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.