Real Estate – Law on Foreign Acquisition – Lebanon

Foreign Acquisition of Real Estate in Lebanon

Alem & Associates (Chapter Part of “Business Laws of Lebanon” – Thomson Reuters)

Rola Tabsh*

The law of acquisition by foreigners of real estate in Lebanon was enforced by Decree 11614/69.1 Said law provided that “[A]ny foreigner, whether a natural person or a legal entity, or any Lebanese legal entity which is considered by the provisions of this law as a foreigner may not acquire any real estate right on the Lebanese territory or any other rights provided for in this Law without an authorization decreed by the Cabinet upon recommendation of the Minister of Finance.” Any exceptions to this rule are set explicitly in this law or by special provision.

For the implementation of this law, foreign (non-Lebanese) legal entities are defined as:

1. Partnerships and limited liability companies which shares are not all held by natural Lebanese persons who are not allowed by the provisions of the articles of incorporation of the said companies to transfer these shares to non-Lebanese or to transfer the same to other than Lebanese companies formed of Lebanese shareholders only.

2. Joint stock companies and limited partnership by shares which shares are not all nominal shares and held by Lebanese natural persons or Lebanese companies with Lebanese shareholders only and which bylaws forbid the transfer of these shares to non-Lebanese natural persons or to Lebanese companies with Lebanese shareholders only.

In compliance with the provisions of Article (1) of the Law, the following exceptions are applicable and exempt from the permission provided for above:

1. Any purchase of built property or property intended to be built made by non-Lebanese natural persons or legal entities provided that the area surface of such property is no more than 3,000 square meters throughout the Lebanese territories.

2. Any purchase of real rights in compliance with the provisions of articles 33 and 40 of the Expropriation Law No. 58 on May 29, 1991.

3. Any purchase of real rights in application of special regulations which provide for the purchase of such property as security or allow the same for any other reason and within the limits and in compliance with their provisions and terms provided for therein.

In application of law of foreign acquisition of real estate in Lebanon,1 any foreign natural person or legal entity or any entity defined as a foreigner by the provisions of the law may not own more than 3% of the total surface of the Lebanese territory and no more than 3% of the total surface area of each district (caza) and no more than 10% of the total of the surface area of Mohafazat of Beirut.

The percentages provided for here above are applicable to ownership of the Lebanese companies categorized as foreign companies according to the provisions of the law to the exception of:

1. Partnerships and limited liability companies where the majority of partners is natural Lebanese persons or Lebanese companies with Lebanese shareholders only who hold more than 50% of shares and where the articles of incorporation of such companies forbids the transfer of such shares to non-Lebanese. In this case, 50% only of the surfaces owned by such companies are only accounted for according to the percentages provided for in this article.

2. Joint stock companies and limited partnerships by shares where more than 50% of shares are held by natural Lebanese persons or by Lebanese companies with Lebanese shareholders only and where the articles of incorporation of such companies forbid the transfer of such shares to non-Lebanese. In this case, 50% only of the surfaces owned by such companies are only accounted for according to the percentages provided for in this article.

The Cabinet, upon recommendation of the Minister of Finance, announces by decree the percentages of real estate rights that may be held by non-Lebanese or any other person categorized as a foreigner according to the provisions of the law of acquisition by foreigners of real estate in Lebanon. The ownership is thereby effective unless such ownership is taking place among non-Lebanese or whoever is categorized as non-Lebanese by law.

The Computer Center at the Ministry of Finance is in charge of recording any and all of the required information to process the registration of the real property purchased by non-Lebanese. Such information shall be published in the Official Gazette every six months.

Spouses and minors are treated as one person when allocating the area surfaces that may be purchased by foreign natural persons with or without license.

The license application is filed with the Ministry of Finance, and it includes the lot and the real right to be purchased. The application is then referred to the Cabinet with a recommendation for approval or refusal.

The Cabinet has the absolute discretion to grant or deny the permission. The decision of refusal of the Cabinet is not subject to any control from any other authority whatsoever.

The license decree is no longer effective if not enforced within a period of one year as of the date it was published in the Official Gazette unless the delay is the result of a lawsuit between the licensed party and the party who took advantage of such right and such lawsuit was recorded in the Real Estate Registry within the above mentioned period or due to any other legal cause beyond the control of the licensed party. In the cases provided for above, the period is stayed during the whole period of the trial or until the legal cause is solved.

Any natural person who purchased a property in compliance with the provisions of this law must complete the construction works on the purchased property within a period of no more than five years as of the date of registration in the Real Estate Registry. Such delay may be extended once only by decision of the Cabinet. Furthermore, any legal entity must assign the purchased property to be fit for the purpose it was originally purchased or for which the licence was granted within the same period above mentioned otherwise, the Ministry of Finance may cancel or sell such right.

*Rola Tabsh is the Managing Partner at Alem & Associates, heading the Corporate and Real Estate Practice Groups.