Freehold Vs Leasehold
Freehold and Leasehold are the 2 forms of legal property ownership available to expats buying in Dubai. As with anywhere around the world, purchasing a property in Dubai is a substantial financial commitment so understanding the regulations around both forms is crucial in making an informed decision.
Freehold property ownership:
Freehold means taking absolute ownership of the property outright including the structure and the land it stands on, in perpetuity, with your name registered as the “land owner” in the land registry at Dubai Land Department. There are designated freehold properties in Dubai, which must be purchased from government-approved real estate agents or developers.
Freeholders can perform improvements and additions as they see fit on their property, have full rights to sell or lease the property at their own discretion, and an heir may inherit it upon the owner’s death.
Whole houses are normally sold freehold. Freehold property owners and their immediate family may be granted renewable Dubai residence visas, although they can choose not to reside in the property as Dubai residency is not a requirement to acquire and maintain a freehold property.
Freehold Areas of Dubai include:
- Dubai Marina
- Downtown Dubai
- Jumeirah Beach Residence
- Palmy Jumeirah
- Jumeirah Lake Towers
- Discovery Gardens
- Business Bay
- Jumeirah Golf Estates
- Emirates Hills
- Arabian Ranches
- Jumeirah Village Circle
- Jumeirah Village Triangle
- Motor City
- Sport City
Leasehold property ownership:
Leasehold means a property can be taken on a lease from a freeholder for a period of 99 years irrespective of the lessee’s nationality. Technically, it is buying the right to live in or occupy the property for a long period of time, with which within the duration of the contract, the lessee pays ground rent to the landowner or landlord. The ownership of the property however, will revert back to the landlord at the end of the lease.
As an example, if you are an owner of a unit on a building offered as leasehold estate, this meant that you own the said unit for the next 99 years, however, the land it was built upon is owned by someone else. Theoretically, at the end of the lease, the landowner owns everything that is built on it, including your purchased unit.
Expats are not allowed to own properties in non-designated areas in Dubai and long-term leases are their best bet. However, long-term leases in non-designated areas cannot be registered with the Dubai Land Department, although these leases/contracts remain as personal rights and deemed legal. The conditions and agreements stated in the contract remain enforceable as personal contractual rights between the parties.
Leasehold property ownership could be renewed upon expiration of the lease contract for another 99 years. You and your family also has the option of reselling the unit at any given time without worrying about the leasehold clock ticking away impacting the value of your leasehold property investment.
Getting improvements on a leased property such as additions, remodelling, alterations, or renovations is a bit complicated if you are a leaseholder as this would require approval in writing from the freeholder of the entire building. For repairs, in most cases, the freeholder is the one responsible for repair arrangements especially if the problem affects the structure of the building or shared areas in general. Upon termination of the lease, improvements and other additions become the property of the freeholder without any cost or obligation to the latter.