A Legal and Economic Study and Perspective
For decades, Egypt witnessed a clear imbalance in the relationship between certain landlords and tenants subject to exceptional premises rent laws. Many leases continued at rental values that gradually became detached from economic reality, while maintenance and management costs increased and the market value of real estate changed substantially.
The consequences of this situation were not limited to the two parties to the lease relationship, but extended to the real estate assets themselves, particularly a number of older buildings whose rental returns became insufficient for maintenance or rehabilitation, in addition to certain units remaining outside the real estate market cycle for extended periods.
In 2025, the most significant legislative transformation occurred with the issuance of Law No. 164 of 2025 concerning Certain Provisions Relating to Premises Rent Laws and the Reorganization of the Relationship between Landlord and Tenant, published in the Official Gazette on 4 August 2025 and effective from the following day.
The effect of this Law is not limited to adjusting rental values. For the first time, it established a specific time limit for leases subject to its provisions and regulated a transitional period for gradually returning the lease relationship to a framework more closely connected with the general rules and freedom of contract.
The Office of Dr. Mostafa El Rouby – Attorneys and Legal Consultants has previously addressed this issue in a number of articles and studies. Following the issuance of the Law, Dr. Mostafa El Rouby also examined its impact on the real estate sector in his article published on the Akhbar El Yom electronic portal on 22 September 2025 under the title “The New Rent Law and Its Impact on Real Estate Development: Opportunities and Challenges”. This study expands that analysis from a broader legal and developmental perspective.
Historical Background and Reasons for Reform
The exceptional rent laws originated under economic and social circumstances entirely different from those prevailing today and were intended to protect tenants during periods when the housing market experienced shortages and high demand.
Over the decades, this exceptional protection evolved in certain cases into a long-term system in which statutory rental values became detached from the actual economic value of the premises. Certain leases were also extended to persons who were not parties to the original relationship pursuant to statutory extension rules that developed through legislation and judicial rulings.
This resulted in a continuing conflict between two legitimate considerations: the right to property on the one hand, and social protection of tenants and family stability on the other.
Law No. 164 of 2025 sought to redefine this balance, not by abolishing the system immediately, but through a transitional period combining adjustment of rental values, establishment of a time limit for leases, and regulation of social mechanisms to assist tenants in transitioning to new arrangements.
Which Leases Are Subject to Law No. 164 of 2025?
The Law precisely defines its scope of application, providing that it applies to premises leased for residential purposes, as well as premises leased to natural persons for non-residential purposes, where such premises are subject to Laws Nos. 49 of 1977 and 136 of 1981.
This is an important point because the Law does not apply to all lease agreements in Egypt, nor to modern leases already governed by the Civil Code and Law No. 4 of 1996.
Accordingly, the first step in any legal assessment of a property is to determine the legal regime governing the lease before applying the provisions of the new Law.
A Time Limit for Old Rent Leases
This provision represents the core of the legislative reform.
Article 2 of the Law provides for the termination of:
- Leases of premises for residential purposes after seven years from the date the Law came into force.
- Leases of premises rented to natural persons for non-residential purposes after five years from the date the Law came into force.
The relationship may, of course, terminate earlier if the parties mutually agree.
Accordingly, the exceptional lease relationship is no longer open-ended for an indefinite period. Instead, there is now a transitional period during which the tenant may arrange their affairs, while the owner can begin planning for the future of the real estate asset once that period expires.
What Happens After the Seven- or Five-Year Period Expires?
The old rent lease does not automatically convert into a new lease governed by the Civil Code.
Legally, the more precise position is that the old lease terminates by operation of law upon expiry of its transitional period. If the owner and tenant wish to continue the relationship thereafter, they may conclude a new lease on terms mutually agreed upon in accordance with the general rules applicable to new leases.
If no new lease is agreed, the tenant must surrender the premises upon termination of the old tenancy status in accordance with the procedures prescribed by law.
Reassessment of Rental Values for Residential Units
The legislature did not wait until the end of the transitional period to correct rental values, but instead established a system that operates while the old leases remain in force.
Committees are formed in each governorate to survey areas containing residential units subject to the Law and classify them into:
- Premium areas.
- Middle-income areas.
- Economic areas.
The committees take several criteria into account, including geographical location, standard of construction, unit size, availability of utilities, road networks, means of transportation and services, as well as the annual rental value of built properties within the area.
How Is the New Rent Calculated?
The Law determines the rental value of residential units according to the classification of the area as follows:
- Premium areas: twenty times the existing statutory rental value, subject to a minimum of EGP 1,000 per month.
- Middle-income areas: ten times the existing statutory rental value, subject to a minimum of EGP 400 per month.
- Economic areas: ten times the existing statutory rental value, subject to a minimum of EGP 250 per month.
Until the survey committees complete the classification process, the Law establishes a temporary payment mechanism of EGP 250 per month, with differences to be settled after issuance of the relevant governor’s decision according to the classification of the area.
Non-Residential Units
For premises rented to natural persons for non-residential purposes, the Law sets the new rental value at five times the existing statutory rental value.
The rental values prescribed for both residential and non-residential units then increase periodically by 15% annually.
The Law therefore combines two elements: a relative immediate adjustment of rental values, followed by periodic increases during the transitional period.
Alternative Housing… Social Protection, Not a General Condition for Eviction
One of the points requiring legal precision is the assertion that the Law prevents termination of the lease or eviction unless the State provides alternative housing to every tenant. This is inaccurate.
Article 8 grants every tenant or person to whom the lease has been extended, before expiry of the transitional period, priority in applying for the allocation of a residential or non-residential unit from units available through the State, whether by lease or ownership, in accordance with the applicable rules and conditions.
Cabinet Decree No. 53 of 2025 has already been issued to regulate the procedures for submitting applications, determining priorities, and allocation mechanisms, including lease, lease-to-own, mortgage finance, and ownership through cash payment or installments depending on each announcement.
However, this mechanism does not mean that termination of an old rent lease is suspended in every case until an alternative unit is first provided. The Law establishes an independent time limit for termination of the leases while simultaneously regulating a social program for allocating available units to eligible applicants.
Eviction Before the End of the Transitional Period
The Law also introduced two circumstances in which eviction may be sought before expiry of the seven- or five-year periods, without prejudice to other grounds for eviction prescribed under previous laws.
They are:
- Leaving the leased premises closed for more than one year without justification.
- Proof that the tenant or the person to whom the lease has been extended owns another unit capable of being used for the same purpose for which the leased premises were intended.
If the occupant refuses to vacate, the Law permits the owner or landlord to apply to the Judge of Urgent Matters at the court within whose jurisdiction the property is located for an eviction order, without prejudice to the right to compensation where appropriate.
Law No. 165 of 2025… How Does It Relate to the Reform?
Another law, Law No. 165 of 2025, was issued at the same time as Law No. 164 of 2025, but it does not extend the transitional period and does not regulate old rent leases themselves.
Law No. 165 of 2025 amended certain provisions of Law No. 4 of 1996, which governs premises that had not previously been leased and premises whose leases have expired or will expire without any person having the right to remain therein.
Its most important addition is the obligation imposed on the tenant or successor to vacate and return the premises upon expiry of the lease term specified in the contract, while granting the owner or landlord—where the occupant refuses—the right to apply to the Judge of Urgent Matters for an eviction order, with the tenant retaining the right to bring substantive proceedings without such proceedings automatically suspending the eviction order.
The investment significance of this Law is clear: it reinforces the principle that a modern lease is a fixed-term contract whose expiry must be respected, thereby increasing predictability in lease relationships and reducing investor concerns about the emergence of a new exceptional statutory extension of modern leases.
The Law and Real Estate Development… Where Is the Connection?
At first glance, the Law may appear to regulate a relationship between an owner and a tenant, but its impact extends to real estate asset management and urban development.
The existence of indefinitely extended leases at extremely low rental values meant that the valuation of certain properties was based on the reality that the owner held title but lacked full practical ability to repurpose or redevelop the premises.
The existence of a known termination date for leases now enables owners, investors, and developers to prepare future plans for the real estate asset according to a predictable timetable.
This highlights the importance of the Law for Asset Management, as it is now possible to develop a plan for what will happen to units after the leases terminate rather than treating the existing situation as permanent.
Will the Law Immediately Release Millions of Units onto the Market?
No.
It is important to avoid overstating the economic impact. The Law establishes a seven-year transitional period for residential units, meaning that most effects relating to the return of units to the market will not occur simultaneously.
Some units may continue to be occupied under new leases agreed between owners and tenants, while some properties may require renovation or legal regularization before being reused. Certain owners may also prefer to sell rather than redevelop.
Accordingly, the expected impact will be gradual and will vary according to the area and the nature of the property.
First Opportunity: Rehabilitation of Older Buildings
Cairo, Alexandria, and Egypt’s older cities contain buildings in valuable locations and of significant architectural merit, some of which suffer from inadequate maintenance or uses that are no longer appropriate to their value and location.
As certain lease relationships terminate over the coming years, opportunities may arise to rehabilitate these properties and improve their efficiency, whether for residential, administrative, commercial, or hotel use, where permitted by urban planning and legal rules.
However, recovering a unit does not mean unrestricted freedom to demolish the property or change its use. Heritage buildings and areas subject to special requirements are governed by other laws and decisions that must be taken into account before any development project is undertaken.
Second Opportunity: Increasing the Financeability and Investment Value of Assets
The clearer the legal status of a property, the greater the investor’s ability to value it.
A property burdened by lease relationships with no defined termination date makes it difficult to determine future cash flows, whereas the current transitional period allows clearer scenarios to be developed for the property’s value after the leases expire.
This may in the future facilitate:
- Revaluation of certain older real estate portfolios.
- Participation by investors in joint development projects with owners.
- More efficient use of properties after existing lease relationships terminate.
- Improved ability to assess long-term financing for real estate projects.
Third Opportunity: Repurposing Commercial and Administrative Units
The change will not be limited to residential units. Leases of premises rented to natural persons for non-residential purposes terminate after five years, which is a shorter period than that applicable to residential units.
This may create relatively faster opportunities in certain commercial streets and central areas for restructuring older shops, offices, and professional premises.
However, every project must examine the permitted nature of the activity, commercial licensing requirements, urban protection rules, and occupants’ rights before an investment decision is made.
Fourth Opportunity: Joint Development Instead of Sale
An owner does not necessarily have to sell the property after recovering possession.
In some cases, a more viable model may be to enter into a joint development agreement with a real estate company that undertakes financing, renovation, or reconstruction—where legally permissible—in return for a share in the project, units, or revenues.
This model may be particularly useful where heirs own a high-value real estate asset but lack the financing or expertise required to develop it themselves.
First Challenge: The Social Impact
The Law addresses leases on which families have relied for many years. Accordingly, transition to the free market after expiry of the transitional period may place a burden on low-income persons, particularly elderly people and certain social groups who may find it difficult to bear current market rental values.
For this reason, the success of the reform should not be measured solely by the number of units returned to owners, but also by the ability of the alternative housing and social support systems to deal with eligible persons in an organized and transparent manner.
Second Challenge: Increased Supply Does Not Necessarily Mean Lower Prices
An increase in units available on the market may improve supply, but it does not automatically mean lower sale prices or rents.
The real estate market is also affected by land and construction costs, financing costs, inflation rates, income levels, location, and demand within each area.
Accordingly, expectations that treat reform of the old rent regime alone as a solution to the housing crisis or rising prices should be approached with caution.
Third Challenge: Fragmented Ownership
Many older buildings have passed through inheritance to a large number of co-owners. Even after the leases terminate, redevelopment may face the problem of disagreement among owners over sale, demolition, renovation, or participation with a developer.
In such circumstances, organizing ownership before development becomes an essential step, including identifying heirs, determining ownership shares, and addressing co-ownership, minors, mortgages, and existing rights in rem.
Fourth Challenge: Building Safety and Licensing
A property that has remained without adequate maintenance for decades may require a comprehensive structural assessment before it can be reused.
Development decisions may also be restricted by the Building Law, height requirements, rules governing demolition, urban harmony regulations, and protection of buildings of distinctive architectural character.
Accordingly, project planning should not begin only after the last unit has been recovered, but should commence years earlier in order to identify the legally and technically available alternatives.
Fifth Challenge: Disputes During the Transitional Period
Disputes are expected to continue during the coming years over matters such as:
- Who is the tenant or lawful holder of statutory extension rights.
- Classification of the area and the rental value due.
- Leaving the unit closed without justification.
- Ownership by the tenant of another usable unit.
- Subletting or assignment.
- Procedures for obtaining alternative housing.
Accordingly, an owner or investor purchasing a property occupied under old rent leases should conduct Legal Due Diligence on each unit individually and should not merely rely on the assumption that the leases will terminate after a specified number of years.
Legal Due Diligence of Real Estate Has Become More Important
Before purchasing an older property for redevelopment, several fundamental matters should be reviewed:
- Title documents and chain of ownership.
- Lease agreements and their dates.
- Identity of current tenants and the legal basis for extension of their leases.
- Litigation and judgments concerning the units.
- Rental values applied following Law No. 164 of 2025.
- Existence of closed or unused units.
- Licenses and building violations.
- The structural condition of the property.
- Whether the building is subject to heritage protection or urban harmony rules.
- The expected timetable for obtaining actual possession of the units.
This due diligence determines whether the asking price of the property accurately reflects its genuine legal risks.
How Should an Owner Prepare from Now?
The transitional period is not merely a waiting period, but an opportunity to prepare the property for the post-exceptional-rent phase.
Owners are advised to:
- Inventory all lease agreements, tenants, and actual occupants.
- Determine the correct rental value of each unit according to the classification of the area.
- Monitor payments and annual increases and document any delays.
- Review closed units and cases falling within Article 7.
- Assess the structural and legal condition of the property.
- Prepare a preliminary plan: sale, development, renovation, new leasing, or partnership with a developer.
How Should a Real Estate Developer Prepare?
The Law creates genuine opportunities, but a developer who purchases a property on the assumption that it will automatically become vacant on a specific date may assume an uncalculated legal risk.
The developer should therefore base the investment model on different timing scenarios and take into account litigation costs, renovation, licensing, ownership regularization, and co-ownership issues, rather than considering only the purchase price of the building.
New models may also emerge in the coming years for companies specializing in the rehabilitation of older properties and the management of historic and urban real estate assets, rather than focusing solely on development in new cities.
The Role of the State During the Transitional Period
Legislative success ultimately depends on the quality of implementation.
Among the key priorities are:
- Completing the work of area classification committees and announcing the classifications clearly.
- Developing the alternative housing platform and updating available units.
- Providing transparent procedures for determining priorities.
- Reducing conflicting interpretations of the Law among different authorities.
- Educating owners and tenants regarding the correct deadlines and procedures.
- Linking rent reform with policies for preserving real estate assets and older urban areas.
The Perspective of the Office of Dr. Mostafa El Rouby – Attorneys and Legal Consultants
The Office of Dr. Mostafa El Rouby – Attorneys and Legal Consultants believes that Law No. 164 of 2025 should not be read merely as legislation terminating old rent leases, but as the beginning of a new phase in the management of an important part of Egypt’s real estate wealth.
The transitional years allow owners and investors to prepare assets legally and technically instead of waiting for leases to expire and only then discovering problems relating to ownership, licensing, or the condition of the building.
Legal support in this field includes:
- Reviewing the legal status of tenants and occupants.
- Conducting legal due diligence on properties proposed for investment or redevelopment.
- Managing eviction proceedings and disputes arising from the new Law.
- Drafting settlement agreements between owners and tenants.
- Reviewing contracts for the purchase of older buildings and joint development transactions.
- Regulating relationships among co-owners and heirs.
- Drafting new development, management, and leasing agreements.
- Advising real estate companies on the legal impact of the transitional period on project valuation.
Conclusion
Law No. 164 of 2025 represents a fundamental transformation in the history of exceptional rent regulation in Egypt. It does not merely increase rental values, but establishes a time limit for old leases and creates a transitional period for reorganizing the relationship between property ownership and housing.
Law No. 165 of 2025 completes the picture with respect to leases governed by the Civil Code, confirming the principle that a modern lease terminates at the end of its agreed term and providing an expedited procedural route for recovering possession where the tenant refuses to surrender the premises.
From a real estate development perspective, the most important effect is not the sudden return of millions of units to the market, but rather the transformation of a real estate asset from an arrangement with no defined endpoint into an asset whose future can be planned according to a known legal timetable.
This transformation may, over the coming years, open the way for the rehabilitation of older buildings, increased investment in central areas, improved management of real estate portfolios, and repurposing of residential and commercial units that remained restricted for decades under an exceptional regime.
However, the opportunity is not without risks. Fragmented ownership, the condition of buildings, licensing requirements, the legal status of occupants, and the social dimension are all factors that investors must take into account before making development decisions.
Accordingly, the success of the Law will not be measured solely by the termination of old rent leases, but by its ability to achieve an orderly and fair transition that returns real estate assets to the investment cycle without causing uncalculated social disruption.