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Wed 27 Feb 2008 12:00 AM

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Key buying terms explained

Your questions answered quickly and efficiently.

What is a premium?
Premium is the amount that you pay above the original price charged by the developer. This can be a percentage of the original price, or a fixed amount. The premium plus the original price is the net selling price to the owner, and does not include transfer fees or commission.

What is a transfer fee and commission?
This fee is paid to the developer in transferring ownership from seller to buyer. It varies between 1 percent and 7 percent of the selling price or original price and so can be a substantial amount, usually paid by the buyer. Commission is normally 2 percent of the selling price in which the buyer normally pays, although on some occasions, the seller may pay 1 percent of the commission.

Why do people want to know the original price?
This is the price which the original owner paid to the developer. From this you can work out the percentage premium which is often used as a guide to see if a property is good value or not. In addition, when financing, all lenders need to know the original price, as most will not lend on any of the premium.

What is Initial Deposit?
This applies when buying direct from a developer and is paid to the developer in order to secure the property in your name. It is usually 10 percent to 15 percent of the selling price.

What is a Holding Deposit?
This secures the property for a period up to one month usually, allowing the buyer time to organize funds through either financing or transferring of cash funds. This deposit is non-refundable and can range from AED 20,000 - 1,000,000 depending on the property price.

What is Memorandum of Understanding (MoU)?
This is a contract made between the buyer and seller to secure the sale. A holding deposit is paid to the agent or seller to make the contract binding.

Are there different types of freehold?
If we assume that the term freehold is being used in Dubai in its international sense, then the answer is yes. Freehold usually indicates that the owner of this kind of title enjoys the most superior form of private property ownership. A purchaser can have freehold title in land, in a free standing villa and also for an apartment, the latter kind of ownership us usually called common hold and not freehold.

Can one lawfully sell freehold properties to foreigners in Dubai?
There is no provision in the law that forbids immovable property (except in an auction) from being sold to foreigners in the UAE.

Are there any restrictions imposed on freehold apartments?
Yes, there are some restrictions being imposed in most sale and purchase agreements issued by developers in Dubai; these conditions are to make sure that owners of properties pay their Service Charges in time, especially if they intend to sell their property.

How often will the Service Charges increase?
It is expected that the Service Charges levied will be reviewed yearly and only if necessary, increased annually. Unless all the owners of the building/dwellings have to pay for an emergency expense, it is not expected that there will be dramatic fluctuations or increases in the Service Charges during the year.

What type of residency visa is received upon the purchase of freehold in Dubai?
The residency visa is arranged by the developer and is usually a 3 year renewable visa. It does not normally include a work visa. It is purely to allow the owner and his immediate family to reside here without needing to renew transit visas.

Why are Guarantees needed?
If properties are no handed over for whatever reason to the purchaser after a particular time period, the buyer usually has the option to get his money back or receive some form of compensation. Most developers give a 10 year guarantee from structural defects.

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