Guide to Doing Business
Private property ownership, long-term land lease & short term land lease
Private property ownership (eigendom)
A private individual or a legal entity, be it foreign or local, can be owner of real estate property in Aruba. The owner of real estate property has the absolute right to that property, i.e. the right to freely enjoy and dispose of that particular property. The owner must observe encumbrances, if any and also take into account limitations of use according to the zoning plan and the civil code. Real estate can also be jointly owned, which joint ownership occurs when two or more private individuals or legal entities jointly purchase the real estate property. In case of joint ownership common regulations (beheersregeling) may be constituted or already in place which provide rules for the use and obligations of the individual owners.
Ownership of real estate in Aruba must be recorded in the public register for real estate property (Kadaster). The civil law notary who executes the deed of transfer will have to register the new ownership in the register.
Long-term land lease (erfpacht)
A long-term land lease, also referred to as long lease, is the right to hold and use someone else’s real estate for an fixed or unlimited time, generally against a(n) (annual) payment (erfpachtcanon). The holder of a right of long lease is allowed to use the real estate as if he was the owner, although limitations of use are often included in the deed of long lease. The long lease is constituted by having land owned by one party leased out to another party or parties for a long period of time, i.e. generally several decades. In contrast to the normal lease, long lease is a proprietary right, which can be mortgaged as security for a monetary claim. The long lease is primarily granted by the government and is mainly created because:
- the government intends to regulate the use, for example to encourage house-building by persons who cannot (easily) afford to buy land;
- the designated use of land can be regulated by incorporating special requirements into the long-term lease contracts
- to prevent land speculation
- it ensures the government of a fixed annual income; and/o
- increases in the value of the land can be applied for the benefit of general interest.
With a long lease the lessee can use the real estate property and dispose of it as if he were the owner of such real estate, subject to any applicable restrictions on the long lease (e.g. sell it, establish a right of mortgage). The long lease can also be transferred (sometimes subject to prior approval of the owner) and the same requirements as for the transfer of full ownership apply. In most cases the buyer of a long lease has to pay the former holder of the long lease a transfer sum (selling price).
Long-term land lease can usually be terminated by the lessee, unless determined differently in the deed creating a long-term land lease. The lessor can only do so if the (annual) payment, if any, is not paid for two consecutive years or with other severe breach of contractual obligations e.g. if the land is not developed as required.
If a long lease is terminated, the owner of the real estate is obliged (unless otherwise agreed in the deed of long lease) to pay a compensation to the lessee is for example buildings are built on the land.
Short-term land lease (huurgrond)
In the case of short-term land lease, the land is usually owned by the government and is leased out for a short term (e.g. between one and five years), to third parties for agricultural or recreational purposes. This form of lease only allows for restricted use and can be more easily terminated by the lessor. Please note that building on short-term land lease land is often not permitted and that the lessee is not entitled to compensation by the lessor.