From investor options to owner-occupiers, Dubai's property ownership market has a wide array of options. One of the most talked-about, flexible, and community-oriented approaches to property investment is freehold properties. This article delves into the definition of freehold property, its legal framework, benefits, and challenges; compares it to other forms of property ownership; and offers a more flexible investment option for those seeking a community-oriented approach.
Understanding Freehold Property
Freehold property ownership is a structured approach to managing communal properties, where individual unit owners jointly own the freehold of their respective units, as well as shared areas and facilities. The concept of freehold came into the limelight to introduce Dubai's real estate to a more organized way of dealing with shared properties, especially in residential buildings and gated communities. The common areas would be jointly maintained and managed by all the unit owners, with the ownership vested in an HOA comprising all the unit owners. This structure shall ensure the upkeep, maintenance, and management of shared facilities.
Enacted in 2007, the Strata Law governs joint property ownership in multi-unit developments in Dubai. It establishes the legal framework for property ownership, which gives a proper clarification about the rights and responsibilities of individual unit owners and homeowners' associations. Developers shall register with the DLD and create a joint ownership scheme, setting up a homeowners' association to manage the property. The establishment of a service charge fund is also necessary to cover maintenance and management expenses. Strata Law protects the interests of individual property owners and provides an effective, equitable, and transparent system for the management of common areas.
There are two types of ownership of a freehold property: individual unit ownership, also known as freehold, and shared or common area ownership.
1. Individual Unit Ownership
Every proprietor in a freehold development receives a freehold title to their specific unit. Owners can sell, lease, or mortgage their apartment, villa, or townhouse and own it entirely. They enjoy the same level of ownership as those who own traditional freehold properties.
2. Common Ownership of Common Areas
While the individual unit owners enjoy full ownership and complete control over their respective properties, they also jointly own and have shared responsibilities regarding common areas in a given development. Typically, shared areas encompass lobbies, corridors, staircases, parking lots, gardens, swimming pools, gyms, among others.
All the unit owners in the development collectively share ownership and manage these common areas through a homeowners' association. Each owner typically influences the maintenance and management of common areas based on the size or value of their unit.
3. Homeowners' Association (HOA)
The HOA plays a significant role in the functioning of free hold properties. This pertains to the management of shared facilities, the collection of service charges from unit owners, and the decision-making process regarding repairs and upgrades, among other common expenses. Members typically make decisions democratically through voting. An owner's voting rights are usually based on the size of the property.
The homeowners' association also ensures adherence to the rules and regulations that govern the use of common areas. These can pertain to noise levels, property modifications, or the use of communal amenities. The HOA can also mediate disputes between unit owners and resolve issues related to property management.
Freehold properties offer numerous benefits to both investors and end-users, making them a compelling choice in Dubai's real estate market.
1. Full ownership with flexibility.
freehold ownership gives you the advantage of owning the unit in full, but it still provides shared amenities. This enables flexibility similar to freehold ownership while offering the convenience of access to facilities that would be very expensive to maintain on an individual basis, like gyms, pools, and landscaped gardens.
2. We propose the concept of fully transparent management of common space.
One of the most significant benefits of a freehold property is the accountability and transparency of the individuals responsible for managing the common areas. The homeowners association of the unit owners is legally expected to ensure that the daily management of common areas is coordinated and any decisions made on how to manage and organize those facilities are for the benefit of all the residents of the units.
3. Predictable Maintenance Costs
With the institution of service charges, owners have a clear understanding of the costs associated with property maintenance. Typically, owners pay service charges based on the size or value of their units for common area maintenance, repairs, and other shared costs. This gives owners some degree of predictability and certainty about how much it may cost.
4. Community Involvement
Freehold fosters a sense of community among owners, emphasizing the importance of teamwork, as everyone shares a common interest. ll unit owners share a common interest in keeping the common area and compound in optimal condition, ensuring the maintenance of common facilities. This can thus lead to a stronger sense of civic responsibility in communal living and potentially foster a more harmonious society.
5. Added value to a property
If properly maintained, common property can enhance the value of the development and improve the value for each unit holder. Indeed, properties boasting top-end amenities and well-maintained common areas attract many prospective buyers, positioning commonhold properties favorably for both end-users and investors.
While freehold properties offer a whole host of benefits, there are also some challenges of which the potential buyer should be aware:
1. Service Charges
The main concern of freehold ownership is the continuing liability for service charges. These depend on your property size and the development's services. Sometimes, service charges can be quite high, especially in high-end developments with many facilities within their grounds. Before making any purchase, a buyer should be well aware of the long-term costs associated with service charges.
2. Owners' Conflicts
Shared responsibility for common areas underpins freehold ownership, inevitably leading to disputes among co-owners. Such disputes may concern the use of common facilities, the division of service charge spending, and rules and regulations. Occasionally, the management association must resolve such disputes, which can cause community tension.
3. Management of the Homeowner's Association
The performance of a freehold property depends to a significant degree on how well the homeowners' association manages it. Unfortunately, poor management will cause facilities to deteriorate, service charges to rise, and property prices to fall. Involving the owners in the HOA is crucial to taking proper care of the property and ensuring that decisions benefit all owners.
Understanding the key differences between freehold and leasehold properties is essential when making an informed investment decision.
• Freehold Properties: In Dubai, freehold properties encompass both the unit and the land on which it is located. Property owners have complete control over sales and leasing without legal restrictions. Freehold properties are available to both local and international investors.
• Leasehold properties: Most of the leasehold properties are acquired on a long-term lease basis, normally for 99 years. This title goes back to the landowner when the period expires. This type of property is available in some areas of Dubai; the prospective buyer should be aware of the lease period and its terms before making a purchase.
• Freehold Properties: These properties allow the owner to maintain freehold ownership of the unit or space while also retaining freehold ownership of other portions of the premises. A homeowners association manages these areas, and the owners bear service charges for their upkeep and administration.
Freehold property ownership is a unique form of property ownership, where owners share a hall and share responsibility, thereby combining flexibility. However, investors in freehold properties must prepare to pay periodic service charges, which can lead to conflicts. may end up in a squabble. Writing about possible advantages, disadvantages, and the legal aspects of this type of freehold ownership means that the possible decisions correspond harmoniously with one’s monetary vision, plans, and needs. In as much as Dubai expands, freehold properties are on track to be very significant parts of the growing city’s real estate markets.
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TRPE Real Estate is a company registered in Dubai, United Arab Emirates (License No. 999314) located at Office No 1001, Ascott Park Place, Sheikh Zayed Road, Dubai. We are regulated by the Real Estate Regulatory Agency (RERA) under office number 28357.
