Foreign Landlords in Lebanon: Possibilities & Options
Introduction.
1- Some principles to start with
2- Exceptions to be revealed
3- In case of renting
4- Mortgages and securities
5- In case of construction
6- Registration fees
7- Broker's commission
8- In case of POA
9- Ministry of Finance and Municipality: Waiver of rights.
10- A prior survey is not bad
Conclusion
Introduction:
One of the main reasons why we chose the above ''specific'' title for the current publication is the real estate ''booming'' taking place in Lebanon since three years or more, encouraged by the ongoing flow and ''overflow'' of foreign investments.
Considering such a situation,
We founded of great importance to reply on the various questions that are being asked by foreign investors about the possibilities of investing and sharing a cut of that ''booming''.
Knowing that investments are the engine of each economy, the real estate sector in Lebanon was and remains the key word for each investor, presenting and representing the required security and profitability.
Many reasons maybe mentioned in this aspect, nevertheless five main aspects rest behind Lebanon's real estate fertility:
- Low interest rates in bank accounts, whereby investors are searching for profitable alternatives. Should I leave my money with low interest rates, or invest in a profitable real estate sector?
- High demand for properties from Lebanese expats, because of their desire to return to Lebanon, due to the current relaxed situation that is taking place.
- Highly secured banking system that is highly compared to the ''Gnomes of Zurich''.
- Foreign investments that consider the real estate sector in Lebanon as mostly secure and rigid, especially after surviving the world economical crisis with a strong banking system.
- Appearance of the ''short selling idea'' due to the fast and huge increase in real estate prices.
The present article won't cover all aspects of our real estate ''regime'', rather then it will reply on basic parts that could help in starting-up your deal or business inside Lebanon.
Throughout this publication, we are going to reveal, in brief, the real estate regime in Lebanon, and in specific, we are going to stress on the possibilities and options secured for a foreigner to invest in the real estate sector in Lebanon.
To start with the basics, a foreigner can acquire properties in Lebanon within the limits and conditions stipulated in the Decree n.11614 of 4 January 1969, related to the organization of foreign ownership in Lebanon. He can own the property in person as well through a registered company.
Our main subject in this publication will be interpreting the above Decree through its main articles, as well some side tips and recommendations that could be taken into consideration.
Note at the end, Tax Property table according to the Lebanese Regulations.
1- Some principles to start with:
All Bill of Sales should be registered in front of the Real Estate Office, where the property is located. The Real Estate Office contains all needed details (updated data & statements, area, location…) about any property located in Lebanon. It is the classical reference to be checked before signing any deal or agreement, through which you can be sure that the concerned property is in a safe updated status to be transferred, having no major legal problems that could delay or even prevent final registration. We don't recommend the signature of any deal without being sure of the latest status of the property.
The final agreement should be signed in front of the Notary or the Real Estate Officer. In case the above conditions were not respected, the sale agreement will be considered as void and non-existing between the concerned parties, and could not be opposed to third parties. Registration procedures is finalized in a period not exceeding 10 days, unless a legal problem related to the property was raised, and that is considered as an obstacle for transferring the property.
The registration regime applied on properties in Lebanon is considered as a secured regime for protecting investors as well for revealing clear and updated information about the legal situation of the property. Details for each property can be obtained by anyone, whereby you should get beforehand the reference number of that property.
As for foreigners,
It is prohibited for any foreigner to acquire a property in Lebanon, whether in person or through a company, unless by obtaining approval, through a license, from the Lebanese Government, and upon the suggestion of the Ministry of Finance. The Government has complete discretion in approving or refusing such license.
In order to reveal the nationality of the company according to the Decree n.11614; all kind of companies stated in the Lebanese regulations (kindly refer to April's publication) should the capital be wholly contributed by Lebanese nationals. In case it was found that the Company contains foreign contributions, and whatever the percentage, then it will be considered and treated as a foreigner according to the above Decree.
It is obligatory to insert in the Articles of Association of a company related to real estate business and affairs, a clause stipulating the full accordance with the Decree 11614, otherwise it won't be registered in front the Commercial Registration Office.
2- Exceptions to be revealed:
Nevertheless, Decree n.11614 stipulated main exceptions for the above principles:
- No need for approval from the Lebanese Government if the foreigner is acquiring one or more properties, not exceeding all an area of 3000 m². The overall of foreign properties in Lebanon should not exceed 3 % of the whole area of the Lebanese territories which is 10,452 Km². In case it exceeded the legal percentage, the Decree shall be suspended until the percentage decreases to 3 %. As well the same percentage is applied for each District of Lebanon, exception made for Beirut District through which the percentage is 10 %.
- No need for approval from the Lebanese Government in case the foreigner acquired the properties through inheritance.
- In case of Testament or Donation, and in order to be considered as exception, the mentioned acts should be concluded between foreigners and the person acquiring the property should be one of the heirs.
- In case of a special law demanding the foreigner for guaranties related to his local investment, through which he has to acquire a property for mortgage purposes.
3- In case of renting:
In case the foreigner wants to rent a property in Lebanon, the rent agreement should not exceed 10 years; otherwise he has to get approval from the Lebanese Government. Nevertheless, it should be mentioned that in our legal system, if the rent agreement was signed for one year, it is considered effective for three years. Stamp duties required for the rent agreement are 3 USD /1000 USD.
4- Mortgages and securities:
In case the foreigner is acquiring the property through foreclosure procedures, a priority is given to the national to buy the property through auction proceedings. In case the foreigner won the auction, then the national has a two year limit to decide if he will propose a higher amount, otherwise the property will go to the foreigner.
5- In case of construction:
In case owning the property by a foreigner was done for construction purposes, then the latter should achieve construction in a period not exceeding 5 years from registration date, renewable once and for a similar period. For sure, the concerned party should obtain, before starting, a construction license from the competent municipality.
6- Registration fees:
The Bill of Sale should be registered in front of the Real Estate Office, otherwise it will be considered as void and non-existing even between the concerned parties. Meaning, if the agreement was signed with no registration proceeded; the seller is still considered as the true owner of the property.
Registration fees are approximately 5.8 % out of the price deal. In case the price included in the Bill of Sale was not real, then the Real Estate Officer will estimate the real price of the agreement, on which registration fees will be based and decided.
In addition to the 5.8 %, there are the notary fees of the agreement that are estimated to 5 $ for each 1000 $.
In case the property was acquired by a company through capital contribution of the partners or shareholders, then registration fees are determined for 2 %, upon the property estimation of an expert decided by the Commercial Court.
7- Broker's commission:
It is not mentioned in our legal system the percentage of a broker's commission. As applied in practical means, the broker has the right to cash 2.5 % of the price deal from each party, in case he was a common broker for both. In case a broker was designated by each party, then each one will cash his 2.5 % from his side. The percentage could be higher in case the broker and the concerned party (seller or buyer) approved so.
A lawyer cannot act as a broker according to the internal regulations; as well a broker cannot cash his commission unless the deal is finalized. Usually the broker demands an appointment letter from the seller or buyer or both, for a limited period, in order to start his mission. The appointment letter is usually considered as a proof for his role as a broker, in case a dispute was raised.
In our own opinion, it is preferable to deal with brokers acting under or as corporate entities, and not in person, especially that the profession is still unorganized under a certain association or syndicate.
8- In case of POA:
In case the seller or the buyer is not present upon the signature of the agreement, they can issue a special POA for a trusted party to proceed with the case. The POA cannot bypass a period of 5 years; otherwise it cannot be used for registration in front of the Real Estate Registration Office. The 5 years limit was initially stipulated in order to protect the expats and foreigners from a long term POA.
The POA should be issued in front of the Notary, and in case the concerned party was a foreign resident, then it should be done through the Lebanese Embassy or Consulate where he is located.
9- Ministry of Finance and Municipality: Waiver of rights.
In case the property contains constructions, it is mandatory to demand from the owner, before registration, a waiver of rights from the Ministry of Finance. In case the waiver was not obtained, the new owner will be responsible for late taxes jointly with the past owner.
The waiver of rights is obtained from the MOF, and ensures that the property is clean of any late taxes or similar, until date of Bill of Sale.
Not to forget the Municipality's waiver of rights that should be also obtained before final registration of the property.
10- A prior survey is not bad:
It is to be mentioned that a live survey for the property by the buyer is mandatory before purchasing. Our experience shows that some buyers conclude the Bill of Sale without even having a prior look at the property. Big problems were raised because of that.
In case the property was an apartment that is still not constructed, then there should be a prior agreement concluded between both parties, and joint with an official map of the property designing the location, area, fixed price, payment timetable, delivery period and all needed details of the property. We call it ''buying on the map'' (direct translation).
Conclusion:
We stressed on the possibilities of a foreign person or entity to own a property in Lebanon. We also informed him of our real estate regime, and what are the basic points that should be regarded whenever a decision was taken to buy or sell a property in Lebanon.
High demands for properties in Lebanon elevated the pricings. In simple wording, we can say that the booming kept on going because '' what you demand is what they are ready to pay ''.
Note the property taxes applicable in case of rent agreements or similar to any income sourced from the property:
(1500 LP = 1 USD)
| Percentage |
Amount of rent / year |
| 4 % |
1 - 20,000,000 LP |
| 6 % |
20,000,001 - 40,000,000 LP |
| 8 % |
40,000,001 - 60,000,000 LP |
| 11 % |
60,000,001 - 100,000,000 LP |
| 14 % |
100,000,001 LP and over |
The rent agreement should be registered in front of the Municipality and Ministry of Finance. The owner is charged by the tax property and the tenant by the Municipality Fees that could range, according to the rent price, between 6.5 % in case the rent was for non-commercial purposes and 8 % in case it was for commercial purposes.
Example:
- Commercial rent per year: 10,000 USD
- Owner tax property: 400 USD/year (4 %)
- Tenant Municipality fees: 800 USD/year (8 %)
- Stamp duties: 3 USD / 1000 USD = 30 USD for each year.
Our Publication was achieved thanks to research and applied experience. We hope we cleared out what is needed to be known about Business Entities.
This article is the intellectual property of  , and should under no circumstances be reproduced or copied without their prior consent.
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