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Expiration of Lease Contracts for Non-residential Juristic Persons

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Expiration of Lease Contracts for Non-residential Juristic Persons

Law No. 10 of 2022

A lease contract falls under the category of ‘beneficial contracts’ in which the lessor grants the right to a particular property to a lessee for a specified period, in exchange for a certain price. This, however, does not grant the lessee the right to dispose of such property (i.e. through sale or sub-leasing), but rather return to its owner upon the expiry of the contractually specified period.

The lease is considered to be one of the most utilized ‘beneficial contracts’ for owners, allowing them to exploit their properties, and for lessees, for allowing them to use an asset that they do not fully own for residential or non-residential purposes.

The predecessive lease laws stated that residential or non-residential lease contracts could not be terminated even if their terms have expired, however recently, a dispute was presented to the Supreme Constitutional Court in Case No. 11 of Judicial Year 23, regarding the unconstitutionality of this premise, namely, the continuation of lease terms for properties leased to juristic persons for non-residential purposes. In this case, the court ruled that the text of Article 18 of Law No. 136 of 1981 which was related to the dispute, was indeed unconstitutional.

Elaborating on this point, the court stated that property owners have the right to determine the duration of the contract and that the law cannot take this right away from them, since this would constitute a denial of the owner’s proprietary right to utilize their property as they wish. 

Based on this ruling, President Abdel Fattah El-Sisi issued Law No. 10 of 2022, which now regulates the termination of lease contracts to non-residential juristic persons. This law has given lessees time to reconcile their situation, whilst also stipulating that all leased units would be vacated upon the expiry of a period of 5 years from the date of enforcement of this law unless otherwise agreed between the parties. Moreover, the law states that the lease value shall be increased to 5 times the legal value for the rental, and shall be increased annually by 15% thereafter, for a period of five years.

This law also obliges the lessee to vacate the leased unit and return it to the owner/lessor immediately on the day following the expiry of the aforementioned period. In the event that the lessee refuses to oblige by this term, The owner may request their eviction from the competent court, without prejudice to their right to compensation, if any.

To conclude, this article aims to highlight that the introduction of this law exemplifies a legislative move aiming to balance owner and lessee rights, whilst maintaining the country’s principles of social solidarity.

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Written By

Noor Mahdy - Attorney at Law

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