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Lebanon, as other nations, is suffering a
severe shortage in housing mainly due to the heavy rural migration to
the cities. Since the devaluation of the Lebanese currency in 1985, rent
laws have not been working to solve a root cause of the problem that
exists. The present government forwarded a new draft law to the
parliament - Decree No. 7104 on Jan. 3, 2002 - for debate and a vote.
But before presenting the main points of that bill, one should examine
the current and previous rent law situation.
Current Rent Situation
It is estimated that families residing in
Lebanon number approximately 850,000 (within an estimated total
population of 3.6 million). 20.6% of those families rent their place of
residence, 68.3% own their homes, and 11.1% reside free of charge.
However, percentages vary from one area to another; for example, in
Beirut the percentage of rentals reaches 48.8%. This average decreases
in the suburbs to 33.7%, 15.7% in the North, 13.7% in Mount Lebanon,
13.5% in the South and Nabatieh and 7.1% in the Bekaa. As for the type
of housing, 73.1% live in apartment buildings, 26.3% live in independent
buildings and 0.6% in other forms of residence.
Previous Rent Law
The government has made adjustments to the rent laws several times in
the past, in order to reinforce the rent market and motivate owners to
lease their properties. The rent increases, however, did not meet
owners’ expectations, especially since the old rent fees remained very
low when taking into consideration inflation and the devaluation of the
currency. From this perspective, Law No.159/92, known as the ‘Law of
Free Contracts’ covering contracts signed staring July 23, 1992,
established contracts that are valid for one year and renewable for a
3-year period at the same rent fee. At the end of this period, landlords
have the right to ask for either a rent increase or request that the
tenant vacate the property. This law opened up a new way to free a
portion of the rent market, but the problem of old rent contracts signed
before the above date remained (although they were raised substantially
by Law No.160/92, dated July 22, 1992). Those rents are still minute
according to owners, and too expensive according to rentees of limited
income (making up approximately 50% of tenants), to whom rent
constitutes approximately 20-25% of family income. Since July 1992, no
new rent laws have been introduced, and the Law of Free Contracts
remains in force. Also, four consecutive extensions of Law No.160/92
extended its validity until June 30, 2001.
New Draft Law
A new draft law for rents was approved by the Council of Ministers in
its session of Dec.13, 2001 and was referred to the parliament under
Decree No.7104 dated Jan.3, 2002. The parliamentary Committee of
Management and Justice, which is legally responsible for studying it,
did so and returned it for approval by parliament last March.
Some deputies in parliament believe that it will not be approved in its
present form and will meet with a delay until the end of this year.
Following are the most important articles of the draft law:
• All rent contracts relating to built
properties signed before 23/7/92 are governed by this draft law, while
all rent contracts signed after that date are considered ‘free
contracts’ as per Law No.159/92.
• All residential rent contracts that are governed by this law will be
renewed as follows:
Contracts signed between Jan.1, 1985 -
July 22, 1992 will be renewed until Dec. 31, 2006.
Contracts signed between Jan.1, 1975 -
Dec.31, 1984 will be renewed until Dec. 31, 2007.
Contracts signed between Jan.1, 1960 -
Dec.13, 1974 will be renewed until Dec.31, 2009.
Contracts signed before Jan.1, 1960 will
be renewed until Dec.31, 2010.
The pivotal point of this draft law is
that within a 4-8 year period, all rent contracts will become free.
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• Starting in 2010, landlords have the right
to ask tenants to vacate their property, in exchange for compensation
amounting to 20% of the property’s value.
• The first six months after this law takes effect and without waiting for
the renewal period as mentioned above, landlords have the right to ask a
repatriation committee to value the leased property and request that the
tenant vacate the property for compensation that amounts to 50% of the
value of the property in the first year, 45% in the second year, 40% in
the third year, etc. However, tenants have a right to refuse this offer
and wait out the extension period.
• Rent fees will not increase throughout the extension period.
• If the owner does not ask the tenant to vacate the property within the extension
period, rent fees will double at the end of the extension period. Beginning the
following year, rent fees will be increased at a percentage equal to the annual
inflation rate, but not greater than 5%, in accordance with the index published
by the Central Bureau of Statistics for the previous year.
• In each mohafaza, there exists one or more ‘Repurchasing Committees’.
They are appointed by a decree from the Minister of Justice and are
headed by a judge of the sixth degree and two other members.
• In order to encourage tenants to buy the apartment being occupied,
registration & insurance charges, as well as stamp duties and taxes on
built properties, will be cancelled for 10 years after the date of
purchase. Those tenants will be given priority in housing loans from the
Housing Bank or the Public Institution for Housing.
Conclusion
The exceptional rent laws that have been in force for almost half a
century have accentuated the housing crisis and new laws that take into
consideration social, economic, financial and legal factors are
required. The rent issue affects more than half of the Lebanese
population, either as landlords or tenants. The positive aspects of this
law are that tenants who would like to buy their apartments are not
charged fees and taxes, and many committees are operating beyond working
hours in order to move faster in deciding on reacquisition cases instead
of going to the courts for many years. The only principal negative
aspect of this law is the short time period specified between old
contracts and the new free contracts.
By requiring some175,000 families to end their tenancy within 8 years,
in the shadow of the present economic crisis and high unemployment and
cost of living, the government must find suitable alternatives or wait
further for free contracts to take effect, while simultaneously
increasing rents in the extension period. It is very unfair for
landlords not to receive the minimum amount of revenues from renting
real estate. However, it is even more unfair to send many families out
on the streets without shelter.
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