Commercial leases differ from residential ones in their provisions and protections. Decree-Law No. 35/1978 on Property Rental governs commercial leases, accounting for the special nature of commercial activity and associated elements like clientele and goodwill.
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Commercial Lease Characteristics
- Covers property designated for commercial, industrial, or professional activity
- Governed by the Property Rental Law with commercial custom considerations
- Distinguished by special considerations: location, clientele, and reputation
- Typically written for longer terms than residential leases
- May include special terms regarding activity type and modifications
Landlord Rights
- Rent: Collecting agreed rent on schedule
- Property recovery: Recovering the property at lease end per legal conditions
- Preservation: Requiring the tenant to maintain the property
- Termination: Seeking termination for tenant default
- Security deposit: Obtaining a deposit at lease commencement
Tenant Rights
- Use: Using the property for its designated purpose
- Maintenance: Requiring the landlord to perform necessary maintenance
- Renewal: Right to remain upon automatic renewal
- Compensation: Goodwill compensation if evicted without attributable cause
- Deposit return: Recovering the deposit at lease end
Rent & Adjustment
- Rent is set by party agreement in the contract
- The landlord may not raise rent during the lease without agreement
- Rent may be adjusted at renewal per market rates
- The tenant may challenge unjustified increases before the Rental Committee
- Late rent payment is grounds for eviction after notice
Lease Renewal
- Express renewal: Parties explicitly agree to renew on same or new terms
- Implied renewal: Tenant continues after expiry without landlord objection
- Statutory renewal: Cases where the law mandates renewal
- Implied renewal runs for a similar period or indefinitely per the agreement
Eviction Grounds
- Non-payment of rent despite notice
- Using the property for a purpose other than agreed
- Causing serious damage to the property
- Subletting without the landlord's permission
- Demolition for reconstruction (with compensation)
- Landlord's personal need (under strict conditions)
- Lease expiry with notice within the legal timeframe
Goodwill Compensation
- Due when evicted for reasons not attributable to the tenant
- The tenant must have established clientele and commercial reputation at the location
- Assessed based on business volume, occupancy duration, and location
- Covers loss of clientele, relocation costs, and new premises setup
Assignment & Subletting
Lease Assignment
- Transferring the entire lease to another person
- Requires landlord consent unless the contract permits it
- The assignor exits the lease relationship
Subletting
- The tenant rents the property to a third party
- Requires written landlord consent
- The original tenant remains liable
Frequently Asked Questions
Can the landlord raise rent suddenly?
No, rent cannot be raised during the lease term. At renewal, the landlord may request an adjustment, and the tenant may object before the Rental Committee if the increase is excessive.
Am I entitled to compensation if the building is demolished?
Yes, if the building is demolished for reconstruction, the commercial tenant is entitled to goodwill compensation covering loss of clientele, relocation costs, and new premises setup.
Can I sell my commercial premises?
You may sell your commercial business (the going concern with its elements), but assigning the lease requires the landlord's consent unless the contract expressly permits it.
Commercial Lease Disputes
Protecting your commercial lease rights requires a specialized attorney. Attorney Meshari Obaid Al-Enezi — Yumnaak Law Firm — handles commercial lease and goodwill cases. Contact us.
Disclaimer: This article is for legal education purposes only and does not substitute professional legal advice. Laws and judicial interpretations are subject to change.
