The Supreme Constitutional Court in Egypt ruled that the first paragraph of both Articles I and II of Law #136 of 1981, regarding some provisions related to renting places and regulating the relationship between landlord and tenant, is unconstitutional, as they included fixing the annual rent value for places licensed to be established for residential purposes, starting from the date of implementing the provisions of the aforementioned law.
The court based its ruling on the fact that exceptional laws for renting residential places include two characteristics; the first is the legal extension of their rental contracts, and the second is the legislative intervention in determining their rent value – both are not immune to legislative regulation.
The court explained that as the legal extension has defined a scope for categories of beneficiaries from its ruling, and no one else, then determining the rent must always be based on objective controls that aim to achieve a balance between the two parties to the rental relationship, which requires the legislator to intervene to create this balance.
It added that the legislator must not enable the landlord to impose a rental value that exploits the tenant’s need for a home to shelter them, and must not waste the return on investment of funds – the value of the land and buildings – by fixing its rent at a low price for that return, thus rendering it nonexistent.
The court stated that the two contested texts prohibited increasing the annual rent for places licensed for residential purposes as of the date of implementing the provisions of this law to seven percent of the value of the land upon licensing, and buildings according to the actual cost at the time of construction.
The court explained that this leads to the rental value remaining fixed at a point in time, a fixity that does not change after decades since the date on which it was determined, and is not affected by the increase in inflation rates and the decline in the purchasing power of the annual rent value, and the decline in the return on investment of the rented properties to the point of near nonexistence.
The court set the day following the end of the current regular legislative session of the House of Representatives as the date for implementing the effect of its ruling, due to the legislator’s need for a sufficient period of time to choose between alternatives to establish governing controls to determine the rent value of places licensed for residential purposes subject to Law #136 of 1981.
Edited translation from Al-Masry Al-Youm
