Explanation of Article 436

Explanation of Article 436

The article completes the provisions regarding the return of the leased property. After Article (435) stipulated the obligation to return the leased property in the condition in which the lessee received it, this article clarifies the ruling on what the lessee has constructed or planted on the leased property. There are two scenarios:

The first scenario: There is an explicit or implicit agreement between the lessor and the lessee regarding the ownership of the construction or planting made by the lessee after the lease contract ends; this agreement must be adhered to, whether the construction or planting benefits the leased property or the lessee. For example, if it is agreed or customary for the lessee to leave what they have constructed for the lessor without compensation, or for the lessor to compensate them for its value upon return.

Article (433) indicates that one form of implicit agreement is when the lessor permits the lessee to construct or plant for the benefit of the leased property, which aligns with the general desires of lessees and not for the lessee's benefit. This is considered an implicit authorization from the lessor to the lessee for construction or planting, and the lessee then has the right to own the planting or construction, even if they did not stipulate compensation from the lessor, as long as the leased property is not damaged. If the lessor required the lessee to remove what they constructed after the lease contract ends, what the lessee constructed or planted becomes the property of the lessor, and the lessee cannot remove it after the lease contract ends, nor can the lessor compel the lessee to remove it.

The second scenario: There is no explicit or implicit agreement between them regarding the ownership of the construction or planting after the lease contract ends. The lessee constructs or plants with or without the lessor's permission for their personal benefit and not for the benefit of the leased property, without any agreement on the retention of what was constructed after the lease contract ends. For example, if a commercial premises lessee divides it according to the nature of their activity, the lessor's permission in this case is not considered implicit consent for the retention of what was constructed after the lease contract ends, because this construction or planting aligns with the lessee's personal benefit and not with the general desires of lessees, which is evidence that the lessor did not intend for this permission to mean the retention of the construction or planting, as long as there is no explicit or implicit agreement indicating that.

This scenario also applies if the lessee constructs or plants for the benefit of the leased property without the lessor's permission; the reason being that the lessee is obligated to return the leased property in the condition in which they received it. If they construct or plant without the lessor's permission, they have breached this obligation.

The first paragraph of the article decided the ruling for this second scenario; if there is no explicit or implicit agreement between the contracting parties on the retention of what the lessee constructed or planted,

the lessor has the right at the end of the lease contract to choose one of two options:

The first option: To request the removal of the construction or planting made by the lessee at their expense, with compensation if warranted, such as if the construction or planting caused damage to the leased property.

The second option: To retain the construction or planting, and pay the lessee compensation equal to the lesser of two values:

A- Its value subject to removal, which is the value minus demolition costs, because they have the right to request its removal, so they can retain it at its value subject to removal.

B- The value of the increase that occurred in the leased property due to the construction or planting.

It is noted here that the compensation the lessee is obligated to pay is not based on the rules of unjust enrichment; the rules of unjust enrichment do not apply, as the lessor must pay the lesser of the two values: the value of what they enriched, which is the value in paragraph (B), and the value of what the lessee spent, which includes the cost of materials and labor, which is higher than the value in paragraph (A).

The reason for deviating from the rules of unjust enrichment is that the lessee is obligated to return the leased property in the condition in which they received it; if they obtained explicit or implicit consent from the lessor to retain the construction or planting, they have returned to the system, breaching their obligation, and are thus treated as a bad faith improver for what they retained after the lease contract ends.

The second paragraph decided the lessor's right to request the removal of the construction or planting if its retention causes damage to the leased property, even if the lessor objects to that removal because it is their property, and the owner is not prevented from their property as long as it does not harm others.

What the article contains is consistent with what the general rule of accession stipulated in Article (650).

Related To

Article 436

1. If the lessee adds for his benefit structures or plants to the leased thing even with the lessor’s permission and the lessor and lessee did not agree that such additions will remain in place after the lapse of the lease term, the lessor may, at the end of the lease contract, demand removal of the same at the lessee’s expense, together with compensation, if applicable. The lessor, however, may keep such additions against payment of their value as removed or payment of the amount of appreciation of the leased thing due to such additions.

2. The lessee may demand the removal of the structures or plants he added if the removal does not cause harm to the leased thing, even if the lessor objects thereto.