INSIGHTS

No Solution to the Tenancy Law?

September 5, 2019

By: Salma El-Nashar, Associate

The new tenancy law being discussed in parliament runs the risk of being found unconstitutional should it pass into law

Discussion was continuing in parliament this year before it adjourned for the summer recess regarding the amendment of the old tenancy law for non-residential properties, with the discussion of a new law being postponed to the upcoming parliamentary round.

Under the old law, rents determined years ago may no longer be compatible with the current value of rented properties. The problem also concerns residential units, though for the time being parliament is only looking at non-residential units.

Law 49/1977 regulates the relationship between owner and tenant regarding both residential and non-residential properties. Article 29 of this law says that “if a property is leased for a commercial, industrial, professional or artisanal activity, the contract shall not terminate with the death of the tenant but shall remain in force for the benefit of the tenant’s heirs and partners.”

In July 1996, this article was ruled unconstitutional by the Supreme Constitutional Court in favour of the partners of the original tenant after his death. In February 1997, the court ruled that the continuation of the lease in favour of the tenant’s heirs if they did not practise the same profession was also unconstitutional.

Law 6/1997 amended the article by removing the word “partners” and putting in restrictions regarding the use of the leased property by the heirs of the tenant after his death. The new law allowed the tenant’s heirs to continue using the property only if they practiced the same profession or activity and if they were first or second-degree relatives under Article 36 of the Civil Code, such as sons, grandsons, parents, grandparents or brothers/sisters.

However, the property could still be used by such individuals’ representatives.

According to statements by the parliamentary Housing Committee, the new law being discussed in parliament will include five articles regulating the relationship between landlord and tenant for non-residential property.

The rent will be increased by five times in the first year and then by 15 per cent over the subsequent four years to bring it closer to present values. At the end of the five years, the contract shall be considered terminated with no need to follow any new procedure. A new contract and new terms can then be issued.

The new law concerns property leased by legal persons for non-residential purposes. A legal person, as defined in Article 52 of the Civil Code, is a public or private institution or entity such as an association, company, union or other institution having legal personality.

Discussion has continued in parliament on the scope of the application of the new law, with some MPs proposing the inclusion of tenants that are also natural persons, though this has been ruled out by a majority.

Some still believe that the new law risks being ruled unconstitutional since if it only applies to legal persons it runs the risk of breaking Article 53 of the constitution, which stipulates that citizens are equal before the law and in rights and freedoms. The right of ownership is an important legal right, in which all citizens must be equal before the law.

The distinction between a natural person and a legal one as far as tenancies is concerned is unjustified, commentators say, since in both cases the owner must have the right to dispose of the property either by selling it or by re-leasing it at a rent compatible with its actual value.

The new law goes against this principle.

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