Commercial Rent Late Fees in Kuwait: Actions Against Defaulting Companies

In the office and showroom sector in Kuwait, commercial leasing is governed primarily by Decree-Law No. 35 of 1978 Regarding Property Leasing (commenced 16 August 1978). Companies heavily manage their financial cash flows against the market; if a company defaults on paying a rent cheque exceeding thousands of Dinars, a major crisis arises for the landlord. However, caution must be exercised before imposing penalties.

Legal DisclaimerThis guide provides general legal information. Lease laws can change. Always consult a licensed notary or lawyer in this region.

Does the Law Permit a (Daily/Percentage) Fine for Companies?

Even though the parties in a commercial contract are companies, imposing usurious late-payment interest (e.g., compounding interest that exceeds the 7% cap mentioned in Article 110 of the Commercial Code) is heavily scrutinized. In rental matters, such clauses can be nullified in the Rental Court if they are deemed to violate the specific protections of the Rent Law.

Practical Alternatives in Commercial Leasing in Kuwait

1. The Fixed Compensatory Clause (For Bounced Cheques)

Lawyers resort to including a clause demanding the tenant company pay a fixed, lump-sum administrative fee whenever a company's cheque bounces due to insufficient funds. This is considered an administrative cost of compensation (e.g., 500 Dinars) to offset the actual administrative harm. The court might accept this if framed as liquidated damages rather than usurious interest.

2. The 20-Day Grace Period and Direct Enforcement

Under Article 20 of Decree-Law No. 35 of 1978, if a tenant fails to pay rent within 20 days of its due date, the landlord may seek eviction.

With the enactment of Decree-Law No. 95 of 2024, overdue rent can now be collected more directly through notarized lease contracts (Executive Deeds). By including the Executive Formula (Article 11 bis), landlords can bypass lengthy litigation for rent recovery. If the tenant fails to pay after a formal 5-day notice, the landlord can proceed directly to the Execution Department to recover arrears. However, if direct collection fails or eviction is required, the landlord retains the right to file an immediate eviction lawsuit before the Rental Department of the Court of First Instance.

3. Drawing from the Bank Guarantee

If the landlord holds a Bank Guarantee, they can, upon any delay, issue a formal warning outlining the breach and then withdraw the equivalent of the delayed rent directly from the bank without resorting to prolonged litigation.

Executing automated payment demands and tracking due cheques is seamlessly possible through platforms like Landager, providing Kuwaiti landlords with tools to manage compliance under the 2024 amendments.

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