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We are excited to share the latest edition of the Law Update, beautifully and appropriately titled “Sustainable Horizons: The Saudi Arabian Vision.” Giving special honor to the Kingdom’s 2030 vision, this update focuses on a collection of both informative and inspiring articles.
For those in construction, you can learn about how the tendering environment impacts risk-pricing for contractors, the updates on the legal framework of the construction industry and how contractors can protect themselves against financial difficulties.
There is good news too from the kingdom’s banking sector, from which the practice of “Open Banking” is being pushed for! But what is open banking? We’re answering that too.
Also . . . Are there any women trail blazers in Saudi Arabia you can name? We’ll help you with that. We cover how the Middle East has been making strides in empowering women in the entrepreneurial space,most notably in STEM fields.Read the full edition
Odai Mismar - Senior Associate - Corporate Structuring
December 2014 – January 2015
The new law includes amendments to the previous law of 2009 in order to correct and align the legal position of landlords and tenants.
The 1994 Law regulated the landlord and tenant relationship and applied to all leased real estate except for:
In an aim to improve the regulations controlling landlords and tenants, the new law has been implemented. The amendments apply retrospectively to all rent contracts concluded before 31 August 2000. Rental contracts concluded after this date are governed by the terms of the contract in question, and are left in the control of the parties unless the issue reaches the courts.
The key amendments introduced by the new law are:
a) Contracts concluded before 31 August 2000 to have rent rises regulated
In contracts concluded before 31 August 2000, the rental amount was reached by mutual agreement by the Landlord and the Tenant. If the parties could not decide the rent, then it was within their right to approach the competent court to apply the so-called “rent value of similar property” principle, which allows courts looking into rent-related disputes to determine a fair raise in the value of the rent by taking the current rent fee of a similar property in a similar area as the base of calculation. However, the amendments brought in by the new law (article 5(a)(2)–(4)) now stipulate that rent raises in contracts concluded before 31 August 2000 must follow the percentage rise determined and published by the Council of Ministers. Additionally, the new law stipulates that the Council of Ministers shall reevaluate the said percentages and make any necessary amendments every five years.
b) Use of a property by family members of a deceased tenant
In the 1994 Law, the family members of a deceased tenant renting a property for residential purposes and who were living with the tenant at the time of death were giving the right to remain in the property for three years. If the property was rented for purposes other than residential purposes, then the heirs of the deceased had the right to make use of the property for a period of six years, ensuring that they comply with the “rent value of similar property” principle. The new law however now gives the right for family members of a deceased in a residential property to remain in the property indefinitely (Article 7(a)) unless the landlord decides to evacuate the property by virtue of one of the situations provided for in Article 5 of the Law. In relation to non-residential properties, the heirs now have the right to continue use of the property indefinitely, rather than for a limited time of six years. The key change in this case is that the wife of a deceased tenant loses any right to the property in the event that she remarries.
c) Divorced wife can stay indefinitely
Under the 1994 law, a legally divorced wife had the right to remain in a property for three years as of the date of divorce. Under the new law (article 7(b)), the divorced wife and any children in her custody, have the right to remain in the property indefinitely unless the landlord decides to evacuate the property by virtue of one of the situations provided for in Article 5 of the Law.
In general, the above mentioned amendments have been met with controversy. Landlords have felt that the amendments are in the tenant’s best interest, whereas tenants have felt that they favour the landlords. This particularly apparent in relation to the amended rights of widows and divorced women. It is anticipated that further amendments will be made in the future to balance out the discrepancies and harmonize the landlord and tenant relationship.
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