Leasehold and freehold properties defined

Ask the agentSanket Khanna

Question of the Week
What is the difference between leasehold and freehold properties?

When we talk about “owning” a property in the UAE, the two options in land or property ownership that exist are freehold and leasehold.

The term “freehold” means absolute in possession, as all the land is technically held subject to the freehold law. In practice, it means the outright ownership of land or property for an unlimited period and applies to the majority of areas in newer developments in the country.

On the other hand, “leasehold” means a temporary right to occupy land or property. A person who owns the property may grant a lease on it to another person. This creates a relationship of landlord and tenant (lessor and lessee). The lease will be a written, legal document based on property and contractual law which sets out the rights and obligations of both the landlord and tenant.

A lease will be for a fixed term. Most leases are for 99 years, although more recent leases (especially for commercial properties and warehouses) may be for 30 years. One that has a leasehold property has the temporary right to occupy the property, albeit “temporary” lasts for many years.

It is this temporary nature that sets leasehold and freehold properties apart as freehold property ownership is permanent. It is usually observed that a freehold property will always maintain its value, while a leasehold property is a diminishing asset.

I have just moved to Dubai and want to rent a two-bedroom flat. What are the things that need to be considered?
There are many portals and mediums where you can check a list of properties that meets your expectations. You can then call agents to give you details and a tour on the properties you are interested in. When looking for an agent, ensure that he has a RERA card. This way, you save yourself from the trouble of dealing with a person who is not legally allowed to do that kind of work. After finalising the property, you can request for a title deed (proof of ownership) and the passport copy of the owner to verify and confirm that he actually owns the said property. Always issue a cheque on the name of the property owner unless a power of attorney has been issued signifying another person to act on the owner’s behalf. You can also request the agent to organise a meeting with the owner before handing over the final payments to him in case he resides abroad.

I am an interior designer who wants to make the ambiance of my rented house inspiring. What procedures do I have to take to make alterations?
Generally, you are not permitted to make changes to a rented property without the landlord’s written permission. This includes painting, and installing fixtures and fittings. If you need to do so, ask consent from the landlord before you make renovations. If the property is being managed by an agent, put your request to them. It is best to provide as much information as you can about the change and put it in writing. Before you proceed with the changes, ask your landlord who will pay for the cost and what will happen to any fixtures you add at the end of the tenancy. Put it in writing. If you pay for fixtures, you can take them with you at the end of the tenancy as long as you notify the landlord/agent of any damage these have caused. You must then either pay for repair or arrange to have the damage repaired .

I own two properties in Dubai. One of my tenants called complaining about leakage and broken appliances. What should I do to avoid such problems?
To avoid such situations, you can sign a property supervision or property management contract with a real estate company as they can inspect the property as agreed in the annual contract. At the time of inspection, everything will be checked properly. This may include the servicing and maintenance of air-conditioners, any kind of moist/damp patches on the wall, any kind of leakage, and everything else as written and agreed in the supervision contract.

Living a healthy life means focusing on living in a healthy atmosphere. In short, either you should get everything inspected after a certain period of time or sign a contract with any company who can take care of your investments on your behalf and even in your absence. Thus, if something needs to be fixed, the property management firm will be able to let you know and sort everything out without creating further issues.

I own a couple of apartments in Dubai. One of my tenants is not paying his rent on time. How do I deal with him?
A tenant not paying rent is one of the most serious issues one faces as a landlord. When the tenant is a few days late, it is a good practice to send him a reminder letter of the overdue payment or give him a call.

If the tenant is regularly late, you may wish to discuss about changing the method of payment to one which provides more certainty such as a direct debit arrangement.

If the tenant falls more than 14 days behind, you can serve him a termination notice. The notice must be in writing, signed and dated by you or your agent, and properly addressed to the tenant. Give the day on or by which the tenant is requested to vacate, state the grounds or reason for giving the notice (the tenant is more than 14 days behind with the rent). Include a statement informing the tenant that he does not have to vacate if he pays his debts and fully complies with a repayment plan.

Source: Sanket Khanna, CEO and Founder, SNS Properties, Special to Freehold


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