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What are the usual forms of leases?
  • Industrial leases
  • Commercial office leases
  • Retail leases
  • Residential leases
  • Development leases/ground leases
Are lease provisions regulated or freely negotiable?

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.

Is there a maximum term for leases? Can these be extended?

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.

What are the usual lease terms?
With the exception of development leases or ground leases, and industrial leases that are usually for terms of between 15 and 25 years, most leases are for terms of one year, renewable for further one-year terms and subject to upward rent review.
Are there instances where tenants may demand an extension of the lease?


On what grounds may a lease be terminated?
In general, a landlord can only terminate a lease pursuant to the termination provisions contained therein, where for example the tenant is in breach of its obligations under the lease.

A tenant may not terminate a lease without cause, unless there are specific provisions in the lease allowing so.
Must rents be paid in local currency?

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.

Is rent paid on a monthly basis? Is it required to be paid in advance?

Rent is typically paid annually in advance.

How is rent reviewed? Are there limits to the increase in rent?

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.

What are the basic obligations of landlords and tenants?

The following is usually required of landlords:

  • Repair and maintain the structure of the property
  • Insure the property
  • Provide tenants with a valid notice of termination if terminating the tenancy

The following is usually required of tenants:

  • Pay rent on time
  • Keep the property in good order
  • Inform the landlord if repairs are needed and give the landlord access to the property to carry out repairs
  • Give the landlord access for inspections and landlord work
What provisions or restrictions typically apply to the transfer of the lease by the tenant? May a tenant sublet the leased premises?

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.

What happens in the event of destruction of the leased premises?

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.

Who is usually responsible for insuring the leased premises?

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:

  • The landlord takes out all-risk property insurance and third-party/public liability insurance
  • The tenant takes out insurance in respect of its fixtures, fittings and belongings within the leased premises
Will the lease survive if the owner sells the leased premises?
Yes, as the lease runs with the land and binds subsequent owners.
Will the lease survive if the leased premises are foreclosed?
Yes, as the lease runs with the land and binds subsequent owners.