Legal Considerations for Long-Term Leasing of Villas and Apartments in Maldives Resorts – A Guide for Buyers

14 June 2025

1. Introduction

As the Maldives continues to attract global interest not just as a luxury destination but also as an investment opportunity, more foreign nationals are exploring the option of acquiring long-term leasehold rights to villas and apartments within resort developments. In recent years, the Maldivian government has implemented comprehensive legal frameworks designed to attract discerning buyers interested in securing long-term leases for water villas, apartments, or rooms within its luxury tourist resorts and integrated tourist resorts. These opportunities offer an enticing blend of lifestyle and return on investment – but they also come with unique legal and regulatory considerations.

This guide provides an overview of the key legal issues prospective buyers should understand before entering into such arrangements. It highlights critical investment considerations to help buyers make informed decisions when acquiring a villa or apartment within Maldivian resort properties.

2. Legal Framework for Resort Properties in the Maldives

All resort properties in the Maldives operate under long-term leasehold rights granted by the government to private developers or operators, as freehold ownership is not permitted. These leases are governed primarily by the Maldives Tourism Act (Law No. 2/99) (the “Tourism Act”) and related regulations issued by the Ministry of Tourism.

Resort operators may structure their properties to allow the sub-leasing of individual units—typically villas or apartments—under a strata property model, allowing third-party buyers (including foreign investors) to acquire long-term leasehold rights.

3. Foreign Ownership Rules

The Maldives permits foreign individuals and entities to acquire and hold long-term leasehold rights in strata-titled resort property, subject to applicable foreign investment laws and the Tourism Act. Eligible parties include:

  • Foreign nationals – who can directly enter into long-term lease agreements;
  • Maldives-registered entities – including those that are wholly foreign-owned;
  • Re-registered foreign entities – foreign companies that re-register under the Maldives Companies Act are also eligible to acquire and hold leasehold rights.

4. Tourism Strata Property Regime in the Maldives

The Tourism Act and the Regulation on Long Term Strata Leasing of Villas or Rooms (Regulation No. 2023/R-154) (the “Strata Regulation”) allow subdivision and creation of strata properties with separate strata titles in tourist resorts or integrated tourist resorts (the “Resort”).

A strata property, for the purposes of the Tourism Act and Strata Regulation, is defined as a separate villa, apartment or room located within the Resort with the following characteristics (the “Strata Property”):

  • Included in the site plan of the Resort;
  • Separate from the other facilities at the Resort;
  • Boundary demarcated/identified;
  • Connected to utilities provided by the Resort operator; and
  • Right of entry to the Resort and associated right of ways to the Strata Property.

Under the strata model, individual units (villas or apartments) are leased out on a long-term basis while common areas (such as swimming pools, gardens, and recreational facilities) are managed by the Resort operator or manager.

Key Characteristics of Strata Property in Maldives Resorts

• Nature of Ownership

A leasehold title is allowed to be held by the lessee of a strata lease (the “Strata Leaseholder”) for the term of the lease, pursuant to the Tourism Act and Strata Regulation. Buyers acquire a leasehold interest, not freehold ownership.

The lease is tied to a specific unit (villa or apartment) and cannot be separated from it. Pursuant to the acquisition of the strata lease, the Strata Leaseholder will obtain the right to exclusively use and occupy a specific unit (villa or apartment) on a long-term basis. However, it does not confer freehold ownership of the underlying land, the building, or any fixtures attached to the Strata Property.

All movable or personal property—such as furnishings and interior decorations—located within the boundaries of the unit is considered the exclusive property of the Strata Leaseholder.

• Length of Strata Lease Term

Under the Tourism Act and Strata Regulation, the term of a strata lease cannot exceed the term of the Head Lease Agreement or if applicable, the Sublease Agreement for the relevant island or lagoon.

Head Lease Agreements—entered into between the Government (represented by the Ministry of Tourism) and the head lessee—are typically granted for 50 years with an option to extend up to a maximum of 99 years. Sublease Agreements, which are entered into between the head lessee and a third party (the sublessee), must also remain within the term of the Head Lease Agreement.

Similarly, strata leases are generally granted for long durations, often for the remaining balance of the Head Lease or Sublease term. Within these legal constraints, the actual lease term under a Strata Lease Agreement is determined through commercial negotiations between the lessor and the lessee.

• Ownership Rights Over the Strata Property

Under the Strata Lease Agreement—entered into between the Resort operator (as lessor) and the Strata Leaseholder—the Strata Leaseholder is entitled to a range of rights in relation to the leased unit. These rights are subject to the terms of the strata lease, the Tourism Act, and the Strata Regulation:

  • Right of Use: The Strata Leaseholder has to right to use the unit, typically for holiday (for a specified number of days per year) and investment purposes. Use is often governed by the Resort’s rules and may include participation on a rental pool scheme, where the unit is made available for short-term letting to guests.
  • Right to Mortgage: The leasehold interest may be mortgaged in accordance with the Tourism Act, Strata Regulation and the Strata Lease Agreement. Any mortgage over a strata unit must be registered with the Ministry of Tourism.
  • Right to Assign or Sell: The Strata Leaseholder may sell or assign their leasehold interest to a third party, subject to the terms of the lease and regulatory approvals. In most cases, assignment requires the prior written consent of the Resort operator, which cannot be unreasonably withheld or delayed if the proposed assignee meets relevant criteria, such as the ability to comply with obligations under the head lease.
  • Easements: The Strata Leaseholder is entitled to reasonable access to and from the unit through the Resort, and to the supply of essential services such as water, electricity, drainage and sewerage.

These rights form core of the Strata Leaseholder’s legal interest in the property, and prospective buyers should ensure they are clearly reflected in the final Strata Lease Agreement.

• Registration and Legal Recognition

Following the completion of a Strata Property acquisition or lease transaction, the Strata Lease Agreement must be registered with the Ministry of Tourism. This process ensures that the rights and interests of the Strata Leaseholder are formally recognized under Maldivian law.

Upon successful registration, the Ministry of Tourism issues a Strata Title Registry, which serves as the official confirmation of the leasehold interest in the specific unit. This registration provides an added layer of legal protection and security of tenure and strengthens the enforceability of the Strata Leaseholder’s rights.

5. Leasing Process

The principal regulator overseeing strata-titled resort property transactions in the Maldives is the Ministry of Tourism. All acquisitions or long-term leases of Strata Property must be documented in a Strata Lease Agreement, which is then registered with the Ministry to ensure legal recognition. In addition, where a unit is leased to a buyer, a Management Agreement—governing the administration and maintenance of the unit—must also be signed and submitted as part of the application package for registration. These steps are essential to formalise the lease and secure the buyer’s rights under Maldivian law.

Main Contracts Involved

• Sale and Purchase Agreement

The Sale and Purchase Agreement is a key contractual document in the acquisition of a strata-titled apartment within a resort property. It outlines the terms under which the developer agrees to sell, and the buyer agrees to acquire, a leasehold interest in a specific unit. The agreement typically covers the purchase price, a payment schedule, and conditions precedent to completion—such as obtaining necessary government approvals. It also requires the buyer to enter into ancillary agreements, including a Rental Agreement and a Property Management Agreement, which govern the unit’s participation in the Resort’s rental program (providing returns to the buyer) and ensure ongoing upkeep to agreed standards. The contract provides for the transfer of leasehold title and risk upon completion, and generally ensures that the unit is delivered free from encumbrances.

• Rental Agreement

The Rental Management Agreement sets out the terms under which the Resort operator manages the leased apartment as part of a rental program. This agreement is typically entered into between the operator—who holds the leasehold rights to the island—and the buyer, who acquires a leasehold interest in a specific unit. Under the agreement, the operator is responsible for including the unit in the resort’s rental pool, managing its day-to-day operations, and ensuring fair and equitable usage across all participating apartments. Buyers are required to enter into this agreement to make their units available for guest occupancy and must comply with the operator’s management standards. The agreement also outlines financial arrangements, including the buyer’s share of rental income and the operator’s management fees.

• Management Agreement

A property management agreement must be entered into between the Resort operator and the Strata Leaseholder. This agreement governs the maintenance, upkeep, and operational use of the unit by the resort operator for revenue-generating purposes. One of the primary reasons such an agreement is mandated under the Tourism Act is that a Strata Leaseholder cannot operate the unit independently as a separate tourist establishment within the Resort.

The Strata Regulation (effective 5 September 2023) sets out the minimum content requirements for this agreement, including:

  • The permitted period of personal use of the unit by the Strata Leaseholder within a calendar year;
  • The period during which the unit may be used by the Resort operator for tourist accommodation;
  • Obligations relating to the maintenance and upkeep of the unit.

• Strata Lease Agreement

The Strata Lease Agreement sets out the legal framework for the leasehold interest in the unit. It must comply with the requirements of the Tourism Act and the Strata Regulation, and must also align with the terms of the Head Lease Agreement. This means that the lease term cannot exceed the head lease term, and no further subleasing of the unit is permitted.

In addition to these regulatory requirements, the Strata Lease Agreement typically includes standard commercial terms, such as lease duration, rent, use restrictions, and the respective rights and obligations of the parties.

6. Due Diligence Considerations

Before entering into a Sale and Purchase Agreement, prospective buyers should undertake thorough legal and commercial due diligence. This includes verifying the title of the developer’s or Resort operator’s leasehold interest in the island or lagoon from the government, and ensuring that the operator holds the legal authority to sublease individual units as strata properties. Buyers should also review the strata plan to understand the layout and boundaries of the exclusive unit versus common areas, and examine whether there are any existing mortgages, encumbrances, or unresolved disputes affecting the property. Additionally, a careful assessment of the operational structure and governance of the resort—including how strata units are managed and maintained—is essential.

From a legal standpoint, key risks include uncertainties in title and capacity. These risks can be mitigated through a proper title due diligence process, which involves reviewing the head lease, any sublease agreements (if applicable), and ensuring the developer’s compliance with the Tourism Act and Strata Regulation.

• Pre-Sale Conditions

Under the Strata Regulation, a Sale and Purchase Agreement may be entered into before or during construction, and payments for the unit may be collected in advance, provided that specific registration requirements and procedures are satisfied. These requirements must be fulfilled for a Strata Title Registration Certificate to be issued in the name of the seller. This certificate is essential for the legal creation of rights in the Strata Property and for enabling its sale.

Until the title is registered, the seller does not hold the right to transfer the strata leasehold interest. Registration of the strata title is a critical step in establishing ownership rights and enabling the lawful transfer of the property.

7. Taxes Applicable to Strata Properties

Strata leaseholders should be aware of the tax obligations that may arise from acquiring and holding leasehold interests in resort-based strata properties.

Resort properties, including strata-titled units, are subject to Tourism Goods and Services Tax (TGST) at 16%, which will increase to 17% from 1 July 2025. This tax is charged on goods and services obtained by tourists staying at the Strata Property. In addition, a Green Tax of USD 12 per tourist, per day applies to guest stays. These taxes are typically administered by the Resort operator as part of the rental management arrangement.

As of November 2024, the Supreme Court of the Maldives has determined that the sale or transfer of strata leasehold interests is exempt from Goods and Services Tax (GST). These transactions are classified as transfers of long-term lease rights, rather than as supplies of goods or services. Consequently, no GST is payable on the purchase price of a strata lease.

Professional tax advice should be sought to determine the most efficient structure for holding the strata property and to understand local tax implications related to owning and generating income from an investment property in the Maldives.

8. Final Observations

The long-term lease of resort villas and apartments in the Maldives offers an exciting opportunity for foreign investors, but success depends on proper legal structuring and due diligence. Understanding the regulatory landscape, ownership structure, and leasehold nature of these investments is essential.

Buyers are strongly encouraged to work with experienced local counsel and qualified advisors to ensure that their investment is secure, compliant, and aligned with their personal or commercial objectives.