Ejar Contracts in the Kingdom of Saudi Arabia
Real Estate & Construction and Hotels & Leisure
Andrew ThomsonPartner, Head of Real Estate
Joe SabehAssociate,Real Estate
The Ejar Platform is an electronic network for tenancy services, established by the Council of Ministers Resolution number 131 in 2014, to facilitate and authenticate tenancies in the Kingdom of Saudi Arabia (“KSA”) while enhancing confidence between the parties and registering their mutual obligations. The main objective of the platform is to standardize lease agreements, provide electronic payment services, verify client identities, and collect and analyze data. In an effort to standardize the leases in the Kingdom the Ministry of Municipal, Rural Affairs and Housing (“MoMRAH”) issued two forms Ejar that can be used by prospective lessors and lessees to enter into a tenancy arrangement; these templates can be for either commercial or residential purposes.
This is the standard form of the Ejar Contract. It contains specific template provisions (“Basic Provisions”) which fall under one of two categories:
Essential provisions that cannot be tampered with
Other template provisions that can be selected or removed based on the will of the parties to the lease.
It should be noted however that once those provisions are selected, and the Ejar has been issued, the parties may not amend those provisions. The Unified Ejar Contract is considered to be an enforcement instrument that can be directly executed at the courts of execution of the KSA.
In addition to being a set of template provisions, the Unified Ejar Contract includes a section specific for additional conditions (“Additional Conditions”). These provisions inserted under the Additional Conditions, are drafted by the parties and added to the text of the Ejar. Once these provisions are inserted, the Unified Ejar Contract loses its status as an enforcement instrument and becomes a Non-Unified Ejar Contract. It should be noted that the provisions under the Additional Conditions may not contradict the Basic Provisions of the Ejar contract and if such contradiction does occur, the Basic Provisions shall prevail.
JudicialThe Ejar Contract is governed by the laws of the Kingdom of Saudi Arabia and as previously mentioned, can be considered an enforcement instrument, and therefore directly executable at the courts of execution, if the Ejar was a Unified Ejar Contract.
It should also be noted that, in accordance with Council of Ministers Resolution number 292, leases not registered on the Ejar Platform do not benefit from any judicial and administrative effect. In other words, only claims pertaining to Ejar Contracts may be brought forth in front of Saudi courts. However, this resolution does not prohibit claims in relation to bespoke leases being brought to arbitration. Currently, the Saudi Center for Commercial Arbitration still allows claims related to leases not registered on Ejar; this however may change over time.
AdministrativeThe registration of a lease on the Ejar platform is mandatory, as without such registration, a tenant to obtain a civil defense license and a commercial license.
In conclusion, registration of a lease on the Ejar platform is the safest approach to safeguard the rights of the parties involved in a lease. With the increased demand on rental units and therefore the increase in prices in the market, it is imperative that the parties have clarity as it pertains to their rights and obligations.
For further information,please contact Andrew Thomson and Joe Sabeh.
Published in June - July 2024
