Dina Al-Amood | Staff Writer
The Lebanese parliament passed the first rent law in decades during its last session in December. The law effectively allows landlords of non-residential properties to dramatically increase rent prices and take back properties from tenants unwilling or unable to pay. However, without a president, the law can only be transferred to the cabinet, which has now passed its one-month constitutional deadline to enact it.
The legislative amendments to the 1963 law provide landlords with two options to free their properties from rent-control regulations that have kept their rent revenue below market value. The first option for them is to extend the lease of existing tenants for two years without permission to hike rent. Alternatively, they may extend the lease for four years, with permission to raise rent yearly. Legal courts will appoint experts to re-appraise the commercial property based on its location and other relevant factors, with eight percent of this appraisal value becoming the annual rental fee owed by tenants. The tenant’s payment schedule involves contributing 25 percent of the 8 percent value during the first year, 50 percent in the second year, and 100 percent in the third and fourth years. To illustrate, if a property is appraised at $120,000, the annual rental fee per the new law would be $9,600, with the tenant paying $2,400 in the first year, $4,800 in the second year, and the full $9,600 in the third and fourth years. Either way, after two or four years, landlords reclaim their properties again. They are at liberty to choose to lease, sell, or utilize their properties in any other manner, essentially overriding the existing rent extension law.
If this new law goes into force, the Lebanese Ministry of Finance estimates it will affect around 24,900 rent-controlled properties. It will allow landlords to adjust their rent revenue to inflation from the 1980s and, more recently and significantly, in 2019. It also exempts landlords from paying 90 percent of their property taxes, fees, and fines accumulated over the past 10 years, accounting for rent not being adjusted to inflation since 1963.
Led by The Gathering of Owners of Rented Buildings in Lebanon, 50 property owners gathered in Riad Solh Square to rally for the law’s immediate publication in the Official Gazette. Patrick Rizkallah, President of the Rented Buildings Owners Syndicate, points to how this dramatic rent increase is justified. He told L’Orient Today, “The tenant is selling and trading his merchandise in fresh dollars, yet pays rent at the old lira rate. This is a form of injustice and it is 50 years old.” Many argue that dozens of small businesses will not survive if the law is implemented. However, owners always point to thriving businesses like health clinics and gold shops taking advantage of the situation to pay “ridiculously low rent” despite being profitable.
On the other side of town, there was a clamor for the total opposite. In Achrafieh’s Sassine Square, the Committee for Defending Tenants’ Rights in Lebanon took to the streets to demand the law be halted. Some call for scraping the proposed law completely. However, most tenants would settle for reducing the 8 percent rate to 6 or 5 percent, understanding the owners’ rights to fair compensation relative to their property value. Protesters also expressed their fears of extending this law to include non-residential buildings in the future.
The law, shrouded in ambiguity, has left economic and political analysts in a state of division as they grapple with critical questions. Ensuring fair rent values for over 20,000 properties raises concerns about practical implementation. Small businesses, the backbone of many neighborhoods, face an uncertain future. Amidst this uncertainty, one certainty emerges—Beirut’s streets have transformed into a battleground where tenants and owners engage in a two-front battle, each vying for their interests in this legislative puzzle.
Sources:
https://www.lbcgroup.tv/news/news-bulletin-reports/746245/unveiling-lebanons-rent-law-changes-what-is-at-stake-for-24000-tenants/en#:~:text=Secondly%2C%20the%20new%20law%20specifies,the%20third%20and%20fourth%20years.
http://www.businessnews.com.lb/cms/Story/StoryDetails/11243/Non-residential-rent-to-be-freed-in-two-to-four-years