- 26
- Mar
- 2024
Rental Law Contracts: LBP 1515 Challenges the Good Faith Principle
modified on 11 Apr. 2024 à 15:56 Read : 6 minute(s) A A A
Recently, Antoine el-Hajj, the sole civil judge presiding over rental disputes in Jounieh, issued a ruling directly addressing the deadlines outlined in the Rental Law. This decision explained the legal validity of the law since 2014, thereby confirming the enforceability of the nine-year grace period from that point onwards, which expired at the beginning of 2024. Furthermore, an extension of three years remains applicable for beneficiaries of the fund, with 8,000 pending requests awaiting assessment by the committees regarding their legitimacy.
The Landlords Syndicate asserted that the legislator's intention was clear in deeming the law effective since 2014. They argued that the 2017 law was merely amendatory, as stated in the ruling, and that the Parliament made only minor revisions to the 2017 law, viewing it as legislation subject to modifications rather than a standalone one. This was particularly emphasized as there were no changes made to the number of years specified in the 2017 law. This ruling holds tenants accountable for acknowledging the law's validity since 2014, impacting 56,000 out of 64,000 lease contracts. Nevertheless, the issue concerning judicial committees remains unresolved. Therefore, tenants who have applied to the fund stand to benefit from an additional three-year extension.
On the other hand, a highly significant ruling was delivered by Judge Alaa Bashir, who oversees rental disputes in the Metn district. In this ruling, Judge Bashir asserted that the calculation of allowances must be exclusively based on the exchange rate of the dollar in the parallel market, currently at 89,000 Lebanese pounds. Bashir stressed that settling allowances at the rate of 1,500 Lebanese pounds per dollar is unacceptable, deeming it an act of bad faith towards the landlords. It's important to note that tenants have the right to settle payments in Lebanese pounds while converting them into dollars at the prevailing rate to fulfill their obligations to the landlords. Moreover, this ruling has been welcomed with relief by landlords facing a significant crisis in old rent agreements, compounded by the 2019 financial and economic crisis. In the absence of action from Parliament to address these loopholes, some judges have boldly taken on the responsibility of regulating the relationship between both parties according to principles of fairness, justice, and equality, echoing the actions of Judges Bashir and el-Hajj.
Judge Bashir believes that Judge el-Hajj was accurate in his ruling regarding the extension years in 2014. He believes that considering the Rental Law issued on 9/5/2014 as a standalone law, its provisions apply to lawsuits filed between 29/12/2014 and 28/2/2017. Bashir argues that it would be illogical to claim that the extension years begin from the date of the law issued in 2017, as the two matters simply don’t line up.
Therefore, this approach seems more appropriate, not only because, contrary to prevalent criticism, it avoids any retroactive implications for the mentioned legislation, but also because setting the starting point of the extension years from the enactment of the law in 2014 aligns with the essence of that legislation. As for determining these years, it corresponds to the provisions of the law issued in 2017, which solely amended the duration without altering its entry into force. Hence, it must be applied as such.
In other words, while the amendment solely affects the years, leaving the effective dates unchanged, thus avoiding any retroactive implications, legislative intervention remains advisable to resolve this divergence in opinions, both legally and according to jurisprudence. Such intervention would decisively determine the date from which the extension years begin. Otherwise, it would establish a date when residential lease contracts are freed from arbitrary extensions, regardless of the onset date of the extension years.
Regarding the ruling he issued, Bashir reaffirms that the principle of good faith governs the implementation of the contract, including the understanding and interpretation of the obligation’s incumbent upon both parties. Furthermore, the principles of justice and fairness remain paramount for the judge in seeking a suitable legal resolution for the presented dispute. Thus, he resorts to interpreting the content of the obligations and applying the relevant legal rule, giving it the practical dimension intended by the legislator.
The contract under dispute specifies payment in US dollars for rental allowances, implying that both parties were fully cognizant of the actual value and purchasing power of these allowances at the time of contract signature. Consequently, each party was fully aware of the extent and nature of the obligations placed upon them, binding them to fulfill the content of these obligations as understood at the time of the agreement. Therefore, they cannot later claim that they were unaware of or disavow these obligations. The actual value of the allowances, amounting to $20,000, equated to approximately 30,300,000 Lebanese pounds at the time of contract signing. However, at the payment date, it fluctuated, by the exchange rate of the dollar in the parallel market, between approximately $340 and $600, constituting a percentage ranging from 1.7% to 3% of the actual value of the $20,000 allowances. In essence, this renders the allowances disproportionate to the rented property's nature and rental worth. Acceptance and acknowledgment of these terms as absolving liability for the claiming party could disrupt the principle of contractual balance and fairness.
Both hinge on the notion that obligations placed on one party should align with those placed on the other, and each party's commitments should be proportionate to the benefits they derive from the contract. Otherwise, it could lead to one party gaining unfairly at the expense of the other, conflicting with Article 169, which asserts that the contract is "for the benefit of all parties, providing them with equitable benefits, such as sale, exchange, and lease."
In the absence of legislative action, judicial intervention is now unavoidable to ensure the contract fulfills its economic and social functions effectively. This intervention aims to safeguard both parties from unforeseen and exceptional circumstances that may compromise their intended purpose, regardless of their involvement. It also aims to maintain fairness and prevent undue burden on one party or illicit enrichment at the expense of the other.
In terms of non-residential leases, a parliamentary session was called by the Committee on Administration and Justice, led by MP George Adwan, representing both landlords and tenants, to discuss the new legislation. During the session, Adwan argued that there is a real chance to tackle this issue outside the judicial realm, particularly given the Landlords' Syndicate's complaint against caretaker Prime Minister Najib Mikati’s decision to send three laws back to Parliament for reconsideration.
Adwan initiated a discussion on four critical points: the four-year grace period, lowering the equivalent allowances, notification procedures, and tenant indemnities. These matters are expected to be conclusively addressed by the Committee on Administration and Justice, leading to amendments in the law during the plenary session and subsequent official publication in the Official Gazette. Notably, the joint committees voted to return the three laws to Mikati for official publication. However, this action was deemed unconstitutional by the committees. Mikati lacks the authority to revoke issued laws, as that prerogative belongs to the president and is transferred to the Cabinet as a whole, not to the caretaker PM.
Therefore, the matter regarding residential and non-residential leases is a burning issue, and efforts are underway to find suitable solutions for both landlords and tenants.
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