets, parking and subletting;
• notice and early termination.

This is often the clearest structure where the owner does not plan to sell, renovate or move into the apartment.

A lease without a fixed term offers more flexibility where the owner is considering sale, major work or personal use. That flexibility does not mean the apartment can be recovered instantly. The applicable notice procedure must be understood and written clearly.

Month-to-month occupation also does not mean the rent can be changed by an informal message at any time. The lease should state the notice period, effective date and tenant's right to decide whether to continue.

The deposit should be confirmed, not assumed

A weak renewal file consists of a short message saying “same lease, new rent”. A stronger document records the continuing deposit.

Confirm:

• amount;
• currency;
• actual holder;
• original receipt or transfer;
• whether the sum remains adequate;
• whether any part has been applied or disputed;
• who will return it at the end of the renewed tenancy.

The parties may:

• continue the existing deposit unchanged;
• increase it proportionately;
• return the old deposit and collect a new one;
• add a separate pet or key deposit where properly agreed.

Whatever structure is chosen must match the manager's ledger and bank evidence.

Conduct a condition review before renewal

A short inspection before renewal helps to:

• record ordinary wear;
• identify tenant-caused damage;
• schedule owner maintenance;
• update the inventory;
• identify improvements affecting the tenant's decision;
• avoid postponing a known problem into the next term.

The inspection is not an excuse to make premature deductions from the deposit. It is a new baseline and an operational plan.

A renewal document should check:

• parties and authorised occupants;
• new term and future notice dates;
• rent, due date and payment account;
• deposit and any prepaid rent;
• service charges, utilities, internet and cleaning;
• agreed repairs and deadlines;
• access and inspection rules;
• pets and subletting;
• early termination;
• sale and viewing procedure;
• authorised signatures.

A complete new lease is not always necessary, but the extension should identify exactly which original terms continue and which are replaced.

Higher owner costs do not automatically increase tenant rent

An increase in service charge, insurance premium or maintenance cost can justify a commercial review. It does not automatically transfer the cost to the tenant.

Check who pays each item under the current lease and whether the allocation changes at renewal.

Cambodia's General Department of Taxation lists Prakas No. 169 MEF.PrK.GDT on Tax on Property Rental as valid. The published framework uses a 10% rate within its scope, but the exact treatment depends on the owner's and tenant's status and the specific transaction.

The owner should calculate the renewal on the relevant gross and net basis rather than simply adding a tax percentage to the rent without reviewing the documents.

Corporate tenants need a longer decision runway

A company may require:

• budget approval;
• procurement or purchase-order process;
• updated supplier documents;
• legal review;
• approval of the employee's next assignment;
• new signing authority;
• tax and invoice confirmation.

Renewal discussions may need to start 90–120 days before expiry. A verbal statement from the occupant is not the same as approval by the corporate tenant.

The owner should clarify whether:

• the company remains the tenant;
• the employee will change;
• a new occupant needs screening and building registration;
• the corporate guarantee continues;
• the company can terminate when employment ends.

The manager should prepare a renewal recommendation, not merely forward a tenant message

A useful manager report includes:

• current contractual and effective rent;
• payment history;
• condition and unresolved repairs;
• achieved comparables;
• current competing supply;
• estimated vacancy and turnover cost;
• recommended rent and term;
• minimum acceptable terms;
• deadline for a decision;
• fallback marketing plan.

The owner should be able to see why the manager recommends USD 725 rather than USD 750 or no increase.

If the manager is paid a new letting commission when the tenant changes, that conflict should be recognised. The manager should not push turnover solely because it creates another fee.

When an increase is commercially justified

An increase is more defensible where:

• the current effective rent is materially below achieved close comparables;
• the apartment is in good condition;
• the tenant wants a longer commitment;
• the new rent remains attractive compared with the cost and inconvenience of moving;
• vacancy in the building is limited;
• the manager has real evidence of replacement demand.

Keeping the current tenant is often stronger where:

• the difference from market is modest;
• the building has many competing units;
• a new letting commission and repair are likely;
• the tenant pays reliably and protects the property;
• the owner lives overseas and values stability.

When renewal itself may be the wrong choice

Non-renewal may be reasonable where there are:

• repeated serious arrears;
• prohibited subletting;
• material damage or dangerous use;
• persistent breach of building rules;
• obstruction of lawful access;
• a confirmed sale, renovation or owner-occupation plan;
• an incompatible household or use that cannot be regularised.

The owner still needs to follow the lease, applicable notice requirements and lawful possession procedures. A commercial decision not to renew does not justify self-help eviction.

Renewal decision matrix

The matrix does not make the decision automatically. It forces the assumptions to be visible.

Worked example

Current tenant:

• rent: USD 700;
• pays on time;
• wants another twelve months;
• accepts USD 725;
• no major turnover work required.

Alternative strategy:

• advertise at USD 775;
• expected negotiated rent: USD 750;
• expected vacancy: one month;
• letting and preparation cost: USD 500.

Additional monthly rent over the renewed USD 725 option is USD 25.

Turnover cost is approximately USD 1,200.

1,200 / 25 = 48 months

The new tenant would need to remain four years merely for the extra USD 25 to recover the turnover cost, before considering risk and tax. Retaining the existing tenant is financially stronger in this example.

If a replacement can reliably be secured immediately at USD 850 with minimal cost, the result changes. The point is to calculate rather than assume.

Renewal negotiation sequence

90 days before expiry

Review the lease, notice deadline, payment history, comparables and owner plans.

75 days before expiry

Ask the tenant's intention and identify unresolved repairs.

60 days before expiry

Present the commercial proposal and term options.

45 days before expiry

Agree the principal terms or begin controlled marketing.

30 days before expiry

Complete inspection, deposit confirmation and documents.

Before the new term begins

Obtain signatures, payment instructions, building updates and any corporate approvals.

The exact timetable should follow the actual lease and legal advice.

Common mistakes

• treating advertised rent as achieved market rent;
• waiting until the final weeks;
• increasing rent without resolving defects;
• ignoring vacancy and letting commission;
• giving a long-term discount with a free early-exit right;
• failing to confirm the deposit;
• allowing renewal through informal messages only;
• not updating occupants and building registration;
• confusing serviced-apartment rates with private-unit rents;
• replacing a reliable tenant for a very small premium;
• retaining a genuinely problematic tenant solely to avoid vacancy;
• failing to document tax and payment changes.

Conclusion

The central question in a renewal is not whether the owner can ask for more. It is whether the additional net income is likely to exceed vacancy, turnover cost and tenant risk.

A modest increase can be appropriate where the current rent is below proven comparable transactions and the tenant values continuity. Keeping the rate stable or making only a small adjustment can be the better investment decision where the tenant is reliable and replacement costs are high.

The strongest renewal records the term, rent, deposit, occupants, repairs, payment structure and future notice dates in one coherent document.

This article is for general information and is not legal, tax or financial advice. The executed lease, official Cambodian law, current market evidence and the parties' circumstances should be reviewed for each renewal.

Sources

1. JICA Legal and Judicial Development Project — Civil Code of Cambodia, Articles 612–615 on expiry, refusal of renewal and leases without a fixed term.
2. Knight Frank Cambodia — Cambodia Real Estate Highlights H2 2025, used for current Phnom Penh condominium and serviced-apartment market context.
3. General Department of Taxation of Cambodia — Prakas No. 169 MEF.PrK.GDT on Tax on Property Rental, dated 20 March 2024 and listed as valid.
4. Bun & Associates — Cambodian real-estate law and practice materials used for contextual discussion of rent changes, lease costs, utilities and termination.

Frequently asked

How far in advance should lease-renewal discussions begin?

Starting 60–90 days before expiry is often practical, but the notice provisions in the lease and the Cambodian Civil Code rules relevant to a building lease should be checked.

Is it worth replacing a good tenant to obtain another USD 30–50 per month?

Only where the additional income is likely to exceed vacancy, agent commission, preparation costs and the risk that the replacement tenant is less reliable.

Must the deposit be collected again when the lease is renewed?

Not necessarily. The parties can confirm the existing deposit, increase it in line with the new rent, or document the return of the old amount and receipt of a new one.

Can the tenancy continue month to month after the fixed term ends?

Yes, if the parties agree or if the relationship continues as a lease without a fixed term. The notice and termination procedure should then be recorded clearly.