Graduated cuts relating to the heavily subsidised electricity and water rates in Bahrain came into force on 1 March 2016, with rates for businesses, expatriates and Bahrainis (who own more than one home) increasing year-on-year until they reach cost price in 2019. With these, and other subsidy cuts now in effect, many residents will be paying more for utilities over the coming years.
As many residential tenancies within Bahrain are inclusive of electricity and water, landlords may take the recent utility price increases as an opportunity to raise the level of rent paid by their tenants.
The Bahraini Lease Law (Legislative Decree No. 27/2014), which came into force in February 2015, covers the majority of the leases within Bahrain and all applicable leases, which includes residential leases, are required to be in writing and be registered with the Office of Lease Registration (the “OLR”) within certain time periods.
The Lease Law restricts a landlord from increasing the agreed rent within the first 2 years of a lease, and limits the level of increases to 5% for residential leases and 7% for commercial and other leases. The Lease Law also limits rent increases to 5 times during the term of a lease.
Although the Lease Law applies rigid rent increases, the parties are entitled to agree alternative arrangements in respect of the rent. However, a landlord cannot unilaterally increase the rent outside the restrictions imposed under the Lease Law.
If there are disagreements in respect of a lease, either party can refer the dispute to the Dispute Committee (the “Committee”) established by the Lease Law. It is, however, imperative that leases are registered at the OLR as otherwise they will not fall within the Committee’s remit.