Commercial Rent Increases in Kuwait (Ajrat Al-Mithl): A Guide for Landlords

In the commercial sector, rent increases are considered the lifeblood of real estate investors' returns. As mentioned earlier, Kuwaiti rental law did not separate residential and commercial properties regarding increase rules. The five (5) year rule remains the reference point, but practical application for companies differs with broader negotiation and advance planning.

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The 5-Year Protection for Showrooms and Offices (Ajrat Al-Mithl)

According to Article (11), "The rental value of a commercial premises may not be raised except after the passage of five years from the date of concluding the contract or from the date of the last increase made to it."

1. Immediate Nullity: If a mall owner commits to leasing a showroom to a car dealership with a 10-year contract at a fixed price, and adds a clause stating "rent will increase by 10% every two years," this clause is absolutely null and void because it violates the minimum 5-year period legally established in Kuwait.
2. Judicial Demand: Upon the expiration of the five years, if the company and landlord do not agree on a new marginal amount, either party (usually the landlord) has the right to file a lawsuit requesting the estimation of 'Ajrat Al-Mithl' in the Rental Court, to be evaluated by experts based on the fair value of similar offices within the same commercial tower.

Can Pre-Agreed Increases be Built into a Commercial Contract Without Violation?

Yes, there are strategic solutions used in major commercial contracts in Kuwait:

The Step-up Rent Strategy (Escalating Rent for 5 Years)

Instead of waiting for the 5 years, both parties can agree in advance in an extended commercial lease (for more than 5 years) to allocate an escalating rent from the very beginning of signing the contract.

• Legal Example: It is agreed in the contract that the rent for the first five years will be (1000) Dinars, then from the sixth year the rent becomes (1200) Dinars... and so on. Here, the increase is valid because it initially adheres to completing the 5-year cycle before application, and the tenant has agreed to it in advance.

The Turnover Rent System (For Complexes and Shopping Centers)

Massive Malls and some global brands in Kuwait adopt an innovative strategy to cover market fluctuations, where the commercial rent consists of two parts:

1. Base Rent: A fixed monthly fee.
2. Percentage of Sales (Percentage / Turnover Rent): The landlord takes a percentage (e.g., 6%) of the total monthly (or annual) revenues of the restaurant or store if sales exceed a certain threshold (Break-even).

Legality in Kuwait: The Kuwaiti judiciary considers these amounts as participatory revenues and not within the concept of fixed rent covered by the 5-year temporal protection; rather, it is a legitimate commercial agreement pattern. This guarantees the landlord an increase in funds parallel to the store's sales inflation, without raising the burden during a recession.

Your ability to organize these statements and increases in your institution's contracts requires a tracking tool. Because the Landager system supports the inclusion of escalating rent clauses and automated demand notifications, you will never forget the due date for demanding an increase from corporate tenants after the five years have elapsed.

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