Low rents in Lebanon, in light of the new 2014 law
Zouhair Ghazzal
Loyola University Chicago
Concepts of property and contractual obligations in
contemporary Lebanon, as for the rest of eastern Mediterranean societies, have
been marked by a paradigmatic shift whose time framework coincided with the
dismemberment of the Ottoman Empire and the creation of new nation-states by
the French and British colonial powers. Even though the land law of 1858
required the registration in newly
designed ṭāpū registers of all
agrarian properties that were taxed, there were no cadastral registers per se
in the Ottoman Empire, nor did the law admit “ownership” to the concerned
parties. The prime reason for such a lack was indeed the non-existence of
proper modern cadastral methods for delineating the space of a property. In
effect, in Ottoman times, as witnessed in sharia court records, properties were
delineated through their adjacent properties, in their north, south, east and
west directions, hence the system lacked proper measurements and modern
topographic tools. It was only in 1926, when Syria and Lebanon were under the
French mandate, that a cadastral register, known as the sijill ᶜaqārī, was finally institutionalized. From now on each
property would have a cadastral “record” of its own, known as ṣaḥīfa ᶜaqāriyya, and which consists of
the totality of documents that would mark the property as unique in terms of
location, topography, modifications, clearances, sale or tenancy contracts,
lawsuits and so on, as set within a specific region, be it a village or town or
city.[1]
The prime purpose behind such renovation was obviously to delimit properties
and register them based on a scientific method to make visible the surface area,
value, and ownership of land for legal and taxation purposes, or else to
receive a permit of construction. But the other aspect of such rationalization
was to render such knowledge “public” (ᶜalanī),
that is, not simply to the state and tax authorities, but also to common
individuals.[2]
Thus, if I decide to sell one of my properties to an unknown individual, and if
I feel uncertain as to whether he or she would be able to deliver, one way to
solve such dilemma would be to request their ṣaḥīfa ᶜaqāriyya, which is available for public viewing to private
individuals like myself. The latter behaves like a U.S. “credit report,” which
would mark a borrower as legible for further borrowing. The main difference,
however, between a ṣaḥīfa ᶜaqāriyya
and a credit report is that the former is solely based on the property as ᶜayn, that is, as the tangible object
ready for exchange as commodity (res in
commercio), while the latter is based on the performance of the debtor and his or her success at servicing their
debt (bank accounts, mortgages, loans, credit cards, and bills). Perceiving an
individual owner solely in terms of his or her ownership of tangible properties
rather than debt points to a worldview where what matters is what the
individual fully possesses (māl),
which in itself acts as a source for capital. As we will see in the second
section below, things have not changed much since the mandate, considering that
it is still the tangible object as ʿayn
that matters: to win a lawsuit of property recuperation, I must prove against
my opponent-tenant that I do not own anything in full but the leased property; hence the necessity (ḍarūra) for
recuperating the property for my personal (family) use is a must from a legal
perspective; the only other necessity in the eyes of the law is that of
demolition (hadm) either for safety
reasons, or else for the purpose of a new project.
Unsurprisingly, the law that organizes property as such came
four years later in 1930; that is to say: first the properties had to be demarcated
in a cadastral register, then the law at defining
property was promulgated. Besides distinguishing between movable and immovable
properties, another category is that of “incorporeal properties,” that is, all
the rights, obligations, insurances, and lawsuits concerning a tangible
property. But the surprising element in these new regulations was that when it
came to the categories of properties
the mandate did not differ much from its Ottoman predecessor in acknowledging
the three broad categories of mīrī, milk, and waqf. Acknowledging the mīrī was
indeed a bit of an anachronism, considering that mīrī state-owned lands
historically served as tax prebends for an urban élite serving an imperial
state. Now that they are defined as “those properties whose raqaba (“neck”) is for the state, but
whose usufruct (taṣarruf) goes for
individuals,”[3]
what purpose does the mīrī has still to offer in a world devoid of sultanic
power? In a country like Syria, where large ownership was and still is
predominant, and where the Ottoman ex-élite “old classes,” which survived out
of state prebends, de facto “inherited” their prebends, the mīrī–milk
opposition only created a gross confusion which still survives until this day
(but more so in Syria than in Lebanon, where the mīrī category proves
superfluous at best). Suffice it to say for our purposes here that the Ottoman mīrī
became de facto (private or public state-owned) milk under the mandate, even
though still legally inscribed as mīrī, which nonetheless enjoyed inheritance rules
different from sharia law: men and women would in this instance inherit
equally. Therein lies the true aim of the new 1930 law: to demarcate mīrī lands as a category that would not follow the
precepts of sharia law of unequal inheritance. By contrast neighboring
Lebanon, which since late Ottoman times had a more aggressive mercantile and
liberal culture than Syria, the mīrī–milk distinction did not matter that much,
as properties were either de jure private, or else they were state-owned and
public.
By the time the Second World War was nearing its end and the
French had granted Lebanon and Syria their independence in 1943, the economies
of both countries were, by eastern Mediterranean standards, quite good, which
led to an abundance of a much needed cheap labor for the cities. That was
probably even more so in Lebanon than Syria, considering how much the potential
for agriculture was reduced. By 1943–46 the surplus of agrarian labor migrated
to the coastal cities in flocks (the second such wave, following the great
migration from the mountains to the cities in the late Ottoman period),
creating a need for leased apartments at affordable prices, in particular for
the capital Beirut. In an attempt to create a local industry, new manufacturing
plants were established in the suburbs of the capital, thus areas like Dekwāneh
and Shuwayfāt which were traditionally satellite villages with large property
holdings became epicenters of manufacturing plants which were serviced by labor
migrating from the north, east and south of the country. When the new tenancy
laws were therefore promulgated in the post-mandate period, it was precisely
this new labor force, seeking affordable rents over long periods, that jurists
and lawmakers had in mind. (In the U.S. similar laws were enacted by the
Supreme Court during World War II, what ultimately became known as “rent
control,” to serve the state bureaucracy contributing in the nascent war effort
and its massive industrial and military projects; and in spite of lawsuits
initiated until this day by private individuals arguing that “rent control” is
nothing but a “seizure of private property under a different name,” the low
rents still survive in certain crowded and expensive areas, such as the San
Francisco Bay Area and Manhattan in New York.)
The majority of tenancy contracts in the world are normally
set for a specific time period, usually for one year, with a clause permitting
the tenant for a renewal for an additional year, but only if the landlord wishes to do so. That is to say, the landlord
would not need to provide any excuse, personal or otherwise, to reject the
one-year renewal offer by his or her tenant. Such limited renewals share many benefits, irrespective of the society
or the time period in question. First of all, the market would not get clogged
with old rents, which would have to be renewed on special terms, forcing for
new legislation every once and a while to fix the rent value and update it on
inflation. Second, the lease market would remain competitive, as landlords
would not live in fear of having their properties occupied on long terms, if
not permanently, creating a shadow-landlord in the name of a quasi-permanent
tenant. Third, rents would receive an automatic yearly update that would mark
them in par with the current inflation rate. One could add that when the lease
market does not get clogged with old rents, the parallel sale of properties
would not get artificially inflated either; nor would there be pressures on
landlords to pay monetary “compensations” for tenants who decided to leave on
their own amid a prolonged lease.
The Lebanese market would have been in that category of open
competitive leases were it not for the tenancy law of 1944 which
institutionalized the distinction between leases that were “renewed” (tajdīd) amid an explicit joint willingness
from both landlord and tenant, on the one hand, and others that were
“prolonged” (tamdīd) beyond what the
contract had originally stipulated, which is usually one year, on the other.[4]
It is indeed that kind of opening towards a legalized “prolongation” that would
ultimately spell the well known crisis of low rents, but only at the beginning of
the 1980s, once the lira fell apart, amid the Israeli occupation of Lebanon in
1982 and the expulsion of the Palestine Liberation Organization to Tunis; hence
even in the early stages of the civil war in 1975–76 “prolongation” of
contractual leases did not seem to have created the much anticipated widespread
shortages on the market. What Lebanese legislation harnessed on in three
decades, in the 1944–74 interim, was precisely the kind of link between
“renewal” and “prolongation,” providing ample reasons to go for the latter. In
those prosperous decades, up to the early 1980s, the economy was doing reasonably
well with acceptable inflation, low unemployment, cheap and abundant local
labor, affordable housing, and a strong lira in respect to the dollar and other
robust currencies. So why not opt for yearly tenancy contracts? Why legalize
“prolongation”? It is usually assumed that with the end of the French mandate,
a larger than expected rural or mountainous population moved to the cities, in
particular Beirut, which formed the backbone of manufacturing and industries.
Being unfamiliar with city life and its risks, the law sought to mitigate that
uncertainty by legalizing the prolongation of contracts whenever the tenant
felt legible to do so. At the time neither landlords nor tenants had much to
complain about, considering the economy’s good standing.
To see what had happened in the interim, one need go no further
than the tenancy law of 1974, which was the outcome of small incremental
modifications and amendments to the original 1944 text, and which unwittingly
served as the adopted blueprint text for the yet to come 15-year civil war
(1975–1990). The broad rule established invariably in the texts of 1944–1974 is
that “the end of the period of the
lease contract would not ipso facto
imply that the tenancy is over and done with,” which means that the tenant has
every right to renew, if he or she wishes to do so. A corollary rule which was
also a norm on the eve of the civil war was that prolongation was not solely
the tenant’s right, but also, in case of his or her death, that of the spouse
and their children. Moreover, even “relatives” who were “associated” with the
deceased and were occupying the property had their rights maintained in case
they opted for prolongation. Hence the “family” spectrum was fairly broad as to
who enjoyed that right of prolongation: what legislators had in mind was not to
reduce tenants to the one person who signed the lease, but expand it to all
family members who were simultaneously
occupying the property; hence to protect them in their totality from the risks
of the market. Prolongation prompted legislators to regularly update the tenancy
laws every few years, as they had to adjust old rents to inflation. The other
side effect of prolongation is that the law stipulated that proprietors have
the right to “recuperate” (istirdād)
their leased properties whenever there is an urgent need to do so, and in such
instances the tenant would have to be “compensated” (taᶜwīḍ) for having all of a sudden lost his or her contract.
Lawsuits became therefore normative whenever the proprietor would demand his
property back from his tenant on the basis of an absolute necessity, and if
successful thanks to a judge’s ruling, as was the case in the recent litigation
that we’ll document below, then the court would summon the landlord-plaintiff
to “indemnify” his tenant for a cash payment in installments agreed upon in
court. (Over the years, different methods of calculation were adopted to assess
the value of the property, its rent, and the compensation itself, which we need
not get into here, but which will be addressed shortly in relation to the
recuperation-compensation scheme below.) Lawyers tend to agree that it is
indeed such lawsuits, whose numbers have dramatically sprawled since the sudden
end of the civil war in the early 1990s, which have contributed to the overall
decline of old rents from their 50 percent highs in the 1980s to their current
25–30 percent rate.[5]
What is of interest to us is the notion of recuperation (istirdād) and the lawsuit that would be
needed to recuperate a property from the tenant. In effect, even though the property-owner
and tenant may amiably settle without court action, the majority of proprietors
would only settle in court. Post-mandate tenancy laws have regularly appended stipulations
that would render recuperation approved by a judge with the proviso that a
compensation would be paid to the tenant. Chief among such conditions is the
notion of “family necessity” (ḍarūra ᶜāᵓiliyya).
The landlord must successfully argue that he needs his property back because he
has no other place to go, that is, he possesses no other property but the one
under litigation as his own place of residency. For example, he may argue that
he has been for years living in a rented apartment, paid hefty rents, and that
it’s now time to recuperate his own apartment, considering that its rent is
running low, much lower than the cost of his rented apartment; or that he has
been living with his parents since he graduated from college, and now that he
got his first full-time job he needs to be on his own; or that as an outcome of
the civil war he has lived abroad for many years, and he badly needs to get
back home; or that he is now a married man with a family, and his apartment
fits better with his current needs. Several factors could be at play here:
anything from the respective ages of the proprietor and tenant; their
employment status; whether they have families; whether they live in Lebanon or
abroad; and if they do, how often do they come back to Lebanon. As is fairly
obvious, a lot is left to the judge’s discretionary powers, beginning with that
ability to discern individual situations, favoring one variable against
another. For example, it could be hard for a landlord who is young, single, and
a college graduate who just landed on his first job, and lives with his parents
to save money, to displace a tenant who is much older and a father of four.
Considering how much kinship is important in such societies, it is customary
for young men and women to live with their parents even after graduating from
college; since a bachelor is not considered someone responsible of a family,
there is no urgency for single people to live on their own. As all such family
matters are factored by the judge in his verdict, what remains in the final
analysis is that notion of “necessity”: is it that indispensable for the
landlord to evict his tenant, even in the aftermath of an equitable indemnification?
What presumably plays a preponderant role in such litigations is nothing else
but the “cadastral record” (ṣaḥīfa ᶜaqāriyya)
which respectively lists all the properties owned by landlord and tenant.
Considering that the “cadastral record” plays the role of a U.S. “credit
report”—even though the two are essentially dissimilar (the former is rooted in
tangible properties, while the latter is into credit and debt)—what would tilt
the verdict in favor of either proprietor or tenant is whether any of them has
a single property owned in toto. The cadastral report is
open for inspection and made public for any person who wishes to do so: if I
need to inquire about my tenant’s properties, all I have to do is request his
personal report at the General Directorate of Cadastral Affairs for a minimal
fee. The report would list all my tenant’s properties (at times the confusion
of names and birth dates brings more properties than needed which are later
corrected and dropped), their number, location, and the percentage of the owned
shares (ashum; s. sahm). The latter would prove the
crucial denominator in a lawsuit: as the totality of a property constitutes
2,400 shares, if either landlord or tenant possess any property in toto, they may lose the verdict. Obviously, the
nature of the property is of prime importance: if I am suing to recuperate an
apartment that I own, and my cadastral report indicates that I also own a 100
percent share in a land in the same city which is used as a parking lot and out
of which I am generating profit, the two properties that I own in toto are so
dissimilar that one would not compensate for the other. Put simply, I won’t be
able to live in a parking lot, and that’s enough evidence that I badly need my apartment, assuming that other
prerequisites set by the court are met. In sum, a lot is at stake regarding
both the landlord and tenant “needs,” “necessities,” and “familial
obligations,” in conjunction with what they fully or partially own on the
market. The partiality of ownership
is a common trait in middle eastern and Islamicate societies, considering how
much the Islamic rules of inheritance are adamant at dividing properties among
male and female heirs (wills that would favor an heir over another are not
permitted). Hence it is not that uncommon to find proprietors and tenants with
dozens of properties listed in their records but without a single one fully
owned. Obviously, in preparation for the lawsuit, both sides might artificially
work out a reshuffling of their properties among family members: I register part of a property that I fully own
under my wife’s or daughter’s name to avoid a negative verdict. As such
practices are fairly common, councils and judges tend to look closely at the
cadastral report in search of faked fragmentations, potential inconsistencies, or
last-moment shuffles, even though such tasks are no easy matter.
Besides “familial obligations” which remains the most lucrative
feature in the recuperation lawsuits, owners could bring other matters to the
court: the right to recuperate a property that is adjacent to another owned by
the same owner; the owner’s desire to tear down the property in question for
the sake of a new construction project; the tenant has failed to pay his rent
for at least two months; and so on. Once the court approves the recuperation,
the tenant is given a grace period of 2 to 6 months to vacate the property; but
the owner has no right, once the vacation is complete either to sell or sell
the property for a three-year period, during which he must only use it for his
personal matters, as he indicated in his lawsuit (if he does not follow the
court order, the tenant may come back to him and request more compensations).
For those familiar with Beirut’s topography, the sight of
dilapidated buildings, elevators that don’t work, tenants at war with one
another, and building committees that only make decisions on paper without any
follow up, have become all too familiar, all of which are the outcome of low
rent policies which have accumulated and been protected by law since the 1940s,
only to reach their climax in the 1980s. It was indeed the sudden fall of the
lira in 1982, amid the Israeli occupation of the South, the Sabra–Shatila
massacres, and the bombing of the Marines compound and the building housing the
U.S. embassy in Beirut, which made all of a sudden the old rents look really
low in value, with losses exceeding the 100 percent margin for the owners. Needless
to say, such scenarios have become so common that the press devotes weekly
interviews with disenchanted proprietors and tenants, while the parliament has
for more than a decade attempted to draft a new law that would be generally
consensual, to no avail. The only breakthrough came in 1992 with the Free
Contract Law.[6]
Article 1 of the new Law revokes art. 543 of the Law of Contracts and Obligations
(which stands as the Civil Code in Lebanon) which stipulated that “if the
period of lease is more than 3 years, it cannot be beneficial for a third
person unless the lease contract has been registered in the cadastral register.
The renewal would assume the same rule.”[7]
The ability to renew beyond the initial 3 years, which became normative since
1944, has been withdrawn in favor of “open contracts,” albeit still assuming 3
years of lease (at least at the signing of the new lease) rather than one or two
only, hence the law is not that far from the one-year leases common in many
countries.[8]
The 1992 law constitutes therefore a bold attempt to regain the confidence of owners
which in the 1980s have shied away from either investing in residential or commercial
properties (unless the intention is forthrightly to sell), or else have sought
for their residential properties non-Lebanese tenants, or tenants that are
known “not to last that long.” That said, the Law would not solve the problem
of leased properties prior to 1992, whose “real rents,” once inflation and the
value of the lira have been factored off, are at dismal lows. (A Law approved
by parliament in 2014, which we’ll discuss below, forcefully addresses the
issue of low rents.) Moreover, there seems to be a contradiction between “the
freedom to contract” (ḥurriyat al-taᶜāqud)
and forcing landlords to de facto approve 3 years for any lease, residential or otherwise, stipulating that even if
contracts were initially set for one year only, they must nonetheless be
approved for up to 3 years, if the tenant wishes to go that long; there is even
no requirement that the value of the rent should be readjusted in those 3
years, or that the landlord has any right to recuperate his or her property,
whatever the “necessity” may be.[9]
The law has nonetheless been extolled, in particular by landowners and venture
capitalists, for limiting post-1992 leases to 3 years.
We are now ready to proceed with a prototype of a
recuperation lawsuit. The four-bedroom apartment, located in an upper middle
class neighborhood in west Beirut, was originally leased in 1971 upon the
completion of the building for L.P.11,860 ($4,000) a year.[10]
By 2007, on the eve of the lawsuit, the lease amounted to no more than
L.P.1,929,585 ($1,282),[11]
which besides the obvious loss vis-à-vis the dollar does not account for
inflation and for how much valuable $4,000-a-year could do at the time in the
1970s. When the 2011 verdict came through, denying the defendant-tenant any
right to renew the contract, the latter received as indemnity a large cash sum
(more on that later), but he also privately
settled with the proprietor for a one-year extension of his lease as an “open
contract,” that is to say, based indirectly
on the 1992 Law discussed above. Strictly speaking, the old pre-1992 laws
require that if the verdict summons the tenant to vacate the premises within
2–3 months, he may request, at the landlord’s discretion, an extension, which
remains undefined by the law. Moreover, the landlord has no right to make use
of the property except for his own personal use for 3 years, after which he may
lease or sell it or continue using it. Nonetheless, legalities aside, with the
excuse that “I need some time to settle in my new apartment,” which the tenant
alleged he had already purchased but still needed a lot of work (even though he
provided no evidence of that), the tenant went for the price of $32,000-a-year,
which is fair to say represents the “real price” as evidenced by the apartment
right below his which carried the same new price tag. In other words, the proprietor
was with the “old rent” renting his property at a price 25 times below its
“real” current market value. It is indeed such discrepancies between old and
new that make owners eager for a new law that would accommodate their wishes,
to say the least.
The special arrangement between owner (lessor) and tenant
(lessee) is now (summer 2014) in its third year. Initially based on the court
ruling in 2011, the tenant was supposed to vacate the property in February 2012,
once the compensation payment would have been fully completed. The special
arrangement gave him an additional two years of lease, which he indirectly paid through the indemnity:
that is to say, the new $32,000 annual rent was deducted on two counts from the
compensation that the owner owed him. It was, indeed, only in the third year of
the specially extended rent, since February 2014, that the tenant began monthly
payments (rent and assessments) outside the compensation. He even requested
that, starting 2014, all leases be subjected to the 1992 law of “open
contracts.”
In the first year of the extension, 2012–13, the ruling of
11 February 2011 was acknowledged by both parties, on the proviso that the
owner would pay his tenant an indemnity worth $355,250, which roughly amounts
to one-third of the apartment’s value, as estimated by the court’s expert.
|
2011 original compensation
|
$355,250
|
|
2011 adjusted compensation
|
$375,000
|
|
18 July 2011 signature of the agreement
|
$200,000 paid
|
|
18 August 2011
|
$100,000
|
|
remaining sum to be paid upon the delivery of the
apartment on 28 February 2012
|
$75,000
|
|
$32,000 deducted as “new special lease” for one year only,
ending effectively on February 2013
|
$43,000
|
|
$32,000 deducted for a second special lease, until
February 2014
|
$11,000
|
Originally the compensation, as required by the judge’s
ruling, was set at $355,250. However, the landlord, acting on his own behalf in
order to avoid the routinized process of appeals and counter-appeals, proposed
to his tenant a minimal “raise” in the compensation, up to $375,000. The agreement
between the two, signed in Beirut at the tenant’s office on 18 July 2011,
admitted that kind of quid pro quo: “The two parties have agreed that the
leased property should be vacated on time and given to the owner without going
through the specialized tribunals in order to present an appeal to the judge’s
ruling, and without vacating the property through the auspices of Bureau of
Execution in Beirut (Dāʾirat al-Tanfīdh).”
As the date of delivery was set for 28 February 2012, extra
late days would be penalized for $300 each. The tenant agreed not to request
for renewal anymore.
The following document was signed on 27 February 2012, just
when the lease was over, amid the tenant’s demand for a “special extension.”
The owner still owed his tenant $75,000 as the final installment of the
compensation package, as required by the July 2011 agreement. Obviously, in
order to avoid legal hassles that would look in violation of the July 2011
agreement, the new agreement was signed as “a modification of a previous
contract.” The new arrangement stipulates that considering that the tenant had
encountered difficulties at vacating his apartment at the requested time, a
special one-year extension was accorded by the owner until the 3rd of March
2013. The amount would be deducted from the remaining $75,000 that the owner
owes his tenant as part of the settlement-compensation. Interestingly, no
specific sum was mentioned as value for the “new rent”—the document even avoids
all such overt language. Instead, a close notes that what is left of the
indemnity—$43,000—would be delivered by the owner once the tenant vacates on
March 2013. A second special agreement was signed then, claiming this time that
the final installment of $11,000 would be delivered on March 2014. Since then
the two parties have opted for an official lease, in conformity with Law 160/1992.
Strictly speaking, from a legal point of view, and in light
of the court ruling in 2011, what owner and tenant indulged into in the last
couple of years, is “illegal.” What does that mean? The whole court
proceedings, initiated by the owner in 2007, when the lawsuit was filed, were
conducted on the basis that the owner urgently
needed his apartment for the “family reasons” that he pleaded for (more on that
below). Suffice it to say that, in light of the special arrangements between
owner and tenant, such pleas de facto, if not de jure, become “bogus,” as they
lose all their rationale, with a tenant that still occupies the same apartment
but with a much higher rent at the established competitive street price.
However, the “illegality” in this instance proves meaningless as owner and
tenant are indulging into a consensual arrangement that fits them both.
Moreover, such arrangement would not need stricto
sensu any court endorsement. To wit, the court may declare it “illegal” only if it becomes “informed” of the
modalities of the special arrangement. But who is going to “inform” the court,
and on which basis exactly? Certainly not the owner–lessor: there is nothing to
gain on his part through another court action. The only party that may indulge
at informing the court of the “illegality” of the special arrangement is
certainly the tenant. He may, for instance, argue that he “tricked” his
landlord into that kind of arrangement to “prove” to the court that there was
no “family necessity,” as was initially claimed by the owner.
Here comes the rub. Both owner and tenant take the risk
regarding the “illegal” side of things simply because it is worth taking, and,
more importantly, the special arrangement fits them both. On the side of the
tenant, it is true that he is given a new lease with a price tag much higher
than the old one he had been accustomed to, but then, price notwithstanding, he
likes where he is, and he seems to find the arrangement “fair” enough for his
purposes; and obviously he can afford the new revamped rent; he probably looked
for other alternatives, but found the new modern apartments out of reach. On
the owner’s side, had he requested the immediate vacation of the property in
February 2012, as required by the ruling, he would have had—a basic law
requirement—to occupy it himself for at least three years. That would have
constituted in itself the “proof” that he “badly” needed it for the most urgent
“family necessity” that he claimed for when he filed for the lawsuit. So, in
short, what were the benefits for going “illegal”? Without indulging into much
unwarranted speculation, the owner, as he informed me in summer 2014, had not
much interest in occupying his own apartment back in 2012. First of all, he
would have incurred the price of renovating an apartment that had been occupied
since the early 1970s, a price that he estimated at nearly $50,000. Second of
all, he would have had lost two years of rent, at $32,000 each. In sum, the
three-year court requirement, in addition to the renovation, would have
amounted to a hefty $150,000. He therefore opted for the “risk” of going
“illegal” by granting his tenant a special treatment, on the near-certainty
that he would not betray him through another round of court action. To be sure,
the tenant could have tricked his landlord into another court procedure. He
could, for instance, claim that, contrary to what the owner had argued for in
his initial suit, he only renovated and furnished the apartment, but,
otherwise, he was still living abroad for most of the year. But why would he do
so, considering that he “benefited,” as his landowner did, from the
two-year-plus extension?
It goes without saying that the arrangement between the
landowner and his tenant is based on a mutual
risk: either one knows damn well that they could be harmed by the other
party going to court and risking a lawsuit that would place the opponent in an
uncomfortable situation, where more claims for compensation would be at stake.
What is really at stake in such situation are indeed the transaction costs,
whether landowner and tenant accept their new mutual arrangement for the years
to come, or whether one of them decides that it time to break up the entente.
Herein lies the “successes” of such ententes: the court system is used in phase
one, whereby landowner and tenant ferociously fought in court their respective
viewpoints. Pre-trial negotiations did not work all too well at this stage, as
both parties surmised that the court ruling would be beneficial to them. It was
only once the court ruling finally materialized in 2011 that owner and tenant
negotiated at the margins of the law,
and, one should add, by bypassing what the law explicitly states. Once the
verdict was enunciated, the tenant took note of the fact that vacating a
property that he has been occupying for decades became all of a sudden a
certainty, to be reckoned with. He realized that it would be perhaps more
affordable, and more realistic, to indulge into an extension of the same rent, albeit
at a more competitive price, than shopping for a new apartment. He therefore
approached his landlord for a solution to their problems in that direction:
let’s renew the lease, but with a price tag that you determine. The owner could
have refused the offer, but refrained from doing so: it was for him, like for
his tenant, a question of transaction costs. Sure, the court verdict was what
he exactly expected and wanted, but it was also costly: it required him to
occupy the vacated apartment for three years, before deciding on any further
action. On both sides, therefore, there are incurring costs for breaking the
current status quo, which has been at works since the early 1970s. They’ve both
opted to persevere with the status quo, with all the legal risks that such
measure would entail, in order to minimize all transaction costs.
When in 2008 the counsel of the plaintiff-owner pleaded in
court on behalf of his client, he wrote to the district judge that “even though
the plaintiff currently resides in the United States, he nonetheless has plans
to return permanently to Lebanon and find work in his home country. Moreover,
whenever he returns home he is forced to stay with his parents, which are kind
enough to accommodate him with all his belongings; not to mention his personal
library, composed of thousands of books, since my client is a professional
writer and academic with many published books and articles on record. In spite
of his parents’ generosity, my client does not feel anymore at home in such
constrained space. Considering that my client needs a space of his own, so that
he can create and produce by his own standards, we accordingly request the full
recuperation of the apartment that is solely his.” The counsel quotes a section
of Law 160/1992, which even though is restricted to “free contracts,”
nonetheless reiterates the same rules as previous pre-1992 laws on
recuperation: “The proprietor has the right to recuperate his property either
for his own use or the use of one of his children for a family necessity, on
the proviso that he does not own anything else that would be valid for
residential occupation…We therefore demand that the apartment be recuperated
due to a family necessity…”
The defense obviously rebuffed such claims, alleging that
“the plaintiff only expressed his desire
to return to Lebanon from the United States, where he currently holds a
full-time position at an institution of higher learning, which is different
from actually settling here. The mere
desire to return is thus no evidence of a family necessity…” The counsel’s
second target were the plaintiff’s properties. He argued that the proprietor
did own three other apartments in the same building, albeit as the judge would
later point out in his ruling, none of which were fully owned; none even had a 50 percent ownership. In his verdict
in mid-2011 the judge noted that the crux of the matter from a legal standpoint
is the notion of “family necessity,” which is not “hooked to everlasting
notions,” “but it rather gives privilege for someone to use his rights in a
natural and customary way without harming anyone else…” He thus rebuffed the
defense claims of differences between the desire
to return versus the act of returning
to Lebanon from the U.S., adding that the plaintiff has every right to return,
having expressed his desire to do so, but considering that none of the
properties listed by the defense represent more than a 50-percent share, the
plaintiff has no other option under such conditions but to stay with his parents.
At this point, having been in favor of the plaintiff, the judge proceeded with
an estimation of the value of the property in consideration for the indemnity
to be paid to the tenant. The court expert had placed the value at $3,500 per
square-meter in conformity with the prices in the neighborhood which he had
examined in 2010, in disagreement with what the plaintiff’s counsel had
estimated, namely $2,000 per square-meter. The judge, demanding the immediate
evacuation of the property, once the lease is over, thus calculated that the
property’s price tag was $1,015,000 (for 290 square-meters), placing the
compensation at 35 percent of the total value for a price tag of $355,250.[12]
Even though not a law requirement per se, but more of a practice than an official
theory, the indexing of the compensation as one-third of the property’s value
seems to be the adopted rule of thumb.
Even though it took three more years for the verdict to
materialize, the structure of the case is fairly simple, and is representative
of such lawsuits. It consists of the two counsels’ reports; the court expert
who investigated the property, building, and neighborhood, setting a price
based on the municipality’s estimates (which it routinely does for taxation
purposes), and on interviews with neighbors and proprietors in the
neighborhood; and the verdict, which took Law 160/92 as reference. The crux of
the matter amounted at dissecting where “family necessity” lies: was there an
absolute necessity for the owner to reclaim his property? And if so, on which
grounds exactly? Did the owner own at least one other property that would have been
suitable for his living conditions? The two conditions are fairly flexible, in
particular the notion of “family necessity,” which evolves in time. In this
case, the plaintiff was a mid-aged bachelor,
a fact that was not even mentioned by the two counsels, and for good reason:
not a long time ago, the defense counsel would have made a fuss about it; but
the post-civil war mores of Lebanese society are moving slowly toward
recognizing individual over family rights, hence everyone has a right to settle
in his or her own property, assuming that the plaintiff only fully owns the one
property under litigation. For that very reason owners tend to spread the ownership
of properties among family members, at least until they settle through court
action. With this in mind, Law 160/1992 proves a great breakthrough, albeit it
left unresolved a 25–30 margin of low-rented properties, which the newly passed
2014 law may finally put at rest (see the following section); but it played
favorably at encouraging proprietors to reclaim their properties through court
action, even if that entails paying hefty compensations to tenants, which some have
judged totally unjustified and uncompetitive for a liberal economy.
Notwithstanding such grievances, coming from owners and their tenants, the Law
has managed to reduce by a wide margin the crippling effects of low rents,
first by opening the clause of “free” three-year non-renewable leases, and
second, by promptly processing suits in favor of owners who wish to recuperate
their properties.
What the new 2014 revamped law would bring, if approved
The text of the new rental law that was passed in parliament
only recently, in April 2014, and which in principle should put permanently at
rest the episode of old rents by 2025 at the latest, has been under the hood
for many years, receiving many revisions prior to its publication in the
Official Journal in early May 2014. But even though there is a constitutional
probation period of six months, prior to the enactment of the law, which makes
it eligible to be revoked by parliamentarians and Cabinet ministers, or the
house speaker and president of the republic, the published text is worth our attention
for its own sake, considering how much controversy it has already stirred.[13]
For one thing, it highlights the problems that we have been addressing thus far
regarding the differences in value between the old rents and their current
street value. For another, even if the law would not make it to its final ultimate
test, the text itself is serious enough in addressing the compelling issue of
those old tenants who would not be able to afford the new competitive rents.
Already the mixed reaction of the media points to the difficulties of such
legal endeavor: on one side, the argument is that this is too little, too late;
that the property owners, having been subjected to years of losses from rents
far below their street value, have now to willy-nilly accommodate their tenants
for nine more years, prior to breaking free the lease, if they wish to do so.
On the other side, however, the alternative argument is that many of the old
tenants would not afford the new rents, in particular past the nine-year period;
to which some have already responded that such tenants have become over the
years a tiny minority, whose issues need to be addressed separately (for
instance through special funds) rather than to be limited to legal procedural matters.
Well-to-do tenants, those same sources argue, represent another hefty minority,
at least as important as struggling tenants from the lower classes. What is
certain, however, is that assuming the rental law passes the “constitutional” (and
political) test, rent control would finally become a thing of the past.[14]
What is new in the new law approved by parliament in April
2014 is article 15 which gives the possibility for the landowner to “win back”
his property within a 9-year period, a strategy that would prove an alternate scenario from the one that we
have explored above, in particular for owners who would be unable to afford the
hefty compensation on behalf of their tenants. Each strategy comes with its own
risks, perils, and costs. To wit, the strategy explored above, which generally
requires court action, unless owner and tenant consensually agree on a
compensation scheme, would normally take four years, from the filing of the
suit to the verdict, but, due to the required compensation, the cost could be
higher for the owner than what the new 2014 law would propose in this regard.
For the tenants, however, the 2014 law is definitely a much better endeavor, as
it gives them nine years to work out a new lease, either with the same owner or
a different one, albeit the tenant would experience a progressive, but
significant, rent increase in those 9 years. A special state-managed fund, with
all kinds of demanding stipulations, is meant to assist tenants with low
income. No accurate data on the number of needy tenants, nor on the size of the
fund or how it will be funded are provided.
The tenant would pay the new full rent’s value, known as qīmat badal al-mithl, gradually over a
six-year period; but only by the sixth year would the rent become complete, as
a new rent which has been adjusted to the current configuration of rents,
taking into consideration inflation and the competitiveness of the market. The
legislation thus progressively increases pre-1992 rents over six years and
eventually gives free access to property owners by the ninth year. Moreover,
the value of the new rent should not exceed 5 percent of the value of the
property itself “in its current condition,” once vacated. Needless to say, the badal al-mithl is the key component of
the new law, as everything else gravitates around the value of this new rent,
from the gradual yearly increase, to the indemnity to be accorded to the tenant
in case the owner wishes to reclaim his or her property for a “family
necessity.”
How is the “new rent value” to be addressed? Article 18
states that the “new rent” must be bargained either consensually or in court, raḍāʾ-an aw qaḍāʾ-an: that is to say,
either tenant and landlord consensually agree on the new rent, or else they
would seek court arbitration. Once the new rent has been agreed upon, it would
be instated only gradually, within a six-year tenancy period, when it should
reach its full value. In the sixth, seventh, and eighth years, therefore, the
tenant would pay the new rent in full, which would have been agreed upon in
year 1 (consensually or otherwise), and by the ninth year the contract would
become “open” for the first time, as it would become subject to an open “free”
negotiation for a new value, or else the owner may request from his tenant to
vacate the premises, on the basis that he or she has opted for a non-renewal
(no need to provide for any formal reason or excuse, familial necessity, demolition,
new project, or otherwise). By the ninth year, the owner has a right not to
renew the lease which had been imposed on him or her for decades.
Considering that the tenant has been sitting for decades—at
the very least prior to 1992—on an old rent system, protected by the law, which
is far below the current market value, how would then tenant and proprietor
come to agree on the new rent? Suppose a tenant who is renting for $2,000 a
year for a three-bedroom apartment in an upscale middle-class residential area
of Beirut, which if it were to be competitively open would be worth no less
than $30,000, based, say, on a new rent in the same residential complex. How
would then the two agree on a new price in order to proceed with a lease based
on the new law?
Article 15 makes possible the extension (renewal) of the old
pre-1992 lease contracts for another 9 years on the proviso that the tenant
would pay the so-called badal al-mithl
with an incremental increase so as to reach no more than five percent of the
property’s value, considered as the fair lease price, as follows:
15 percent for the first year;
30 percent for the second;
45 percent for the third;
60 percent for the fourth;
80 percent for the fifth;
100 percent—fair price—for the
sixth;
100 percent for the seventh;
100 percent for the eighth.
The lease would then be open to negotiation in the ninth
year, with the possibility of a closure or non-renewal. Only poor households would
be able to extend their stay for 12 years.[15]
So, suppose I am a tenant in an old pre-1992 lease which is worth $2,000
annually, what would the new law do to my lease, and in what way would it
benefit me and my landlord? Either the “new updated rent” is assessed on the
old existing one—$,2000—which means that six years from now it would reach its
full “street value”—$4,000—a 100 percent increase; or else, the new value has
nothing to do with the old one, hence must be assessed independently, and only
then, the above percentages would become operative.
The first possibility seems a bit absurd, at least for the owners,
considering that many of the old rents are now
well worth above the $10,000 mark. In all likelihood, therefore, the second
solution seems a bit more realistic: the value of the new rent is unrelated to
the old, as its value would be marked on the most recent street price, to be
jointly decided by landlord and tenant.
In this instance, a question begs itself: how would tenant
and landlord “agree” on a new price? What if they disagree? What has the new
law to say on this matter? Who is going to arbitrate in case of conflict, which
would seem very much likely, considering the circumstances? What would the
procedures of arbitration look like considering the circumstances?
If as an owner I have an apartment that is available, I
would freely negotiate the rent with any potential tenant. The law would not
impose any “market price” on us. The same would apply if the apartment is under
a new post-1992 rent, which gives me the right either to not renew or else to
negotiate for a new price past an initial three-year tenancy contract. A
disagreement on price or on other matters would simply entail that the tenant
would have to shop elsewhere.
If that scenario proves correct, and assuming that both owner
and tenant agree on the new price (it remains to be seen what happens if they
don’t), then proprietors, in addition to all the “losses” they would have
incurred over the years, would still “subsidize” their tenants for six more
years, until a “market price” becomes a reality. They would only be able to
totally “free” their property—either for their own private use, or for a new
tenant, or a new project—only in three more years—nine years after the new law
of 2014 would have passed, assuming it would receive the final legal (and
legalized) approval, which it partially
did on August 6, 2014, when the Constitutional Council approved the law, safe
for the articles that address the issue of the committee that would handle the
value of the “new rent.” The parliament should therefore revise those articles,
prior to the law becoming effective on 28 December 2014. Otherwise, the law
would become inoperative, and proprietors and their tenants would have to
litigate based on the more “general” law of contracts and obligations, which
stands as Lebanon’s civil code.
At present, in summer 2014, the law has been published as a
“special appendix” to the Journal Officiel on 8 May 2014, and then for a second
time, because the Constitutional Council deemed the first publication
unconstitutional. The then-president of the republic, Michel Suleiman, had
opted for his constitutional rights in not appending his signature to the law,
but also in not sending it back to parliament for review. There is nevertheless
a period of appeal that in principle is 15 days from the date of publication:
the president himself, the house speaker, ministers, and at least 10
parliamentarians could pose a challenge to the new law within the 15-day
probation period from the date of publication. Otherwise the law would become
operative six months as of its publication. There are, however, conflicting
legal opinions as to what the Constitutional Council would consider as
“probation period,” with some interpretations stretching it up to six months.[16]
However, whatever the fate of the law, the preparatory work itself, not to
mention the proposed text of the law, and the reverberations across the media
(we’re turning old needy tenants into homeless people!) point towards a common
no-nonsense mindset of issues regarding property.[17]
Article 18, whose section B–4 has been revoked by the
Constitutional Council,[18]
solves the mystery as to how the new rent (badal
al-mithl) would be negotiated. It would be in principle “consensually” settled
between tenant and landowner. In case of conflict, within three months of the
law’s publication, the lessor should seek the expertise of two professionals
accredited by the courts, which would help in determining the new rent. Once
notified, if the lessee is unsatisfied of the proposal, he or she may in turn
seek the appointment of two legal experts. If the two reports, the one
initiated by the landowner and the other by the tenant, prove to be
incompatible, then landlord and tenant could seek the expertise of the
committee appointed for the muḥāfaẓa where the lease is at stake. Article 19
details how expertise reports should be drafted and the kind of information
that ought to be detailed. (Notice that the expenses of the expertise reports
are on the owner and/or tenant, whoever triggers the demand first.) The lease would be in the 5 percent of the
value of the property in its current
state, if empty (article 20). This article therefore plainly throws all
evaluations on the value of the property itself in its current condition, that
is, in light of having been used for many years, if not decades, without much
renovation or repairs. This could be looked upon as a clause of unfairness for
the landlord, considering that he could easily invest in the property, once
empty, adding both to its value and to its rent.
Article 22 states that in case the owner would like to recollect
his or her property for a family necessity (ḍarūra
ʿāʾiliyya) or demolition (other excuses could also be valid, if
appropriate) in the first year of the special nine-year extension period, then
the tenant would receive a compensation valued at a four-year rent for the
family necessity excuse, based on the new street-based value of the tenancy
contract; if, however, the property is reclaimed within the nine-year period
for the purpose of demolition or whatever other reason, the indemnity should be
calculated on the basis of a six-year rent (as calculated in article 15). However,
whatever the case, if the tenants wish to leave after the seventh year, they
will not be entitled to any indemnity. In our case history above, we’ve noted
that the compensation was estimated at roughly one-third of the property’s
value, as determined by the court’s expert. If the value of the new lease, in
the 2014 law, is estimated at 5 percent of the value of the property in its
current state, if empty, then a compensation worth a four-year rent would be at
best in the range of 20 percent, while a six-year rent would be close to 30
percent, which is roughly similar to what the old law unofficially stipulates. That
said, our landlord above would have probably saved 10 to 15 percent or more to reclaim
his property under the family necessity rubric, assuming he sues immediately from
the first year once the law became applicable, in order to avoid another
five-year “loss” as outlined below. The law assumes that the reclaim could
either happen consensually, or else through the court channels; as this
possibility remains open in every settlement, it is difficult to assess whether
the settlement outlined above in our large-compensation case history would in
all certainty be better off in the new system.
In effect, once the new rent is set, the subvention plan, on
behalf’s of the property’s owner, which translates as another five years of low
payments, would run as follows, in reverse order than the tenant’s new mode of
payment:
85 percent for the first year;
70 percent for the second year;
55 percent for the third year;
40 percent for the fourth year;
20 percent for the fifth year;
zero percent in the sixth year.
At the end of the sixth year the rent would become free,
meaning open for negotiation at a new price, based on law 160 in 1992.
Moreover, the owner would have to wait nine years to free the lease. In the
meantime, he or she would be responsible for the maintenance and safety of the
property (building, apartment, shop, or otherwise).
Article 3 claims that a credit fund (referred to as the ṣundūq)[19]
that manages rents for disfavored lessees would be set to help the tenants
whose income is less than three times the minimum monthly salary (currently
$450, based on a decree from 2012 that regulates salary scales for public
institutions and minimum wages in general). In case the tenants’ income is less
than two times the minimum wage, the fund will pay on their behalf the
difference between old and new rent. If the income is between two and three
times the minimum wage ($900 to $1,350), the fund will cover the difference
between the new rent and 30 percent of the income. But then nothing is
envisaged to help property owners which have suffered from low rents for
decades, as if they’re “wealthy” by definition. Moreover, article 8 gives the
tenant the right to request a special aid from the account set for that
purpose, which means that the rent increase is “frozen” until the committee
decides on the request. No time framework is given as to how long that would
take, although the tenant must pursue his request in the first year (out of
nine) of the special “extension” within two months after a decision has been
made on the badal al-mithl. Thus as
soon as the value of the new rent has been agreed upon, either consensually or
through court action, the tenant, if he wishes to do so, and assuming he is
eligible, should apply to the credit fund within two months. He should pursue
the same application, if he wishes, for every year of the nine years of
“extension.” If approved, the fund would then subsidize the yearly increase
that the tenant has been subjected to as detailed in the above table. To wit,
the fund would pay the rent hike, recommended by the law, so that the tenant
would still occupy the property with the same price. That could go on for nine
years, after which he’ll have to debate a new rent with the landlord, without,
however, any state assistance.
Article 10 states that the owner cannot use what is due from
the credit fund as part of the rent that is due from his tenant. Since the fund
would have to deliver the subsidy directly to the lessor, the latter has no
right to claim the subsidy as an “unpaid due” on the part of the lessee. In
short, the lessor would receive the “new rent” from two sources: the “original”
rent would be delivered by his tenant as usual, as if nothing happened (say, on
a monthly or bi-monthly basis), while the 15 to 20 percent yearly increase
would be delivered by the fund. Besides the fact that the lessor would have to
deal from now on with two different sources, delays created by state
bureaucratic routine are another matter altogether.
Article 29 states that if the tenant dies, or leaves the
leased property, the spouse or other relatives that may have lived with him may
take over within the nine-year extension period, then negotiate a new lease
after that, if both landowner and tenant desire so.
Some have argued that the whole “crisis” of low rents, which
has preoccupied parliament since the end of the civil war in the 1990s, is
overblown, hence does not merit the attention that is normally accorded to it.
On the one hand, the argument goes, the 1992 Law of open contracts has de facto
encouraged negotiations between landlords and tenants, whereby compensations
were consensually agreed upon. For others, the road was open for court action,
as was the case for our landlord above. On the other hand, and with the end of
the civil war, between the sprawling of newly built apartment complexes, and
the demolition of old ones that were too old or defective, the portion of old
rents has been considerably marginalized, considering that new leases would be
subject to the 1992 Law. Moreover, as the unofficial figures below from 2011
point out, even within the already marginalized sector of old rents, the
tenants in dire conditions would not exceed an estimated 13,000 out of a total
of 81,500:
13,000 of which are foreigners;
3,000 are considered wealthy;
5,000 are tenants are landowners at
the same time;
18,000 are in the hostelries and
tourist businesses;
6,000 are independent professionals;
13,000 are workers from the lower
classes, the only category that needs to be subsidized under a new law.
It has been further estimated that by the end of 2011
Lebanon had a grand total of at least 422,000 built properties,[20]
based on a work published by the Central Bureau of Statistics, and funded by
the European Union. This is an increase of 13,485 units from 2004, when the
built properties totaled 408,515. It is also estimated that 20,000 new
apartments are completed each year, with an average of 10 apartments per
building, which means on average 2,000 new buildings a year. That said, 21
percent of the buildings were completed after 1990, when the civil war was
technically over; while 57 percent go back to the 1955–1989 period; and 22
percent are pre-1955. More specifically, in Beirut, 45 percent of the buildings
are pre-1954; 38 percent were constructed between 1955 and 1987; 17 percent are
post-1987; 11 percent in the 1990s, and only 6 percent are post-2000. There are
therefore lots of old buildings in Beirut which the so-called “landed lobby”
attempts to “systematically” erase by various legal or illegal means (the
“protection” of “historical” buildings is practically non-existent).
For Joseph Zougheib, Chairman of the Syndicate of Owners of
Leased Property, once the new law is approved, “There will be a cash flow
injected into the economic cycle. The State will also make more money out of
the taxes it will acquire from transactions, new rents, registrations for more
residential units that were blocked before.” Some buildings will be demolished
and replaced by new ones. “Many of the tenants who cash in their compensations
might pay them as a down payment for owning a new apartment.” This would
activate demand on residential units which is ailing nowadays. One of the
advantages of this new law is that it liberates thousands of blocked
properties. Owners can rehabilitate the property, if they have the means to do
so. The Syndicate of Owners has based its numbers on a study conducted by the
Ministry of Social Affairs, which showed that pre-1992 owners total 80,000, but
with no further breakdown as to income.[21]
Moreover, with the old rents becoming inoperative since 2012, and yet no new
law in operation, some proprietors have initiated lawsuits based on the more
general law of contracts and obligations, which stands as the country’s civil
code. However, to my knowledge, such suits are still pending, probably with the
hope that the new law would become operative by August 2014.
Moreover, in the confusion that reigned in summer 2014, amid
the law’s approval by parliament and its publication twice on purely procedural
matters, and in the long wait for the Constitutional Council to say its final
word by August 11, it became clear that a “confessional” division is at works.
First of all, Christian parliamentarians from the Phalanges Party, the Free
Nationals (Dory Chamoun), and the National Free Movement (Michel Aoun) were at
best hesitant about the law, if not totally opposed. By contrast, the
Hezbollah, Amal, and Mustaqbal Movement have adopted a hands-off approach (in
spite of all their political divergences), supportive for the most part,
leaving it open for individual decisions, with a tiny minority voting against
the law. Which undeniably points to the fact that Christian constituencies in
Beirut and elsewhere have benefited more than others from old rent practices,
while in other neighborhoods this has been less the case. Surely, however, this
is no indication that Christian neighborhoods and towns are poorer; quite the
contrary. There is undeniably a tenaciousness, or a sense of solidarity and
community, among the upper and lower Christian middle classes which makes it
harder to vacate a tenant for the usual excuses (family necessity or
demolition). It does seem, however, that in the other neighborhoods and towns
where Christians do not form an absolute majority there is that tendency to act
against “unprotected” tenants, hence many of the old rents in such areas have
dissipated in the last 20 years either consensually or through lawsuits that
would require indemnities. In the absence of detailed statistics, however, once
can surmise that in such neighborhoods and towns, the number of old-rent
tenants may still be high, but the
relation of “solidarity” with their landlords may be absent here.
Ottoman and post-Ottoman societies are known for their
suspicion towards a “culture of the self” when it comes to the possession of
property under individual holdings.
Thus, with the importance of kinship, and communal property in small localities
in its various forms, known invariably as shuyūʿ
or mushāʿ; not to mention the most
venerable “family” institution of all, the waqf; the primacy was—and still is
in many regards—of the group over the individual. To wit, Ottoman, colonial,
and postwar systems, gave precedence to the “survival” of the group over the
individual, which, when it came to property, it was not the “individual
inalienable right” that mattered. This was fairly clear, for example, in the
Syrian legislation of the mandate, the bulk of which was inherited from the
Ottomans of the Tanzimat, and which, in particular since the takeover of the
Baath in the mid-1960s, has, by and large, disfavored private ownership.[22]
Strangely, however, Syria “solved” the issue of low rents, at least for
residential properties, at least a decade before Lebanon did, while at the same
time disfavoring private property ownership, at least the landed ones, for
instance, by strongly limiting the purchase of land and property transfers, and
through cheap confiscation of land for the purpose of the public good.
Lebanon’s laissez-faire liberalism implies that all properties, urban or rural, would be
treated on an equal footing. Moreover, as agriculture does not constitute a
prime sector of the economy, much less important than tourism, banking, and
services in general, there is therefore no urgency to limit landowners, farmers
and tenants with special legislation and regulations. When it comes to rent
control, our sketch of its history points to the fact that there was no deliberate policy at harming either owners
or tenants. As an unexpected outcome of the fifteen-year old civil war, the
sudden and sharp decline of the lira in the early to mid 1980s has rendered the
value of rents nearly worthless, creating that category of “old rents” which
was more an outcome of unfortunate circumstances than of legislation. With the
end of the civil war in the early 1990s, the state, overburdened by political
and economic pressures, was unable to catch up. Ultimately, the “old rents” as
a category, amid the freeing of rents thanks to the 1992 law, became gradually
marginalized, once attempts of owners to “redeem” their properties through
court action became more and more promising; not to mention the construction of
new buildings and apartments and the demolition of units that were seen
unworthy or unfit for safety reasons. It remains to be seen whether the new
2014 law would pass the final constitutional test by the end of the summer, and
whether it would permanently close the chapter of rent control.
[1]
Wasīm Ḥasan Wehbeh, Qawānīn al-ᶜaqārāt
wa-l-mabānī, Beirut: Manshūrāt Zayn al-Ḥuqūqiyya, 2011, 59–99.
[2]
Qawānīn, 61ff.
[3]
Qawānīn, 170.
[4]
Farid Joseph Ḥaddād, Majmūᶜat qawānīn
al-ījārāt, 1944–1982, Beirut, 1982.
[5]
My special thanks to judge ʿAfif Shamsuddin, in our numerous conversations in
Beirut in July 2012, in helping me sort out such complex social, economic, and
legal issues, which by and large have remained undocumented, even though
Lebanese newspapers are regularly filled with accounts of dissatisfied tenants
and landlords, amid the new tenancy laws which are routinely discussed in
parliament. As usual, however, there is no convincing narrative that would
historically account for the gross failure of the system.
[6]
ʿAfif Shamsuddin, Qānūn al-ījārāt bayna
al-aṣl wa-l-taᶜdīl, Beirut, 1994, which thoroughly documents Law 160/92.
[7]
Shamsuddin, Qānūn, 265.
[8]
It goes without saying that a tenant may opt for 1–2 years only.
[9]
Shamsuddin, Qānūn, 267–8.
[10]
In the 1970s the dollar was three liras, a rate that would be maintained until
1982.
[11]
For a rate of 1,505 liras to the dollar, which is still the current rate.
[12]
All amounts were in dollars in the original, in spite of the fact that the lira
has been pretty much stable since the 1990s.
[13]
“Qānūn al-ʾījārāt fi Lubnān,” Al-Shahriyya,
Beirut, 127 (May 2014), 4–7: “the rental law is a new gate to waste public
money.”
[14]
The association of “Lebanese Landlords” has expressed fears and concerns on its
website at http://www.almalikoon.net/.
A letter to Kofi Anan was addressed to him on behalf of the association when he
was secretary general of the United Nations, urging for the “freedom of
contract” in Lebanon, which is protected by the more general law of “contracts
and obligations,” which stands as the civil code of the country.
[15]
Yassmine Alieh, “New rental law passed by Parliament,” Lebanon Opportunities, May 2014, 74–77.
[16]
An-Nahār, Beirut, 10 May 2014.
[17]
As Michel Suleiman’s presidency was in its final week (May 25, 2014), with no
successor in sight yet, the sitting president decided, based on article 19 of
the constitution, to summon the Constitutional Court regarding the
constitutionality of the new rental law approved by parliament and published on
May 8th. For its part, the union of leased properties summoned all officials
not to revoke the text of the new law, so as not to further extend the plight
they’ve been going through for forty years: “We’ve been informed that 6 members
of parliament have signed a petition on a memo that pretends to represent the
interests of the tenants in order to revoke the new law… Such names would be
for ever in the consciousness of the old landlords, and the memory of their
sons and families, simply because such revocation, if applied, would constitute
a serious attempt at confirming the illegalities of the illegitimate takeover
of the old tenants of the properties of their landowners, so that they would be
inherited by their grandsons and granddaughters…” (An-Nahār, Beirut, 20 May 2014).
[18]
In its August 1st, 2014 meeting, in a 7 to 3 majority vote, as well as articles
7 and 13, which address the constitutionality of the committee that should
revise the “new rent” in case of conflict between owner and tenant, see, An-Nahār, Beirut, August 7, 2014.
[19]
The fund intended to assist the tenants with “limited income.”
[20]
Al-Akhbār, Beirut, 16 May 2012.
[21]
“New rental law,” 77; some of the figures come from the Central Administration
of Statistics.
[22]
Zouhair Ghazzal, “Droit et société,”
in Baudouin Dupret and Zouhair Ghazzal, eds., La Syrie au présent, Paris: Actes Sud, 2007, 625–660.
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