New amendments to the executive regulations governing the leasing and vacating of real estate by government entities have revealed several provisions that will apply to all government agencies, ministries, departments, public institutions, and independent public legal entities. According to the provisions of the new regulations, financial authorization must be available in the lessee’s budget, provided that the property’s area is within the limits of government needs and the lease value is within market value and not excessive. The regulations will take effect starting this month for new contracts, as well as contracts that are expiring or will be renewed.
The regulations require that, in the case of leasing a property without a legal title deed, approval from the Ministry of Finance must be obtained, and there must be no suitable property available with a legal title deed. Furthermore, the regulations stipulate that the property owner must not be a person prohibited by law from conducting business with others or against whom a court decision or judgment has been issued.
As for the lease term, the regulations require that it be no less than one year and no more than three years, renewable or extendable, provided that the contract stipulates the government entity’s right to extend the lease without the lessor’s consent, and that the extension be only after the expiration of the initial term and not exceed three years, with the rent for the extension period permitted to increase by no more than 10% of the initial rent amount.
With regard to a government entity’s desire to lease a building to be constructed, the regulations require that the building’s terms and specifications, along with the justification for the lease, be submitted to the Ministry of Finance for properties with a rent exceeding 200,000 riyals, provided that the lease term exceed twelve years, and it may not be extended or renewed.
The regulations stipulate that the lease agreement terminates in four cases: the expiration of the agreed-upon term; the lessee’s unwillingness to extend the lease; if the property becomes unfit for use due to structural defects or the building’s hazardous condition; or if it is proven that the lessor hashimself or through a third party to bribe an employee of the lessee, or if the public interest so requires; the lessor may not object to this or claim rent for the years following the date of vacating the property. The new regulations stipulate that a government entity may sublease part of the property’s facilities without consulting the owner or obtaining their consent.
