The Old Rent Law had always been a controversial legislative topic, this is a result of never being able to reach a balance between both rights and obligations of landlords versus tenants. A proposed draft law is aiming to amend the old rent law by adding specific rights to the landlords concerning legal entities acting as tenants, in the current imbalanced contractual relationships. The provisions will apply on non-residential rented units. This is due to the implementation of a court ruling issued in 2018, indicating that the a perpetual tenancy relationship between the landlord and tenant is deemed unconstitutional.
The Cabinet approved, during its weekly meeting dated 24 November 2021, a proposed draft law (“The Proposed Draft Law”) amending some provisions on evacuating premises rented to legal entities for non-residential purposes, pursuant to the provisions of Law No. 49 of 1977 amended by Law No. 136 of 1981, and their respective amendments (the “Current Laws”). The approved draft law was passed to the House of Representatives for further legislative negotiations, proposed amendments and final approval.
We will delve into the key highlights of the legislation concerning rights and obligations attributed to the landlord vis à vis the tenant, as follows:
The Rent Value
The rental value will be subject to a multiplication of up to five times the legal value already enforceable by the Current Laws, and it will increase periodically, on an annual basis by fifteen percent.
The Landlord’s Right to Evict
The tenant will be required to evacuate the leased unit within five years from the new law promulgation.
Refraining from eviction by the tenant will give the landlord the legal basis to request the judge of provisional matters to remove the abstaining tenant from the unit without prejudice to the landlord’s right to compensation.
The Amendments’ Scope of Application
The units subject of the scope of application of the Proposed Draft Law are:
-
- Buildings that are leased by foreign embassies.
- Commercial Shops that are leased by the government.
- Residential units that are leased from the government for a commercial or administrative purpose.
- Corporate offices.
- Law firms.
- Doctors’ clinics.
- Consultants’ offices.
Market Reaction
Various experts commented on the provisions of the Proposed Draft Law such as the former advisor of the Minister of Local Development Sabri El Gendy, who indicated that these amendments came after President Abdel Fattah El-Sisi’s speech regarding the current old rent issues. El Gendy believes that this topic would not be closed without a final solution. He also highlighted that, the major problem lies in the fact that about 90% of these rented units are either unused or inherited, therefore there is a disruption in real estate wealth.
Moreover, Ambassador Nader Saad, spokesman for the Council of Ministers, said that the Parliament may consider not limiting these amendments to legal entities, but rather to natural persons as well acting as tenants, stressing that it is up to the House of Representatives to decide this possibility.
