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.

PYQ blogs about landlords' avoidance of the new rent laws in Oman that limit rent escalation to 7.5% per year:

Let’s really think about this! So you decide to rent a property, the owner say here lets sign a lease for one year. Your excited, you found a great flat and you know that you signed a lease for a year and when next year rolls around your rent wont go up by more than 7.5%. A year of bliss passes, and you’re looking forward to sign a new lease at a maximum of 7.5% higher rents. What are the chances of that happening?

Well it depends. Assuming no changes in supply of housing and the current increases in demand, the landowner is not going to sign a new lease. The owner is going to inform you that he is not renting the property to you this year and you need to pack up your bags and leave.
He signs a new lease with a new tenant at 200% increase in rent. You on the other hand, get to move to a new flat where the cap no longer applies!

Kishor Cariappa also blogs about a recently received email message that echoes that same concept:

We are the residents of Muscat Oasis Residents in Boucher. After the abnormal weather conditions that hit Oman in June 2007, the management in the compound started to increase rents for new renewals by at least 45%. After the cabinet decision to put the 15% cap on rents, the management just went crazy! They started to issue evacuation notice to tenants whom their contract is about to expire.

The reason for evacuation is “refurbishment”. Just to show that this is a false reason, some of the tenants got a letter of increasing the rent on 20th Sep 2007, and then they got the evacuation letter on 23rd Sep 2007. We have copies of these letters that was sent to many people. This might seem to be a specific issue, but if we look into it, we will find that many landlords will use such play in order to increase rents.

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