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.
Friday, July 30, 2010
Key Issues in Omani Tenancy Law
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:
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.
