A new rental law that incurs gradual increases in the value of residential lease contracts signed before 1992 will go into effect on December 28.

According to the new law endorsed by parliament last April, tenants under pre-1992 rental contracts will face rent increases in yearly increments over a six-year period, until annual rent costs reach 5 percent of the current market value of their residences.

Tenants whose income does not exceed three times the minimum wage will benefit from state financial aid to cover the increase in rent fees. The total difference in rent prices will be paid to landlords using a special fund to be established by the government for this purpose.

For tenants whose income is between two and three times the minimum wage, the fund will cover the difference between the new rent price and 30 percent of their income while those whose income is less than two times the minimum wage will see the fund pay the total cost difference on their behalf.

During year one, the tenant will pay, on top of the current rent, 15 percent of the difference between the old rent cost and 5 percent of the current market value of the residence.

During each of the subsequent three years, an additional 15 percent will be paid while on the fifth and sixth year, an extra 20 percent will have to be paid by tenants before the rent cost reaches its fair value in year seven and is paid accordingly until the end of the ninth year.

After the ninth year, lower income households will be able to extend their stay until the 12th year while other tenants will have to negotiate a new agreement with landlords or evacuate the residence.

According to the current rent law, landlords can ask tenants to evacuate their residence for two reasons: demolition or the accommodation of a landlord’s family member.

If tenants are asked to leave the premises during the first year of rent adjustments for demolition purposes, the landlord will have to pay a compensation equivalent to six times the new annual rent.

Landlords who request tenants to evacuate for family lodgement purposes will have to pay compensation amounting to four times the new annual rent. Compensation gradually declines to reach nil after nine years.

In the event of a disagreement over the compensation amount or the estimation of the current market value of rented residences, tenants and landlords will have to resort to Lebanese courts to settle the dispute.

The law approved by lawmakers had stipulated the designation of a special committee to estimate the current market value of rented residences, determine compensations for low-income families and resolve disputes that arise between tenants and landlords.

However, last August, the Constitutional Council deemed two articles of the law pertaining to the designation of the committee unconstitutional, ruling that it was the jurisdiction of Lebanese courts to resolve any legal disputes that arise between tenants and landlords.

The law still stands independently of the two revoked articles, according to lawmakers.

While there are no official statistics on the number of families who benefit from rental contracts signed before 1992, the association representing tenants argues that the number is close to 200,000 families.

On the other hand, representatives of the Landlords Association argue that only 13,000 families should benefit from the special fund to be established by the state.

According to landlords, the majority of tenants pay minimal rental fees that often amount to less than LL1,000,000 annually.
The recently enacted law stipulates that tenants wishing to buy a new apartment have priority in obtaining subsidized loans from the Banque de l’Habitat or the Public Corporation for Housing.

Source: EKARUNA Luxury Real Estate Magazine