The growth in population which Qatar has witnessed in the last few years has led the Qatari Government to apply a "rent control" strategy to prevent economic instability caused by high or frequent rent increases that may be imposed by landlords. The Government's direct intervention to maintain an affordable supply of commercial premises has been deemed essential to sustain the economy and protect tenants from any exorbitant or arbitrary rent increases.
In January 2008 an Emiri decree issued the Lease Law No. (4) of 2008 ("Lease Law") to organise the relationship between landlords and tenants in relation to residential and commercial leases. Article (10) of the Lease Law provides that "landlords are not permitted to increase the rent value of leases in force prior to the enactment of the Lease Law or entered into after its enactment except according to the rules, terms and rates governed by a Decree to be issued by the Council of Ministers".
In March 2010 the Council of Ministers issued Resolution No. (9) of 2010 (the "Resolution") which sets out the following limits of any rent increase in relation to non-residential leases:
- 20% per year if the rent value is less than QAR 3,000;
- 15% per year if the rent value is between QAR 3,000 and 6,000;
- 10% per year if the rent value is between QAR 6,000 and QAR 10,000;
- 5% per year if the rent value is more than QAR 10,000.
Pursuant to the Resolution a landlord is entitled to increase the rent of a non-residential lease on a yearly basis without the consent of the tenant and even if the lease agreement does not explicitly provide for such a right. However, the right of increase should comply with the limits referred to above. These limits apply to any non-residential lease agreement entered into prior to, or after, the enactment of the Resolution.
The limits set out in the Resolution aim to protect the tenant from any excessive rent increase imposed by the landlord. These limits do not apply if the tenant agrees with the landlord to a higher rent increase.
The limits set out in the Resolution apply to non-residential leases only but not to residential leases. This means that the landlord upon negotiation of a new residential lease or upon renewal of the same is entitled to determine the rent at its discretion and the tenant is left with no alternative but to agree or to refuse such rent. However, the landlord is not entitled to unilaterally increase the rent during the term of the residential lease agreement without the consent of the tenant. The landlord is bound by the rent rate agreed in such lease.
As the limits provided for in the Resolution apply to non-residential lease agreements which are in force prior to, or entered into force after its enactment, the Resolution may be interpreted to mean that a landlord is entitled upon expiry, or renewal, of a non-residential lease agreement to request a rent increase exceeding these limits and to refuse renewal of the non-residential lease agreement if the tenant does not agree to such increase. This practice hinders the rent control strategy sought by the Qatari Government. Therefore, the Council of Ministers has issued several resolutions providing for legal extension of non-residential leases preventing landlords from terminating non-residential lease agreements if their expiry date falls during such extension. Recently, the Council of Ministers issued Resolution No. (8) of 2012 (the "2012 Resolution") which provides that:
"Non-residential lease agreements which are subject to the Lease Law No. (4) of 2008 and are still in force on 14/2/2012, shall be extended for 2 years starting from 15/2/2012, unless the period provided in the agreement is longer or the tenant intends to waive such extension provided that the tenant uses the leased premises".
Pursuant to the 2012 Resolution, any non-residential lease agreement which was in force on 14/2/2012 is extended until 15/2/2014. This means that the landlord may not terminate such lease agreement at its expiry date if the same falls between 14/2/2012 and 14/2/2014. As an exception, the landlord may terminate the lease agreement only if:
- the tenant commits any breach of its obligations under the lease agreement;
- the tenant explicitly waives its right to the extension of the lease agreement as provided under the 2012 Resolution; and
- the tenant vacates the leased premises and cease using it.
The rent control strategy adopted by the Council of Ministers in relation to non-residential leases has proved effective in controlling inflation. It remains to be seen whether the Council of Ministers will take a step further to adopt this strategy in relation to residential leases, as it has done in the past, to ensure social stability by maintaining affordable accommodation for residents in Qatar.
Note: Qatari Laws (save for those issued by the Qatar Financial Centre to regulate internal business) are issued in Arabic and there are no official translations, therefore for the purposes of drafting this article we have used our own translations and interpreted the same in the context of Qatari regulation and current market practice.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
