Commercial Lease Agreement in Saudi Arabia: Key Points to Check Before Signing

In Saudi Arabia, a commercial lease is documented on the Ejar platform through an accredited real estate broker. Before signing, you should confirm the landlord's capacity and ownership, the term of the lease and how it renews, the rent and payment schedule, who is responsible for maintenance and fit-out, and the conditions for vacating the premises and subletting. These points determine your actual rights for the entire time you lease the shop or office.

Why should the lease be documented on the Ejar platform?

Ejar is the official platform for documenting residential and commercial leases in the Kingdom. A lease documented on it gives both parties clarity on their rights and obligations and is treated as an enforceable instrument, making it easier to claim unpaid rent or seek enforcement in the event of breach in accordance with the approved procedures. A documented lease is also required for many government procedures relating to the business. The detailed fees and procedures are set by the platform and may change, so it is advisable to check them directly.

What should you check before signing?

1. The landlord's capacity: is the landlord the owner, an agent, or a tenant subletting? If it is an agent, check the scope of the power of attorney.
2. Suitability of the property for your activity: does the permitted use of the property allow your commercial activity? Can the necessary licences be obtained for the location?
3. Area and specifications: the actual area, the frontage, parking, and shared services.
4. Condition of the property at handover: record its condition in a handover report with photographs, as this will be the reference point when you vacate.

What are the essential clauses in a commercial lease?

• Term and renewal: does the lease renew automatically? What notice is required if you do not wish to renew?
• Rent and increases: the amount of rent, whether there is an agreed periodic increase, and the payment schedule.
• Fit-out period: many tenants need time to fit out the premises before opening, and it may be possible to negotiate for this period to be rent-free or at reduced rent.
• Maintenance: distinguishing between minor routine maintenance, borne by the tenant, and essential and structural repairs, borne by the landlord.
• Improvements and fit-out works: who owns them when the lease ends? Must the tenant return the property to its original condition?
• Utilities and bills: electricity, water and shared service charges.
• Subletting and assignment: may you sublet part of the premises or assign the lease if you sell the business?
• Early termination: its conditions and the compensation payable by each party.
• Security deposit: the amount of the deposit and the conditions for its refund.

Remember that the unified contract on the platform contains fixed core clauses, while the details specific to your business depend on the additional terms you add, so do not assume the template covers all your needs.

What if you want to sell the business before the lease ends?

This is one of the issues tenants most often overlook. The value of a business is often closely tied to its location, so if the lease does not allow assignment to a buyer, you may find it difficult to sell. It is therefore advisable to negotiate in advance a clause permitting assignment of the lease to a buyer who meets reasonable conditions, or with the landlord's consent, not to be withheld without acceptable reason.

What should you do when the lease ends or you vacate?

The end of a lease is just as important as the beginning. To handle it properly:

1. Check the notice date stated in the lease, and send your intention to renew or not to renew in writing and on time.
2. If you are leaving, return the property in the agreed condition and compare it with the handover report and the photographs taken at the start.
3. Prepare a handover report signed by both parties confirming the return of the keys and the condition of the property.
4. Pay utility bills up to the vacating date, and request the refund of the security deposit in accordance with the lease.
5. Make sure the lease is terminated on the platform so that obligations do not remain registered in your name.

If a dispute arises over damage or the deposit, the documents you have kept from the beginning are what will settle it.

Common mistakes in commercial leases

• Relying on an undocumented paper contract because of a personal relationship with the landlord.
• A mismatch between what was agreed verbally and what was entered on the platform.
• Spending large sums on fit-out under a short lease with no guarantee of renewal.
• Not reading the additional terms attached to the unified contract.

To have your lease terms reviewed before registration, you can use our contract drafting and review service.

Frequently Asked Questions

Q: Can special terms be added to the unified Ejar contract? A: Yes. The platform allows additional terms and conditions agreed by the parties to be added, provided they do not contravene the law, and they should be drafted carefully.

Q: Can the landlord increase the rent during the lease term? A: As a general rule, the agreed rent applies for the whole term, unless the lease provides a specific increase mechanism or the parties agree otherwise.

How can we help?

FATIMA AL ASMARI Law & Intellectual Property Company in Jeddah reviews commercial leases and their additional terms before signing, serving business owners across all regions of Saudi Arabia. Book a consultation or call +966 56 685 9556.

Legal sources

This article is for general awareness and is not legal advice.