Amendments to Oman’s Landlord and Tenant Law

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Amendments to Oman’s Landlord and Tenant Law
01 January 2011
 
Emilie Sarker, business today (Oman) As readers will recall, an innovative new law amending Oman’s bedrock lease legislation (Royal Decree 6/89), was issued in 2008 and created quite a stir amongst landlords and tenants alike, given its proactive approach and response to market conditions. The 2008 amendments were enacted as a response to the then boom in the rental market and associated rent hikes. Royal Decree 107/2010 provides that “The Council of Ministers shall make the required amendments to the provisions of Royal decree 6/89 to strike the balance in the tenancy relationship between the parties in accordance with the circumstances and economic changes.“ It was enacted on 19 October 2010. The sultanate’s government, as ever with its finger on the pulse, recently issued further amendments to Oman’s lease law in response to the recent movements in the market and a stabilisation of rents. The new law applies to all lease arrangements, whether residential, commercial or industrial. All lease arrangements are now subject to the amended provisions, regardless of when the lease contract was entered into and registered at the relevant municipality. As with the 2008 amendments, the new law will have a significant impact on all businesses in Oman, since it changes the legal position regarding key issues such rent review, minimum lease periods and introduces payment of costs in certain situations of nonpayment of rent. The most dramatic changes in the new law are in relation to rent increases and minimum lease periods. As regards rent increases, the previous requirement that landlords may only (except in limited circumstances) increase the rent every three years has been amended such that parties can now agree otherwise. Further, the former cap of seven per cent of the annual rental value stipulated in the lease contract has been eliminated. The new law has also made significant changes to the minimum stay period. The earliest a landlord can terminate a lease for commercial property has been reduced from seven to five years from the date of the commencement of the landlord-tenant relationship. This is reduced from four to three years in the case of residential property. Previous statutory notice periods remain unchanged (the general rule being that notice must be served no less than three months from the end of the contractual term of the lease). With the new provisions, in order to protect one’s position, it is vital for any party wishing to terminate a lease to ensure that he/she is aware of how and when to serve the correct notice for it to be legally binding. The last of the significant changes is that the law now provides (in certain circumstances) a mechanism for the landlord to recover expenses incurred in litigation in relation to eviction notices served as a result of non-payment of rent. A review of the unchanged provisions of Oman’s lease law reveals that a fair balance between the parties is maintained and the tenant’s rights are also considered. For example, the landlord is obliged to hand over the leased premises in a condition suitable for the purpose for which it was leased, failing which the tenant is entitled to apply to the Court for annulment of the lease contract and reimbursement of the tent paid. The landlord is also obliged to carry out all necessary repairs and maintenance to keep the premises useable for the purpose for which it was leased. Further, the tenant’s rights remain protected since the incoming owner steps into the previous landlord’s shoes, bearing all the responsibilities, and being subject to the same obligations and restrictions as the previous owner. Although the reasons for the recent changes in the law have not been publicly stated, given indications that rents have stabilised, one could conclude that the new changes to the tenancy law aims to strike a balance in the landlord and tenant relationship. With a new year on the horizon, it will be interesting to see how the market responds to these legal amendments, and what further developments in the law may be deemed necessary to respond to such changes in due course. Major Changes The requirement that landlords may only increase the rent every three years has been amended such that parties can now agree otherwise. The cap of seven per cent of the annual rental value stipulated in the lease contract has been eliminated. The earliest a landlord can terminate a lease for commercial property has been reduced from seven to five years. In the case of residential property this is reduced from four to three years. The new law provides a mechanism for the landlord to recover expenses incurred in litigation in relation to eviction notices served as a result of non-payment of rent. The author is a solicitor at Trowers & Hamlins Original article See previous HIC-MENA archive news items: Oman Mulls Lower Rent Cap, Tighter Eviction Rules (8 March 2008) Omani Women's Equal Rights to Own Land (24 November 2008) Key Issues in Omani Tenancy Law (30 July 2010)

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