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Civil Law

Explanation of Article 440

Explanation of Article 440

The first paragraph of the article stipulates that the lease contract ends upon the expiration of its specified term in the contract, except when the contracting parties agree on its automatic renewal; in such a case, the contract is considered renewed after the specified term has expired. For example, if a person rents out his house to another for a year and the contracting parties agree on its automatic renewal, the contract does not end at the end of the first year but renews automatically.

In practical reality, it is common to agree that the contract renews automatically unless one party notifies the other of their unwillingness to renew a specified period before the contract ends, such as a month or similar. If one party delays notifying the other of their unwillingness to renew until after the specified period has passed, the contract is considered renewed for them after the existing contract ends, and they are bound by the new contract.

Since the first paragraph determined the time of the lease contract's termination, the second and third paragraphs address the rules for the tenant's continued use of the leased property after the lease contract ends. The second paragraph states that if the tenant's continued use of the leased property after the term ends is based on the explicit consent of the landlord, such as when the tenant requests to continue using the leased property after the contract ends and the landlord explicitly agrees, or if the tenant's continued use is with the landlord's implicit consent, such as when the lease contract ends and the tenant remains in possession of the leased property with the intention of renewal without objection from the landlord, knowing this, in these two cases of explicit and implicit consent, the contract is considered renewed with its conditions and guarantees established in the original contract.

For example, if the landlord or tenant had provided an official or possessory mortgage in the original contract, this mortgage transfers to the renewed contract. However, the term of the new contract is not the same as the first contract; instead, the rules of a lease contract without an agreed term apply as outlined in Article (413). If the rent is for a specified time unit, the new lease contract is considered concluded until the end of that time unit; otherwise, the lease term in the new contract is determined according to custom and contract circumstances.

Exempt from the transfer of guarantees are those provided by third parties; for instance, if the landlord or tenant provided a personal or real guarantor to secure their obligations in the original contract, these guarantees do not transfer to the renewed contract without the consent of the provider; the new contract does not impose an obligation on a third party without their consent.

The third paragraph addresses the ruling if the contract is not renewed according to the first and second paragraphs and the landlord requested a specific increase in the rent specified in the original contract, such as if the rent was sixty thousand riyals annually and the landlord requested it to be seventy thousand riyals annually, and the tenant continued to possess the leased property after the contract ended without objecting to that increase. The tenant's lack of objection, along with their continued possession of the leased property, is considered implicit acceptance of renewing the contract with its original conditions and that increase, binding them to that increase in a new contract with the original contract's conditions and guarantees, except for guarantees provided by third parties. The new contract term begins from the end of the original contract, and its duration is determined as previously stated in Article (413). However, if the tenant objects to the rent, the contract is not renewed even if they continue to possess the leased property, and their possession in this case is considered an infringement on the landlord's rights, as the tenant is obligated to return the leased property. If they do not return it, they are liable for the equivalent rent for the period from the contract's end until the leased property is returned and must compensate the landlord for any damage caused by the delay in return, in accordance with Article (435).

Related To

Article 440

  1. A lease contract shall terminate upon the expiration of its specified term, unless automatic renewal is stipulated.

  2. If the lease contract expires and the lessee continues to use and enjoy the leased thing with the lessor’s explicit or implicit consent, the lease contract shall be deemed renewed under its original conditions and warranties, except for warranties provided by third parties. The term of the renewed lease contract shall be determined in accordance with the provisions of Article 413 of this Law.

  3. Unless the lease contract is renewed in accordance with paragraphs (1) and (2) of this Article, if the lessor demands an increase in the rent and the leased thing remains in the possession of the lessee after the term of the lease expires without objecting to such increase, the lessee shall pay such increase from the expiration date of the previous lease contract, and the lease contract shall be deemed renewed under its original conditions and warranties, except for warranties provided by third parties. The term of the renewed lease contract shall be determined in accordance with the provisions of Article 413 of this Law.