Other than in respect of government leases or leases with government entities, leases of industrial land in Jubail and Yanbu and industrial land administered by MODON, lease provisions are freely negotiable so long as the provisions agreed by the parties do not violate Islamic Shariah laws.
Leases entered into by landlords with government departments or agencies are limited to an initial term of no less than one year and no more than three years. The lease can be renewed. However, the initial term and any renewed term or terms cannot exceed nine years in total.
There is no maximum term or limitations on renewal for non-government leases in Saudi Arabia.
The parties to a lease are free to set the rent in currencies other than Saudi riyals. However, arrangements for payment of rent in foreign currency are not typical.
Rent is typically paid annually in advance.
There are no laws that set a cap on rent reviews or that seek to control renewals.
Rent is usually reviewed upwards upon the renewal of the term, either at market rates or by a fixed increment of 5–10%. There are no limits on the extent to which a landlord can increase rent, so long as the increase takes place at the time of renewal or at dates/intervals agreed by the parties.
The following is usually required of landlords:
The following is usually required of tenants:
Other than industrial and government leases, tenants and landlords are free to agree on the extent to which a tenant can alienate his/her interest in the lease. Typically, tenants are prohibited from assigning or subletting whole or part of the leased premises without the landlord’s prior written consent.
If the tenant caused the destruction of the leased premises, he or she will be liable not only for the remaining rent due for the balance of the term but also for the costs arising from that destruction, including the cost of reinstatement.
If the landlord caused the destruction of the leased premises, the lease ends and the tenant can claim damages from the landlord for his/her direct losses. The tenant will be entitled to receive a refund on that portion of the rent paid in advance prior to the date of termination.
Neither party is obligated by law to insure against the risks arising in respect of the leased premises.
However, it is not uncommon for leases to contain insurance provisions, pursuant to which: