The Egyptian Government is an Eternal Tenant while Property Owners Sue the Government in Courts

How is the Egyptian government delaying the act of vacating thousands of buildings it rents from citizens?

Muhammad Hamid

The setting is Kafr El-Sheikh in the fall of 1977. Egyptian government-owned Nasser Social Bank signed a contract with Ahmad Morsi to rent the first and ground floors of Morsi’s property on Al-Khalifa Al-Ma’moun Street in the city center.

The bank agreed to pay a monthly rent of 110 pounds for the two floors that extend over more than 650 square meters. This rent was equivalent to around 275 US dollars, according to the exchange rate of the Egyptian pound against the dollar towards the end of the seventies of the past century. Today it is worth about only seven dollars.

Twenty-two years later, Morsi asked the bank to vacate the two floors and refused to renew the lease. The law stipulates that the lease period be five years, subject to renewal if one of the parties does not notify the other of the wish to vacate.” But the government officials declined to implement Morsi’s request.

At the time, the Egyptian government was planning on vacating the buildings that it rented from citizens within five years. Otherwise, it was going to prepare new contracts for the buildings that it found hard to leave. This is documented in a decision issued by Egyptian Prime Minister Kamal El-Ganzouri (1996 - 1999) while presiding over a mini-session of the ministerial cabinet in April 1997.

When the government refused his request, Morsi had to resort to court. In 2000, he filed lawsuit No. (192) at the Kafr El-Sheikh Court of First Instance and demanded that the government be expelled from his property.

Morsi is one of thousands of citizens who are leasing their properties to the Egyptian government. Undocumented statistics obtained from government sources indicate that the number of buildings rented by the government from citizens is estimated at 190,000. According to the 2017 population census bulletin issued by the Central Agency for Public Mobilization and Statistics, the total number of official government buildings in the country is 417,593.

Some ministries, public companies, and banks affiliated with the Egyptian government have been procrastinating in vacating buildings rented from citizens for sums less than the market value. These amounts range between 12 and 300 pounds, where one Egyptian pound equals 20 dollars, according to the current exchange rates. This is in contravention of judicial rulings issued by the Supreme Constitutional Court, which categorically ruled in favor of returning these properties to their owners.

Outdated Rentals

Mohammad, Ahmad Morsi’s eldest son, is a young man in his mid-forties. He says, “I was young at the time, but after reviewing my father’s papers, I found that the rent of Nasser Social Bank did not exceed 310 pounds.”
The first one is the Holding Company for Cotton Mills affiliated with the Ministry of the Public Business Sector for a monthly

icon

Click on the image to view the data

1980
-5%
small Losses
40 قرشا
what the pound lost against the dollar
1990
-375%
big Losses
1.5 pounds
what the pound lost against the dollar
2000
-242%
big Losses
3.40 pounds
what the pound lost against the dollar
2010
-191%
medium Losses
6.5 pounds
what the pound lost against the dollar
2020
-248%
medium loss
16.16 pounds
what the pound lost against the dollar
2000
5%
حجم صغيز
40 قرشا
what the pound lost against the dollar

what the pound lost against the dollar

Ashraf Mosleh is a 45-year-old real estate owner in the city of Zefta in Gharbia Governorate. He is going through the same crisis as Morsi’s family is. He says, “I have three government agencies renting from me: The first one is the Holding Company for Cotton Mills and Yarn affiliated with the Ministry of Public Business Sector for a monthly amount of no more than 135 pounds or $8.5 dollars. The second entity is the Telecom Egypt Company affiliated with the Ministry of Communications and Information Technology, with a monthly rent that counts as “pennies.” The third entity is the Land Registry, a government agency that oversees properties and physical assets registration. The agency has been renting an apartment from him since 1972 for 12 pounds per month, that is less than a dollar.

Mosleh points out that the Land Registry has moved to a new headquarters and liquidated the Cotton Mills business in Zefta, but despite that, they still kept the buildings and refused to vacate them.

Mosleh’s crisis is similar to Saleh Abdel Hafiz’s heirs whom the Ministry of Justice had rented their villa on the Nile, in Benha, governorate of Qalyubiyya for 25 Pounds in 1950, which is equivalent to 1.5 US dollars today. It was used as a retreat for the state’s senior Judges or Councilors.

Mohammad Fattouh, owner of several properties in the city of Zefta, has the same problem. The Consumer Cooperative Society of the Ministry of Supplies has been renting three of his shops with an area of ​​more than 90 square meters for around 120 Egyptian pounds or 7.6 dollars per month.

Fattouh tells the investigator that the rent for one shop in that area exceeds 7,000 Egyptian pounds per month, that is $450. He filed a lawsuit against the government in 2019 and is awaiting the ruling.

The size of the old rental buildings in the governorates

icon

click to view the data

Source: Egyptian General Census of 2017 - Central Agency for Public Mobilization and Statistics

Socialist Capitalism

Mohammad Morsi reiterates, “While the Kafr El-Sheikh Court of First Instance was considering the case in 2001, Nasser Bank requested to have it rejected, based on the text of Article (18) of Law (136) of 1981. This law legalizes and supports the tenant’s position of refusing eviction. It also allows the possibility of extending the tenancy indefinitely.”

Morsi was forced to file another lawsuit before the Supreme Constitutional Court, in which he demanded to nullify Article (18).

A member of the Egyptian Association for Economics, Statistics and Legislation, Dr. Walid Jaballah, chronicles the stages that rental regulations went through in the country as follows: “Article (18) is a product of the socialist era of various ruling regimes or systems.”

In the opening notes of the proposal paper we have obtained to amend law No (136) Jaballah explains that the original regulation of the rental relationship is based on Civil Law No. (131) of 1948. When the late President Gamal Abdel Nasser approved the 1956 constitution, amendments were made as per Article (7) calling for social justice to be the guiding principle in regulating the national economy.

After achieving the ‘Arab unity’ between Egypt and Syria in 1958, the provisional constitution still stipulated this article, which was the cornerstone of the state’s intervention in the distribution of goods and services. According to Dr Jaballah, member of the Egyptian Society for Political Economy, Statistics and Legislation, this distribution system was especially embraced by Nasser’s government which adopted socialist systems with the issuance of the 1961 laws.

Jaballah points out that the 1971 constitution adopted a system that combined socialism and capitalism. Accordingly, Laws No. (49) of 1977 and (136) of 1981 were issued. These represent the beginning of laws on (economic) openness (known as the era of Infitah), approved by the late President Anwar El-Sadat.

Then, everything related to socialism was deleted in the 1971 constitution of which Article (4) stipulated the freedom of economic activity. This is also included in the 2014 constitution, according to a member of the Legislative Assembly who adds, “Despite this, the state did not intervene to restore the balance between the lessor and the lessee. It is necessary then that the legislature intervene to rectify this flaw.”

icon

click to the number to view the law

icon

click to the number to view the law

2001

The text and number of the law

Law No. (14) on amending the annual increase in the value of non-residential units with a fixed value of 1: 2%.

1958

The text and number of the law

Law No. (55) on a 20% reduction on properties established between September 1952 and June 1958

1952

The text and number of the law

Law No. (199) on a 15% reduction in the rental value of units established between January 1944 and September 1952

2006

The text and number of the law

Law No. (137) on Documenting Rental Contracts

1997

The text and number of the law

Law No. (6) on increasing the legal fee by 10% for units used for non-residential purposes

1981

The text and number of the law

Law No. (136) on Controls for Determining the Value of Rent

1962

The text and number of the law

Law No. (46) on Determining rental value and on the establishment of committees to complain about rental values

1961

The text and number of the law

Law No. (168) on a 20% reduction in rents for premises established between June 1958 and November 1961

1941

The text and number of the law

Law No. (151) on preventing landlords from increasing rental value and on automatic contract extension

1977

The text and number of the law

Law No. (49) on abolishing all previous rent laws and the introduction of new provisions on rent

1920

The text and number of the law

Law No. (11) on Restricting Housing Rentals
Law No. (4) on Applying Rental Restriction to all residential housing and otherwise

1996

The text and number of the law

Law No. (4) on deactivating the enforcement of old lease laws and implementing the Egyptian Civil Code in rentals

1965

The text and number of the law

Law No. (7) on reducing the rent of housing units by rates ranging between 35% and 20%

Historical Ruling

Mohammad Morsi clarifies that he cannot estimate the amount of money spent on the case of evicting Nasser Bank. He adds, “What I can say is that it went from one court to another and from one department to the next without success for years.”
He adds, “I traveled to Saudi Arabia and worked there for years. Then, I came back, but I still didn’t know how to claim my right.” He explains that this prompted him to rent a shop for his own business activities on the same street where the bank was renting his own property. However, “Unlike the bank’s rent; this was costing me thousands of Egyptian pounds.”
The five-year deadline set by the Egyptian government to vacate the units it rents from citizens expired in 2002 as per the 1997 order by El-Ganzouri government. This is in addition to the expiration of the old rental laws and the adoption of the Egyptian Civil Code that governs rental relations.

Old rental agreements are those that were signed before the issuance of Law No. (4) of 1996 which terminated the enforcement of Law No. (49) of 1977 and Law No. (136) of 1981 that governs the relationship between landlords and tenants. The same law also stipulates the application of the provisions of the Egyptian Civil Code regarding rent.

A leaked document banned from circulation reveals a draft law proposed in 2007 to regulate rental relations. This demanded the termination of the old rental laws because of the injustice towards real estate owners. This draft law was proposed by the Economic Policies Committee of the National Democratic Party which was dissolved by a judicial order.

In the copy we obtained, the committee demanded that the provisions of the Egyptian Civil Code be applied to all leased places, rented by the government or by common people.

This is in addition to the application of the provisions of the proposed law to the leased premises governed by Laws No. (49) of 1977 and (136) of 1981. It also proposes granting the leasing parties a grace period of five years to redress the situation, but this proposal was born dead.

Ahmad Morsi died in 2015, and his family’s case stayed pending in courts. In February 2018, the family lawyer, Mohammad Badawi, requested that the lawsuit be rectified and that the family members replace their late father as heirs.

After 18 years of pleading in courts, the Constitutional Court ruled in May 2018 to expel the government. This came after a ruling that the first paragraph of Article (18) of Law (136) of 1981 was unconstitutional, as it stated that the landlord may not request that the place be vacated even if the period agreed upon in the contract expired. The ruling also included contracts leasing properties to persons who use the properties for purposes other than housing.

The court also specified the implementation of its ruling and its enforcement in its text: This was set to be on the day following the end of the annual regular legislative session of the Lower House of Representatives, which ended in July of 2018.

Yasser Zabadi, a Cassation and Supreme Constitutional Court lawyer says by way of interpretation of the ruling that the state or the government is a “legal entity” and does not die; therefore, leases with the government entail an “eternal and unending commitment” unlike leases to common people. Leases to common people end either with the death of the tenant or whoever the contract is extended to.

(A legal entity or person is an independent entity that aims to achieve a specific purpose, unlike a common person who is an individual human being.)

Zabadi explains that the flaw here lies differentiating between the common person and the legal person or entity in violation of the Egyptian constitution issued in 2014 that stipulates equality in legal standing and in the protection of personal property. The lawyer adds that this paragraph of the law deprives the owner of his right to request the eviction of the rented unit, even after the lease term that was agreed upon in the contract expires.

The number of official government buildings in the governorates

icon

click to view the data

Source: Egyptian General Census of 2017 - Central Agency for Public Mobilization and Statistics

Other Rulings

In the wake of this ruling, which was described as “historic,” lawsuits demanding the expulsion of the government from (long term) rented properties increased. In this investigation, we documented five of these, in which the Egyptian judiciary ruled to terminate leases with the government.

The first ruling was issued in 2021 by the South Cairo Court of First Instance in Case No. (850). This terminated the lease contracts signed by the ‘Kaha’ Preserved Food Company of the Ministry of the Public Business Sector in 1962 and in 1963 with citizen Ahmad Ra’afat Abdel-Azim.

At the end of 2020, a ruling was issued in the Supreme Constitutional Court Case No. (126) which granted Abdel-Wahab Al-Muddathir the right to recover a property he has been renting to the Alexandria Security Directorate since 1961.

In June 2020, the South Cairo Court ruled to terminate a lease signed by the Omar Effendi Company of the Ministry of the Public Business Sector in 1940 with the family of Mohammad El-Sayed Gharib. The ruling favored the return of the property to the family, according to the text of Case No. (707).

In early 2020, the Court of Cassation ruled in lawsuit No. (13626) to vacate the property that has been rented by Egypt Post in the city of Mahmoudeya in El-Beheira Governorate since 1963. It ruled in favor of returning it to the owner Mohammad Abdel-Mohsen Khatir.

The South Cairo Court of First Instance decided in lawsuit No. (821) of 2019 to vacate the properties of Hano, Banzayon and the Green Salon in central Cairo. These companies were affiliated with the high-end fashion houses company of the Ministry of the Public Business Sector. The ruling favored the return of the property to its owner Ali Al-Qaisi.

Procrastination by the Government

Mohammad Morsi explains to the investigator, “Our lawyer had passed away, and two years had passed since the issuance of the Supreme Constitutional Court ruling. Nasser Bank was still procrastinating in vacating the first and ground floors of the property.” He added that the authorities entrusted with the implementation of the judicial rulings did not cooperate with him at all on the issue.
Cassation and constitutional law expert Yasser Zabadi confirms this and says, “The government resorts to procrastination and delays in implementing the final judicial rulings by prolonging the lawsuits or otherwise.” He believes that this may lead citizens to losing confidence in the government.

The investigator monitored not only the Egyptian government’s procrastination but also its use of the Public Interest or Benefit Law No. (10) of 1990 in its favor by designating the status of “public interest or benefit,” (of a property) especially to hold on to schools it rents from citizens. Since the ruling of unconstitutionality was issued in 2018, the investigating reporter counted 32 government such decisions published in the Official Gazette that grant rented schools the status of “public interest or benefit.”

The new law calls upon the state to pay compensation for the property owner according to market value at the time of the expropriation decision with an added 20% of the estimated value and the government entity should pay the entire amount within one month.

Zabadi explains that the Egyptian government submitted a draft law concerning legal entities only because the Constitutional Court committed them to do so. This included granting the government a 5-year grace period to move. During this time, the rent would increase fivefold besides an annual increase of 15%.

But this government draft law included a constitutional flaw since it privileges legal persons or entities over the common persons. But a copy of a decree/Fatwa issued by the Egyptian State Council that we have obtained removed this advantage ensuring that the lease is to supersede legal entity or common person in those cases.

According to the head of the Housing Committee in the Egyptian House of Representatives, Saad Hammoudeh, there is no official draft law submitted by the government or the legislative committee in the Egyptian parliament to amend rent laws even as we speak.

The spokesman for the Egyptian council of ministers, Hani Younes, refused to answer our queries, whether by phone or through WhatsApp.

Infographic on the size of the government rental value during the past five years

2021/ 2020
Annual gross
794.1 Million
The value of the rents for service agencies
517.8 Million
The value of the rent for the local administration
100.5 Million
The value of the rents for the administrative apparatus
175.7 Million
2020/ 2019
Annual gross
686 Million
The value of the rents for service agencies
458 Million
The value of the rent for the local administration
34 Million
The value of the rents for the administrative apparatus
194 Million
2019/ 2018
Annual gross
576 Million
The value of the rents for service agencies
388 Million
The value of the rent for the local administration
27 Million
The value of the rents for the administrative apparatus
161 Million
2018/ 2017
Annual gross
550 Million
The value of the rents for service agencies
385 Million
The value of the rent for the local administration
23 Million
The value of the rents for the administrative apparatus
143 Million
2017/ 2016
Annual gross
344.7 Million
The value of the rents for service agencies
59.8 Million
The value of the rent for the local administration
22.2 Million
The value of the rents for the administrative apparatus
262.8 Million
Total
Annual gross
2950.8 One billion
The value of the rents for service agencies
1808.6 One billion
The value of the rent for the local administration
206.7 Million
The value of the rents for the administrative apparatus
936.5 Million

Everyone Loses

After a long sigh and half a smile on his dark tanned face, Mohammad Morsi says that November 19, 2020, was the last day for Nasser Bank in his premises. He added, “Now, there are people who want to rent the two floors from me for 165,000 Egyptian pounds per month, which is about 11 thousand dollars. You can therefore estimate the size of the loss and the ensuing bitterness I feel.”

This loss is not limited to Morsi or to the citizens; the government also stands to lose. According to Article (18) of the Building Tax Law No. (196) of 2008 and its amendments issued in 2020, the small amounts of the old rent prevent the government from collecting real estate taxes on these buildings.

The article also stipulates the exemption of residential real estate units whose annual rent is less than 24,000 pounds of paying taxes in addition to exempting any real estate used for commercial, industrial, administrative or professional purposes whose annual rent is less than 12,000 pounds.

In the end, Mohammad Morsi concludes, “I swear that the rent that the government has been paying for the past 43 years, we used to donate it to charity!”