Leasehold

Leasehold, in common-law systems, is the right to possess and use a property for a long fixed term, which can reach 99 years or more, in return for rent, after which the land and buildings revert to the original owner. In Saudi Arabia this is not a form of ownership: it is a long lease or a usufruct right in rem over property owned by someone else, governed by the Civil Transactions Law and the Real Estate Registration Law. The Civil Transactions Law defines a lease as a contract by which the lessor enables the lessee to use a non-consumable thing for a fixed period in return for rent, and it sets no general maximum term. A lease does not end on the death of either party, and selling the leased property does not affect the tenant's rights. A usufruct, by contrast, is a right in rem acquired by a legal disposition that ends when its term expires. The Real Estate Registration Law requires leases and obligations over a property's use lasting ten years or more to be annotated in the Real Estate Registry, and they are not effective without that annotation. The Registered Real Estate Mortgage Law allows a property's use to be mortgaged separately from the property itself, which makes it possible to finance projects built on leased land. In practice, long ground leases of commercial land for malls, fuel stations and hotels are common in Saudi Arabia, as are investment contracts over government and waqf land under their own rules. The non-Saudi ownership law also lets the Council of Ministers set the maximum period for which a non-Saudi may acquire a usufruct. The most important points in such contracts are what happens to the buildings at the end of the term, periodic rent increases, and the rights to assign and mortgage, because leaving them out means falling back on general rules that may suit neither party.