Residential Compound
Synonyms: Compound، Gated Community، Villa Compound، Residential Complex
Short Definition
A residential compound is a group of villas, houses or apartments on a single, usually walled, site that share guarded entrances and facilities such as pools, gyms, gardens and maintenance services, and is managed as one unit whether it belongs to a single owner who lets the units or to multiple owners.
Overview
Legal Basis
Where compound units are sold as separate titles, the Law of Ownership, Partition and Management of Real Estate Units issued by Royal Decree No. (M/85) dated 2/7/1441H applies: Article 1 defines a ‘real estate complex’ and ‘common parts’ (including pools, gardens, parking and lifts), Article 12 requires an owners' association registered with the Real Estate General Authority (REGA) once there are three or more owners, and Article 13 allows a complex association to be formed. Letting of units is governed by the Civil Transactions Law and documented on Ejar, and residential rent is VAT-exempt under Article 30 of the VAT Implementing Regulations. Collective worker housing requires a licence from the Ministry of Municipalities and Housing through the Balady platform.
Practical Example
A compound in Al-Khobar comprises 120 villas owned by a single owner. A company leases 10 villas to house its employees and their families at SAR 180,000 per villa per year, including security, maintenance, the club and the pool, SAR 1,800,000 for the ten villas. The owner documents 10 residential leases on Ejar at SAR 125 per contract per year, SAR 1,250 in total, and no VAT is added because the leases are residential. The contract states exactly what the rent covers and provides that optional housekeeping is invoiced separately. Had the villas been sold to multiple owners as separate titles, each owner would contribute to the costs of the common facilities in proportion to the area of their unit through the owners' association.
Common Mistakes
- ✗Comparing the rent of a compound villa with that of a standalone villa without accounting for the services and facilities included.
- ✗Failing to specify in the contract which services are included (security, maintenance, facilities, electricity and water), which invites disputes.
- ✗Confusing a family compound with collective worker housing, which needs a municipal licence under specific requirements.
- ✗Assuming a buyer of a separately titled compound unit is exempt from contributing to shared-facility costs, although the law obliges every owner to pay their share.
- ✗Signing without reading the compound's internal rules on visitors, use of facilities and pets.
International Differences
In many countries the compound corresponds to the ‘gated community’. In the UAE, compounds and master-planned communities are common and their shared facilities are funded through annual service charges. In Egypt the term ‘compound’ is widely used, often linked to new cities. In Turkey the equivalent is the ‘site’, whose shared facilities are run by a site management funded by monthly dues. Distinctive in Saudi Arabia are the historical link between compounds and expatriate housing and the complex association provided for in the real estate units law.
