Non-residential rent to be
freed in two to four years

Gradual increase in rental rate

Parliament has passed a law that liberalizes old rental contracts of non-residential properties from constraints legislated in 1963 after extending them for a period of four years during which the rental rate will be gradually increased.

Non-residential properties are those rented to commercial or industrial businesses and to artisans and the self-employed or to people using the premises for other non-residential purposes.

During the four-year period, the tenant will have to gradually pay a rental equivalent worth eight percent of the sales value of the rented property in its current state when vacant. In the first year, the tenant pays 25 percent of the difference between the current rent rate and the rental equivalent. In the second year, the payment is raised to 50 percent and it becomes 100 percent in the third and fourth years. After the fourth year, rent becomes fully liberalized and subject to agreement between the two parties.

In case the property owner doesn’t ask for the gradual increase in the rental rate, the existing rental contract will be extended for two years only.

The authorities have been extending old rents for decades. According to the Syndicate of Property Owners, old rents, which were already extremely low, became negligible with the collapse of the exchange rate, while taxes and fees, including the tax on built property, have become worth multiple times the rental rate.

According to Lawyer Adib Zakhour who chairs a gathering of jurists who seek to challenge and amend the rental law, the eight percent rental equivalent is excessive and should range between one percent and three percent of the sales value of the rented property. “For instance, if the sales value of the rented property is $200,000, the increase [or rental equivalent] will be $16,000 per year. Most of tenants will not be able to pay this amount, even incrementally, and they will have to hand over the keys [of the property] either in the first year or in the following years,” he said.

Old residential rent has already been liberalized by a law issued in 2014.