Almost every foreign company in Iraq needs premises, whether an office, a warehouse or staff housing. In Iraq, the lease contract is not the only source of the parties’ rights. The Real Estate Lease Law adds rules that apply whatever the contract says, and many of them favour the tenant. A company that signs a lease without understanding these rules may find it cannot leave, cannot recover the property, or cannot enforce the terms it relied on.
Legal Framework
The Real Estate Lease Law No. 87 of 1979 governs the leasing of real property in Iraq, mainly residential and commercial buildings within municipal limits. It sits alongside the Iraqi Civil Code No. 40 of 1951, which contains the general rules on lease contracts. Where the Lease Law has a specific rule, it generally takes priority over the Civil Code.
The law has been amended over the years, and some of its protective provisions have been adjusted more than once. Property owned by the state is generally leased under separate legislation, not under this law. Parties should therefore confirm both the current text and whether the property falls within the law’s scope.
Key Points for Foreign Companies
Mandatory Rules Override the Contract
Many provisions of the law are mandatory. Parties cannot waive them by agreement, even in a carefully drafted contract. A clause that conflicts with a protective rule may simply be unenforceable. Foreign companies should not assume that a lease drafted on an international template will operate as written.
Statutory Extension of the Lease
A central feature of the law is that a lease may continue by force of law after its agreed term ends. In practice, this can limit a landlord’s ability to recover the property simply because the contract has expired. For a foreign company as tenant, this can offer stability. For a foreign company as landlord or sub-landlord, it can be a serious constraint.
Limited Grounds for Eviction
The law sets out the grounds on which a landlord may seek eviction. These typically include:
- failure to pay rent after proper notice;
- subletting or assigning without the landlord’s consent;
- using the property for a purpose other than the agreed one;
- causing serious damage to the property;
- certain needs of the owner, such as demolition and rebuilding.
Outside the grounds recognised by the law, eviction is difficult. Eviction generally requires a court judgment rather than unilateral action.
Rent and Payment Evidence
Rent is agreed between the parties, subject to any controls the law imposes. Disputes over unpaid rent are common, and the burden often falls on the tenant to prove payment. Companies should pay through traceable channels, such as bank transfer, and keep receipts.
Subletting and Assignment
Subletting or assigning the lease without the landlord’s written consent can be a ground for eviction. This matters for groups that lease premises in one entity’s name and let an affiliate or contractor use them. The contract should expressly permit such use where it is intended.
Use of the Premises
The lease should clearly state the permitted use, for example office, storage or residence. Changing the use without consent may breach the lease. Some uses may also need separate licences from municipal or sectoral authorities, which the lease itself does not provide.
Written Contracts and Proof
A written lease, signed by persons with proper authority, is essential. Companies should verify that the landlord is the registered owner or holds a valid power of attorney. Title can be checked against the real estate registry records. Leasing from someone without authority can leave the tenant with no protection against the true owner.
Disputes and the Courts
Lease disputes are heard by the Iraqi courts, and eviction cases follow procedures set by law. Court proceedings are in Arabic, and documents in other languages need certified translation. A clear contract and an organised file of payments and correspondence greatly improve a company’s position.
Practical Recommendations
- Verify the landlord’s ownership and authority before signing any lease.
- Have the lease reviewed against the mandatory provisions of the Lease Law, not only the Civil Code.
- State the permitted use and any rights to share the premises with affiliates expressly in the contract.
- Pay rent only by traceable means and keep a complete record of every payment.
- Plan exit and renewal scenarios in advance, taking the statutory extension rules into account.
Conclusion
The Real Estate Lease Law gives tenants protections that the contract alone cannot remove. Foreign companies that understand these rules can use them to secure stable premises and avoid costly disputes. Careful due diligence and drafting at the outset remain the best protection for both sides.
This article provides general information only and does not constitute legal advice. For advice on property leasing in Iraq, contact Etihad Law team.