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.

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