Controversial Landlord and Tenants Law Comes into Force;

UNCLAS AMMAN 002768 SENSITIVE SIPDIS STATE FOR NEA/ELA AND EEB STATE PASS OPIC E.O. 12958: N/A TAGS: ECON EFIN PGOV SOCI AMGT ABLD JO SUBJECT: Controversial Landlord and Tenants Law Comes into Force; Some Predict Unrest, All Expect Rent Hikes REFS: A) Amman 2673 B) Amman 137 C) 08 AMMAN 2369 D) 08 AMMAN 2316 ¶1. (SBU) Summary: A new Landlord and Tenants Law came into effect on December 1 which will increase landlord rights and establish a mechanism with which to base future increases in rents. The law also includes termination dates for old leases. Critics expect the new law to hit hardest lower-income Jordanians by raising rents, and they further predict possible social and economic unrest given the lack of public housing programs in Jordan. Proponents say the new law will fairly compensate landlords and balance in a more equitable manner landlord and tenant rights and responsibilities. Embassy leases are exempt from the new law's changes. End summary. Erasing A Long History of Pro-Tenant Laws -------------- ¶2. (SBU) A new Landlord and Tenants Law, passed by parliament in August, came into effect on December 1, following the issuance of a royal decree. The controversial law included amendments proposed by the government and the lower house's legal committee, which studied the law over the preceding six months. The new law erases a history of regulations which, since 1941, have been pro-tenant with leases that could be extended indefinitely if the tenant so desired and offered rent controls. The 1941 law was amended in 1982 to include a clause allowing tenants the right to transfer property to immediate family members. A subsequent 1994 law obligated the government to examine rent levels at least once every five years. A 2000 amendment finally attempted to address the de facto practice of favoring tenants' rights over those of landlords by setting December 31, 2010, as the termination date for all leases signed prior to March 2000. Leases signed after the March 2000 cut-off date must adhere to the negotiated terms, including the agreed-upon termination date. Leases held by expatriates, such as those negotiated by embassies on behalf of their diplomatic staffs, are not subject to the termination date. ¶3. (SBU) The new law has raised concerns among contacts because of an article under which "the landlord has the right to vacate the tenant from their properties." This aspect is controversial in Jordan because there is no institutionalized safety net for renters who are evicted from their homes as a result of the law. Note: The government does not provide public housing for citizens and the "Decent Housing for Decent Living" initiative for low-income housing has only assigned approximately 6,000 units (as apartments or parcels of land) out of the 100,000 units planned for construction during a five-year period. Moreover this initiative primarily targets public sector employees, leaving others to fend for themselves (ref C). End note. Contacts fear the potential rise of social and economic problems should a rash of evictions occur. Defenders of the new law contend that it promotes rational criteria for property disposal, renter eviction, and raising rents using a formula based on the number of years since the original lease was signed and the value of the property, a change from years of having a law that favored tenant rights over landlord rights. Mandatory Lease Termination; Rental Rates to Rise -------------- -------------- ¶4. (SBU) The new law mandates termination dates for rental property occupancy. Tenants will have to vacate properties based on the date their original leases were signed unless they sign new rental agreements with the property owners. Additionally, renters who signed leases before 1970 will have to vacate their rentals or sign new leases by December 31, 2010. Leases signed after that date will have graduated termination dates falling between 2011 and 2015. ¶5. (SBU) The amended law further specifies that in instances of contract renewal, increases in the amount of rent should be calculated based on the number of years since the signing of the original lease and the current property value. Under this formula, the added percentage rate for residential leases ranges from 1% to 3% for contracts signed between 1975 and 2000, and is a flat 5% for contracts signed prior to 1975. For non-residential contracts signed between 1975 and 2000, the added percentage rate ranges from 2% to 4%, and is set at 6% for those signed before 1975. Rents can be raised beginning January 1, 2011. ¶6. (SBU) An additional substantive change under the new law will allow rental contracts to be renewed automatically for a similar contractual period if a renewal condition was included in the original contract. If the tenant notifies the landlord prior to the contract end date of his intention to terminate the contract, there is no automatic renewal. Real Estate Gains, Social Hardships Ahead -------------- ¶7. (SBU) Opinions on the new law vary greatly. Contacts have told EconOffs that the motivating change was a desire to develop the real estate sector and increase investment. Critics of the new law, however, assert that the past five years have seen massive, inflated growth in the real estate sector and that the new law will create further economic hardships for many Jordanians by raising rents as monthly incomes stay flat, a situation that could lead to social and economic instability. Minister of Justice Ayman Odeh told the media that he also expects the new law to increase the burden on Magistrates Courts, where landlord and tenant cases are heard, as he expects more litigation when it comes to tenant and landlord rights under the new law. ¶8. (SBU) For non-residential real estate, the main concern is expressed by tenants who have invested in the properties they rent. Under the new law, some of these businesses will be forced to vacate their shops, and owners will have no recourse for compensation for their self-financed improvements to rental properties. Defenders of the law say that statistics show that tenants are often stronger financially than landlords and that the new law will not only set fair rent increase mechanisms, but also more equitably balance the rights and responsibilities of both landlords and tenants. ¶9. (SBU) Comment: While the new Landlord and Tenants Law will rationalize current rent levels, its implementation will surely hit poorer segments of Jordanian society hard, particularly given the lack of public housing programs in the country and the dramatic elimination of funding for social safety net programs in the 2010 budget (ref A). The law's implementation will also be met by an uproar of protest from Jordan's business and commercial community, as the bulk of commercial enterprises in Jordan are conducted from rental properties. Already on December 21, the Irbid Chamber of Commerce, which claims that the law will hurt 90% of its business members, began calling on the GOJ to issue a provisional law that would mitigate the effects of the law enacted in early December. End comment. Visit Amman's Classified Website at http://diplopedia.state.sgov.gov/index.php?ti tle =Embassy_Amman BEECROFT