Friday, July 30, 2010

Key Issues in Omani Tenancy Law

One of the most fundamental administrative priorities for a company operating in Oman is securing and maintaining local business premises. As many companies, particularly foreign companies, rent their business premises, it is important to be aware of the legal provisions governing the landlord-tenant relationship. This article summarizes some of the key features of Omani tenancy law that are most relevant to companies.

The landlord-tenant relationship in Oman is governed by Royal Decree 6/89 (as amended), the Law Regulating the Tenancy of Residential, Commercial and Industrial Premises (the “Tenancy Law”).

The Tenancy Law requires that the landlord-tenant relationship, as with other business relationships (e.g., commercial agency relationships), be recorded in a lease contract that is registered with the government. The statutory default rule is that the landlord must register the lease contract with the relevant municipality and pay the attendant registration charges. However, the parties may agree to shift this responsibility to the tenant, and the tenant in any case has the right to register the lease if the landlord fails to do so. As the Tenancy Law provides important protections to tenants, particularly in the form of rent controls and protections against eviction (see below), even when the duty to register the lease contract falls on the landlord, it usually behooves the tenant to ensure that this contract is duly registered with the municipal authorities.

One of the main focuses of the Tenancy Law is limitations on rent increases. Rent controls were featured in the Tenancy Law as originally promulgated in 1989 and were strengthened significantly by an amendment to the Tenancy Law issued in 2008 in response to sharp inflation in the Omani real estate market. Under the current Tenancy Law, landlords are not allowed to increase rent during the first three years of the lease, and rent increases thereafter may not exceed 7 percent per annum. As an exception to this general rule, the landlord may increase the rent at any time commensurate with the cost of any improvements that the landlord makes to the property at the tenant’s request.

The other key focus of the Tenancy Law relates to the term of the lease, in particular protections for the tenant against eviction. Like rent control, this featured in the original Tenancy Law but was bolstered significantly by the 2008 amendments. Under the current Tenancy Law, during the first 7 years of a business tenant’s lease (i.e., a lease for commercial, professional or industrial purposes), the lease is subject to consecutive automatic renewals unless the tenant gives the landlord notice of his intention to vacate at least three months prior to the end of the original term or the relevant renewal term. Subject to limited exceptions (e.g., misuse of the premises by the tenant or a municipal demolition order), the landlord may not terminate the lease contract or evict the tenant during this initial 7-year period.


Tuesday, July 20, 2010

Fast-Tracking of Omani Court Proceedings

In a country as well managed as Oman, it should come as no surprise to see court cases resolved quickly. But even we have been surprised at how swiftly some Omani court proceedings are being resolved these days as a result of strengthened efforts by the court system to fast-track proceedings. For example, in a recent Primary Court labour case, the Judge allowed two submissions only: a statement of claim by the Claimant, which was filed at the first hearing; and our written response on behalf of the Defendant employer, filed at the second hearing, which took place just 14 days after the first hearing. The Court then pronounced its judgment at the third hearing, which took place 20 days after the second hearing. From start to finish, the entire Primary Court proceeding took only 34 days. Traditionally, labour cases may have taken up to 12 months in the Primary Court before receiving a judgment. Happily, our client won and the Claimant's case was rejected. Our recent experience indicates that this case was not an exception, but rather part of a growing trend of Omani courts taking a fast-track approach to many proceedings. This trend has important implications: lawyers must be increasingly swift and responsive in their handling of disputes, and their business clients must also be prepared to take part in a fast-moving process. Legal strategies will need to become more forward-thinking and preemptive. For example, as many readers know, all exhibits to an Omani court filing must be presented to the Omani Court in Arabic (and must also bear the stamp of a certified translator). In defending the case cited above, one key to our success was having translated many key emails into Arabic before the proceedings began – so that they were immediately available when we needed them for exhibits. It will be interesting to monitor the fast-tracking in the Omani court system as this trend continues. Of particular note will be the extent to which this expedited approach extends upward through the ranks of the court system. While fast-tracking is clearly on the rise in the Primary Courts, we shall have to watch closely to see whether the same will occur in the Appeals Court, and finally in the Supreme Court.


Tuesday, July 13, 2010

Ministerial Decision Clarifies Telecom Dispute Procedure

For telecommunications companies that have grappled with uncertainty over the handling of disputes between licensees, a recent Ministerial Decision provides some welcome clarity. Ministerial Decision No. 44/2010, issued by the Omani Telecommunications Regulatory Authority (“TRA”), has set out clearly the procedures for the resolution of such disputes, as well as the process whereby Licensees can appeal TRA decisions. Preliminary Settlement Attempt Required Prior to filing any case, a petitioning licensee must serve a notice on the other licensee. Within 14 days of this notice, senior executives of the respective licensees are required to meet and attempt to reach a settlement. If a settlement cannot be agreed, the matter must be escalated to the respective chairmen of the two licensees within 20 days of the original notice, and the two chairmen must attempt to reach a settlement within 30 days of the original notice (although the chairmen may agree to extend the settlement period). Minutes must be recorded for all meetings, but non-compliance by one licensee will not delay any of the procedures. TRA Disputes Hearings: Key Features If the settlement attempts described above have taken place and have failed to resolve the dispute, the petitioning licensee may file a claim with the TRA. Within 15 days of this filing, the TRA will perform preliminary scrutiny of the case and decide whether, prima facie, the dispute falls within the TRA's purview. If the TRA deems that it does, it will constitute a panel to hear the dispute. Perhaps the most important thing for companies to understand from the outset about the TRA dispute hearing process is that Ministerial Decision No. 44/2010 grants these panels very extensive powers, such as the discretion to: (i) introduce additional parties to the dispute; (ii) appoint an expert to provide an opinion; (iii) require any party to take measures or refrain from any action until the end of the dispute; or (iv) issue orders for interim or precautionary measures. Another noteworthy feature of TRA dispute resolution hearings is that the proceedings are required to take place in Arabic, although the chairman of the panel may at his discretion approve the use of a foreign language for all or part of the proceedings. Regardless of the languages used in the proceedings, the final decision will be rendered in Arabic (although if some of the proceedings have taken place in another language, there may be limited use of that foreign language in the decision). Panel Proceedings Once the TRA has constituted a panel to hear the dispute, the chairman of the panel will provide the defendant licensee with a copy of the petitioner licensee’s statement of claim, together with any decision the chairman has made concerning the language of the proceedings. The chairman shall grant the defendant licensee a period of at least 15 days to file a reply, and once the chairman receives this reply he shall provide a copy of it to the petitioner licensee. If either party requests a quasi-court hearing based on grounds deemed acceptable by the panel, then the panel must convene such a hearing, and the chairman of the panel will be responsible for the conduct of the hearing. The panel may also convene a quasi-court hearing on its own initiative, if it deems this necessary. When the panel has concluded its deliberations, the parties will be notified that the matter is reserved for a decision, which will be rendered within two weeks of such notice. This notice marks the cut-off point beyond which neither party may submit any further documentation. The panel’s decision will be given in writing and signed by the chairman. Appealing the Panel’s Decision Either party may appeal the panel’s decision by filing an appeal with the TRA within 30 days of being notified of the decision. Although the filing of an appeal does not automatically suspend the enforcement of the decision, enforcement may be suspended if deemed necessary by the TRA. Within 30 days of the appeal being filed, the TRA will issue a judgment to (i) uphold the decision, (ii) amend/revoke the decision or (iii) refer the dispute, or any part of it, back to the original panel, or to another panel, for resolution. Article 35(4) of Ministerial Decision No. 44/2010 states that the ultimate judgment on the appeal will be final and binding. In summary, this new Ministerial Decision promulgated by the TRA provides a helpful measure of clarity for understanding the dispute process for the telecommunications sector, yet it also prescribes a very lengthy and detailed set of rules to which the parties must adhere. We therefore suggest that companies consult legal advisors as early as possible in the process when a dispute arises.


Thursday, July 8, 2010

Judge's Verdict: Landlords & Tenants

This article was written by Curtis partner James Harbridge of the firm’s Muscat office. It originally appeared in the Muscat Daily and is republished here with permission.

Landlord/ tenant disputes are sometimes quite prevalent. Furthermore, on some occasions, the outcome at court may differ from what one would have expected.

The facts that led to Supreme Court case 273/06 were as follows:

A property owner rented out a property to the tenant, who planned to use the premises as an educational establishment. However, when the tenant stopped paying the rent, the owner of the building filed a case in the Primary Court. The tenant was ordered to pay RO12,000 in accrued rentals to the owner. This sounds fairly routine, but in fact it was a judgment that surprised the tenant, for reasons explained below.

The tenant, meanwhile, filed an appeal to the Appeal Court, stating that the two parties had never actually signed a lease. He also relied on the resultant fact that there was no tenancy agreement registered with the relevant municipality. Accordingly, the tenant reasoned, the Court should disregard the case as it is a statutory requirement in Oman that a building lease must be registered.

However, the Appeal Court ruled against the tenant, and upheld the RO12,000 judgement in favour of the landlord.

In consequence, the tenant appealed to the Supreme Court. He relied upon four lines of appeal:

  1. The Primary and Appeal Courts in Muscat should have declined to hear the dispute as the property in question was not in Muscat;
  2. The lease contract had never been signed;
  3. He had never derived a benefit from the lease, as he had never obtained the necessary licence from the Ministry of Education; and
  4. He had made some payments by cheque and therefore the claimed amount was wrong.
On November 8, 2006, the Supreme Court gave its ruling. They adjudged that the lower courts in Muscat had been right to hear the dispute, as although the building was outside Muscat, the two parties had met and negotiated the lease in Muscat. Moreover, it was held that a dispute regarding an unregistered lease could be heard, as, in the particular circumstances of this case, the tenant had admitted there was a lease contract in place. Indeed, it seems that the fact that the tenant stated he had made some rental payments by cheque was evidence in itself from the tenant that a landlord-tenant relationship existed and that the monthly amounts paid were connected to the lease arrangements.

The judges, moreover, sated that it was not the fault of the landlord that the tenant failed to obtain the necessary licence from the Ministry of Education. Finally, the Supreme Court state that it could only hear legal arguments, and not factual disputes, meaning that the fourth ground of appeal lacked credibility.

In this way, the Supreme Court upheld the lower courts' judgements that the tenant must pay RO12,000 to the landlord.

The lack of signature on the contract was deemed not to be a problem, as the parties had formed the contract by a combination of writing it and then acting in accordance with what it stated.