Saturday, May 24, 2008
Rent Control finally enshrined as a Royal Decree

Well, it looks like someone with more than half a brain has finally thought about the problem of hyper-inflation of rents in Muscat, how to control those rents, and has considered some of the obvious side-effects. Another good thing is its been done as a Royal Decree, and is therefore Law, rather than the previous ad-hoc 15% statement from the Council of Ministers which was more of a polite request.

His Majesty Sultan Qaboos released a decree yesterday (unusually, a Friday) that caps rents for 3 years to a 7% rise, making lease contracts for residential dwellings effectively 4 years, and (finally) explicitly tries to control the previous ‘work-arounds’ landlords were using to evict tenants and then re-lease after a 50% or more hike, such as evicting ‘for a relative’ to use the house, for ‘renovations’, or even selling the house to a relative, and then re-purchasing once the tenants were gone.

Of course, there will be side-effects to this new decree too. Firstly, the prices of houses and especially land should drop a bit, but that’s probably a good thing. Secondly, there will now be 2 types of leases, those that are effectively rent-controlled by being under a lease before 23 May and those that are not (for example a newly built house). So, I’d expect new leases post 23rd May to be very expensive, but if you’ve just signed a lease with increased rent, lucky lucky you, it looks like you’re in great shape for ~3 years.

The more nasty side effects will be present, as anywhere with controlled rents. There will be a huge (and growing) temptation for landlords to use threats to force tenants out, to cease doing any maintenance, or perhaps even to cut off power and water or other such tricks. We’ll see. Hopefully the decree status will encourage the press to publish reports of any such miscreant landlords.

Amendments in rent law to ensure stability
MUSCAT HE Sheikh Saif Bin Mohammed Bin Saif Al Shabibi, Minister of Housing and Chairman of the committee formed by the Council of Ministers to devise a mechanism to address the problem of rising rents, said in a statement to ONA that the issue has been one of the main concerns of His Majesty Sultan Qaboos Bin Said.

Shabibi said the new amendments introduced by the Royal Decree No.72/2008 aim at preserving the contractual relationship between the landlords and the tenants and also maintaining the interest of both parties.

He said the ministerial committee has taken into consideration the various social and economic aspects while drafting the amendments to ensure stability in contractual relations. The provisions of the Royal Decree are applicable to both existing and future tenancy contracts, he added.

According to the new amendments, the landlord does not have the right to raise the rents of residential, commercial and industrial units before three years from the date of the lease contract or from the last increase introduced in these contracts. The increase, when eligible, should not be more than 7 per cent of the annual rate shown in the contract. The landlord also does not have the right to request the eviction of tenants of residential units before four years from the date of lease contract and seven years in case of commercial and industrial units.

In case, the landlord wishes not to renew the lease contract, he should notify the tenant at lease three months before the expiry of the lease contract. The lease contracts will remain valid until the expiry date and will be automatically renewed during the period at which the landlord is not entitled to request eviction of the tenants.

The landlord has the right to request eviction in the following cases:
-If the unit is utilised for purposes other than those specified in the lease contract or in violation of laws, which includes those on public morality.
-If the tenant subleased the unit or assigned it to a third party without getting prior approval from the landlord except in cases of the commercial and industrial units which is included in the lease contract.
-If the landlord wishes to operate the unit himself or by any of his close relatives who do not have vacant units, provided the tenant is given a six month notice period. If the same unit is not utilised within three months from the date of eviction, the tenant may be reinstated.

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15% Rent Cap—What Does It Mean?
22nd September 2007

The recent accouncement of a rent cap of 15% over the next two years in Oman raised a number of questions among landlords and tenants alike. Here we try to clarify some of the queries

As soon the new ministerial decision was announced in the local media our office started to receive calls from
our patrons asking for some clarifications. Of course we were not in a position to answer these questions
authoritatively, neither are we in that position now. However, as a service to our readers, we took the initiative
to seek answers from the appropriate municipality authorities. Here we share with you our understanding
of the new law, but we do not claim to have definitive answers — there’s still room for misunderstandings. Rather
than relying solely on the information provided here, you should yourself seek any clarifications you need directly
from the responsible authorities.

Q: The announcement talks of a 15% rent cap for two years. Does that mean 15% over a two year period?
A: No. It means 15% per annum over the next two years.

Q: Does the restriction apply to existing tenants or only to new tenants.
A: Only new tenants.

Q: I had already given notice of a rent increase (greater than 15%) to my tenants before the new law was announced,
but had not yet renewed the agreement. Can I still apply the increase? A: If there’s a written acceptance of your new rent from the tenants you can apply the increase. Otherwise all new tenancy agreements must comply with the new law.

Q : What if my tenants are willing to pay a rent increase of more than 15%?
A: That’s fine. Tenant’s approval is authenticated by his/her signature on the tenancy agreement.

Q: Can I ask my tenants to leave so that I can bring in new tenants at a higher rent of more than 15%?
A: You cannot ask your tenants to leave specifically for the purpose of circumventing the law. As currently stipulated
in the terms of the tenancy agreement, three months before expiry of the contract you may notify your tenants to vacate your property for reasons other than rent increase of more than 15%.

Q: The new law is said to apply over the next two years. What happens thereafter?
A: Who knows. Presumably a new law would be announced.

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Oman's bloggers are ranting about increasing rent and driving in Ramadan in this round up of Omani blogs.