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3. Commercial Leases: Government Caught in a Tight Spot

Following the liberalization of residential rents, old commercial leases are now poised for gradual reform. This long-awaited shift ends a decades-old status quo and promises significant change. However, a recent ruling by the Council of State could have consequences far beyond the rental market. Hundreds of government offices and public institutions might be forced to leave premises they have occupied for years due to the absence of legal safeguards guaranteeing their continued tenancy. Estimates suggest that over 400 sites could be affected.

The Constitutional Council largely upheld the new law on old commercial leases, passed in April 2024, dismissing a legal challenge brought by thirteen members of parliament. Yet, it struck down one key provision: paragraph (d) of Article 10 was ruled unconstitutional for violating the constitutional principles of equality and fairness.

The legal challenge targeted Law No. 302/2024 as a whole, which sets out new rules for old commercial leases. The law introduces revised rent adjustment mechanisms and redefines the criteria for calculating rental values. The MPs behind the appeal argued that the law favored landlords, granted excessive authority to valuation commissions, and contained vague language in several articles.

In its ruling, the Constitutional Council rejected most of the objections, stating that the law had been passed following proper procedures. It emphasized that lawmakers are entitled to balance competing interests, as long as fundamental constitutional principles are respected.

The sole clause invalidated was paragraph (d) of Article 10, which allowed evaluation commissions to revoke the “old lease” status if the rent exceeded the property’s assessed rental value by 50 percent or more. The Council found this violated the principles of contractual stability and acquired rights, arguing that decisions of this kind should rest with the courts rather than administrative bodies acting on unclear criteria.
With only a limited portion of the law annulled, Parliament is now expected to revise the censored clause in a way that brings it into line with constitutional standards.

The new law on old commercial leases extends beyond shops and warehouses. It directly affects properties rented by the state before 1992, including public schools, faculties of the Lebanese University, police stations, and government offices. Altogether, more than 400 sites are likely impacted.

A legal expert warns that the financial consequences for the state could be substantial. The law requires that renewing a lease for four years entails paying annual rent equal to 16 percent of the property’s market value. Given that the state often rents at above-market rates, this could lead to significant additional costs, ultimately borne by taxpayers.