Problems on hold
Last week I broached the topic of Egypt’s rental law which has been in force since the 1960s when it was issued among a bunch of ‘revolutionary’ [socialist] decisions. The law left us with a bitter economic and social legacy. It froze rental values and immunised rental contracts against termination or cancellation, seriously tampering with market mechanisms and working to sour the relationship between landlords and tenants. Landlords found their ownership rights practically suspended whereas tenants usurped ownership rights that were never originally theirs, all under the blessing of the law. I concluded that we needed the political will to draft a new law that would rectify the more-than-half-a-century fault, and would bring about long overdue justice. [http://en.wataninet.com/opinion/editorial/law-to-tackle-old-time-rents-justice-long-overdue/18601/]
I am well aware of the economic and social upheaval the prospective law might trigger once applied. I invite you to a reading of the articles of the bill, currently under study by the House of Representatives’ Housing Committee. It is anyone’s guess whether the law would be passed, postponed, or cancelled; this will depend on indicators of tenants’ response.
- Articles (1), (2) and (3) deal with building units rented to State authorities and apparatuses. The bill stipulates that their rental contracts should be terminated, unless these authorities are still in need of the units for public interest. In this case the rental contract may be extended for a maximum of five years at a new, higher value defined by the executive code of the law. At the end of the five years, the units must be vacated and returned to their owners.
- Articles (4) and (5) deal with housing units rented for non-residential use: for commercial, industrial, professional or technical purposes. The bill stipulates that, if the tenant dies, the contract is terminated. It may be extended only once for a five-year period as of the implementation of the law, at a higher rental value according to the table of transitional provisions included in the law.
- Article (6) tackles housing units rented for residential purposes but which do not fall under law (4) of1996 which freed rental values and contract durations. The bill stipulates that current rental contracts expire ten years after the new law goes into effect. The rental value is reviewed in accordance with the table of transitional provisions included in the law. This takes into account the conditions, location, and distinct characteristics of each building to determine the increase in rent. A contract does not expire in case the tenant or landlord dies during this period; it passes to the next of kin.
- Article (7) stipulates that in case the landlord still wishes to let any of the building’s units at the end of the 10 transitional years mentioned in Article (6), priority is to be given to the initial tenant who occupied the unit. The rental contract is then governed by the civic law.
- Articles (8) and (9) deal with other aspects of the landlord-tenant relation. Article (8) stipulates that in case the tenant gives up the rented unit before the end of the transitional period stipulated by the law—five or 10 years depending on the use of the unit—the landlord must compensate the tenant for giving up the remaining period, with not more than 25 per cent of the market rental value of the unit. Article (9) stipulates that, during the transitional period, the tenant is not entitled to give up the rental contract or to sub-let the unit without approval of the landlord. Otherwise, the contract would be automatically annulled, without warning or court ruling.
- I see Article (10) as highly important and critical, and expect it to lead to not a few conflicts or disputes. The article tackles a situation common in a large number of old buildings, when tenants no longer live in their housing units yet retain them closed since the rent is too meagre to constitute any burden on their finances. ‘Old buildings’ denotes all buildings built before the 1960s, and those built after the 1960s but governed by the 1960s rental law. Article (10) stipulates the automatic termination of the contract without need of warning or court ruling in case the rented unit remains unused for more than three years, provided any proof is supplied that the tenant has alternative housing inside or outside Egypt. Once more I stress that although this article intends to bring long-overdue justice to landlords, it will not pass without a fair share of conflict.
- Article (11) settles an issue that has long been a subject of dispute between landlord and tenant; it requires the tenant to shoulder a share of the maintenance and restoration costs of the building, as well as its security. The contract is automatically terminated in case the tenant fails to honour this responsibility.
- Article (12) is another important article since it takes into account the underprivileged who fear they would never be able to find affordable housing once their ‘old’ rental contracts expire under the new law. It stipulates the formation of a fund to support underprivileged tenants. The fund is to be financed through the real estate tax proceeds and a portion of the rent, in accordance with the transitional measures included in the law. Article (12) also stipulates that the State should build housing units for underprivileged tenants, to be rented through long-term rent or finance leasing.
- Article (13) tackles the means by which the new rental values for old buildings should be determined. It stipulates the formation of special committees in each governorate to assess the building according to neighbourhood and location, as well as to its proximity to places of particular allure such as beaches, gardens and public parks. A building is also categorised as luxury, medium or economic housing according to its structure, finish and the public utilities it offers. The committees are formed through a decision by the administrative authority concerned; each committee must include representatives of the landlords, the tenants and real estate taxation authority.
- Article (14) tackles in detail the gradual raises applied to rents, according to the estimates made by the committees mentioned in Article (13). The raises begin with 20 per cent of the value estimated by the committee, and go up to 100 per cent at the end of the 10 years, following which all contracts answer to the provisions of the civic law.
I believe that responses to this bill will vary depending on the stakeholders, be they landlords or tenants. I also believe that it can finally bring long-awaited justice.
29 January 2017