A new UAE federal property law is expected this autumn. But would it be better if the UAE opted for leasehold rather than freehold for its property ownership system? For high-rise apartment buyers leasehold is common overseas, while freehold is awkward to operate in multiple-occupancy buildings.
Buy a property in Dubai and you do take a risk on the final tenure that you will enjoy. At the moment there is no federal legislation preventing ownership of property, but equally nothing to say that you can, or more importantly what your legal rights are if you do.
This situation could change as early as this autumn, according to some market insiders. However, there is a mounting school of thought that believes long leases rather than freehold ownership may emerge as the preferred solution.
Leasehold is common in many countries for high-rise property. This establishes the duties and obligations of the freeholder, or landlord, to maintain the whole property in good condition. Equally the rights of the individual apartment owner are secured, with tenure typically granted for 99 or 125 years.
By contrast various freehold arrangements exist for high-rise buildings, and none of them is nearly as clear as leasehold. Problems arise, for example, when some owners refuse to pay for common services. What do the other tenants then do, leave half the building without electric lights?
This could be a particular problem in Dubai where certain owners may visit infrequently and 'forget' to pay their maintenance bills. Under leasehold tenure the landlord could apply for an eviction order after a long period of non-payment, therefore safeguarding the integrity of the whole property.
Where leasehold is perhaps less desirable is for villa ownership. There is something nice about owning a plot of land in perpetuity. Yet in practice leasehold confers the same rights to buy and sell a piece of land, and leases can almost always be extended.
Surely the most important thing for buyers is to have a legal title. At the moment they do not have anything, freehold, leasehold, or commonhold.
Some people feel less secure under a leasehold system – with the landlord or freeholder as he is generally termed, more in control. But this is also an answer to those who worry about how villa compounds will be maintained once the title has passed to freeholders and the developer has moved on.
So in conclusion, if the new UAE property law was to opt for leasehold and not freehold for ownership titles, this might actually be a good thing, although there would doubtless be a general outcry because freehold is what people have been promised, and leasehold is perhaps unjustly seen as an inferior title.