Law of State Leasing of Property

The Law of State Leasing of Property is a set of legal rules established to regulate the state leasing of property operations through government entities in the Kingdom of Saudi Arabia, based on needs. It was issued on July 27, 2022.

The Law of State Leasing of Property seeks to streamline the financial costs associated with government entities' real estate leases, optimize the use of leased properties, and promote governance principles. It aims to establish transparency and efficiency in government entities' leasing operations while unifying oversight under a single supervising entity. The law applies to ministries, public authorities and institutions, and the like, as well as the property owners or their authorized legal representatives.

The Law of State Leasing of Property requires that government entities collaborate with the State Properties General Authority to develop an annual plan for leasing real estate before the start of each fiscal year. This plan must be published on the entity's website or through other means, but the publication does not create any obligations for the entity.

Under the law, no government entity is allowed to lease property unless it is necessary and approved by the State Properties General Authority. Several conditions must be met: the entity must not own an unused property that fulfills its needs, the State Properties General Authority must not have a suitable property available, and the government entity must have the required financial approval to lease and use the property.

Housing for government entities' employees is generally not considered a valid reason to lease, except for government entities with specific provisions in their laws for employee housing. In such cases, the rent paid must not exceed the housing allowance provided to entity employees at the time of renting, extending, or renewing the lease. The law also permits multiple government entities to jointly lease a single property.

The Law of State Leasing of Property has established several conditions for properties eligible for leasing. These include: the property must be free from construction defects, meet all licensing requirements from relevant entities, have a suitable area to fulfill the needs of the government entity, and, if applicable, be insured by the lessor in line with relevant laws. Additionally, the property must not be subject to any violations or disputes with any competent entity.

Furthermore, the property cannot be owned by employees of the State Properties General Authority or the government entity seeking to lease it, nor by their first-, second-, or third-degree relatives. It also must not belong to any individual prohibited from dealing with the law, as outlined in the regulations. When determining the technical specifications, the government entity must consider the needs and accessibility requirements of persons with disabilities.

The Law of State Leasing of Property limits the term of a lease contract to a maximum of five years. However, with the approval of the State Properties General Authority, the government entity may extend or renew the contract for an additional period of up to five years. The total duration of a property lease may reach up to twenty-five years with the authority’s approval, and up to fifty years for properties built on government land when the State Properties General Authority contracts with investors for investment projects.

If the government entity remains in the leased property after the lease contract has expired without extending, renewing, or vacating it, it must continue paying rent for the duration of its stay.

The Law of State Leasing of Property permits the leasing government entity to terminate or cancel the contract and vacate the property before the contract period ends under certain conditions. These include the property becoming unfit for use due to construction defects, safety risks in the surrounding area, cancellation by the government entity, force majeure or emergency circumstances, and proven misconduct in the leasing process attributable to the landlord. The Board of Grievances has jurisdiction to resolve disputes related to the enforcement of this law.