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11th October 2015

Buying property in Dubai can be a highly rewarding experience. However, selling your house in a buyer’s market can be challenging. That is when a lease option can come in handy.

Lease options were popular and sought-after practices in the west during the late 1970s and early 1980s. Here’s a quick look at them.

If you are looking at leasing property in Dubai or buying property in Dubai, a lease option may be the perfect solution to ensure that you get top and immediate returns from your home at current market prices and enjoy relief from paying a mortgage on an unoccupied property. Simply put, it involves you opting for leasing property in Dubai to a potential buyer who has the option to buy your home at the end of the lease term. Renting out your property in this manner can thereby allow you to get access to consumers who are driven by the idea of buying property in Dubai but may not be quite ready to make the purchase yet.

Generally speaking, lease options are offered by sellers of hard-to-sell properties. Under lease options, the buyer and seller may agree to a purchase price right away. Alternatively, the buyer may agree to pay the current market price at the time of exercising the option. While this may be negotiable, it is recommended that buyers lock in the future purchase price right at the start.

While there is no doubt that lease options can be a win-win situation for the owner and the person keen on buying property in Dubai, a key concern is that if unregulated, they could pave the way for inexperienced investors to cash on and exploit naïve renter-buyers and desperate sellers. For instance, how do you fix on the purchase price? What happens if the buyer defaults? Would sellers be required to refund any portion of the lease payments? Can anyone else buy the property?

Further, what is the usual term of the lease agreement? If you are the seller, keep in mind that offering shorter lease terms to someone interested in leasing property in Dubai tends to result in sales more than longer terms, as many variables could add up over the long term. Also, if housing prices appreciate quickly, you may be getting a not-so-profitable deal on a long lease, as you would be obligated to sell at the price which has been agreed upon. On the other hand, if housing prices fall, you could win yourself a better deal, but if values decline significantly, then the renter is unlikely to buy your property.

Aside from coming to an agreement on such issues, every party in a lease option should do due diligence on who they are dealing with. This would involve conducting a home inspection, consulting a lawyer and examining the title deed, insurance, mortgage amounts and other legal documents. A few simple steps will keep everyone safe and the market secure, stable and regulated.

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