What you should know about freehold and leasehold properties

The initial cost of purchasing a leasehold property is often lower than that of a freehold property

By George Barker/Realty Bytes

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Published: Tue 21 Mar 2023, 4:12 PM

I am on the lookout for a property in Dubai, but I am often confused between the terms freehold and lease (hold)? I am an expat who wants to buy a flat. Should I opt for freehold or leasehold? What are the benefits and negatives of the two?

The term leasehold means you will own the property rights for a fixed term, which is a maximum of 99 years. However, you will not own the property’s land, the total ownership of the land goes back to the freeholder.

The benefits of owning a leasehold property include:

The initial cost of purchasing a leasehold property is often lower than that of a freehold property.

You are not fully responsible for the maintenance and upkeep of the building, as this is the responsibility of the freeholder or landlord.

You may have access to additional amenities such as communal gardens or leisure facilities.

The negatives of owning a leasehold property:

You are subject to the terms of the lease which can limit what you can do with the property. Any upgrades or alterations you'd like to make to the property require written approval from the freehold owner.

You may face other restrictions and less control over the management when it comes to subleasing the property or owning pets.

You may be required to pay ground rent and service charges which can increase over time.

Whereas freehold ownership if you buy the property on a freehold basis you have absolute ownership of the property and the land it’s built on. The property can then be sold, leased or occupied at the owner’s wishes.

George Barker, sales consultant at Betterhomes.  - Supplied photo
George Barker, sales consultant at Betterhomes. - Supplied photo

It's worth noting that the benefits and negatives of owning a property freehold or leasehold can vary depending on the specific property and the terms of the lease. It's important to carefully consider these factors before making a decision.

What is an escrow account when an expat buys property? How does it protect the buyer?

An escrow account is an account set up so that monies can be held by a third party while other parties complete a transaction. As a buyer, when you deposit your funds into an escrow account rather than giving this money directly to the seller, as a buyer you are protected if the sale falls through. The third-party managing the escrow account can return the money to buyers without involving the seller, mitigating the financial risks for buyers.

An escrow account offers several benefits to the buyer:

Protection from fraud: The funds are held by a neutral third party, so the buyer can be sure that they will only be released when all conditions of the sale have been met.

Assurance that the property is as advertised: The escrow agent will typically hold the funds until the buyer has had an opportunity to inspect the property and confirm that it meets their expectations.

Protection against non-performance: If the seller fails to transfer ownership of the property, the funds can be returned to the buyer.

Overall, an escrow account provides a level of security and peace of mind for both the buyer and the seller, ensuring that the transaction is completed smoothly and fairly.

George Barker is sales consultant at Betterhomes. Views expressed are his own and do not necessarily reflect those of Khaleej Times.

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