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THE ACQUISITION OF REAL ESTATE BY FOREIGNERS

IN LEBANON

January 1998


Table of Contents

1. General Principle: The Need for a License

2. Definition of Foreigners

3. Exemptions from Licensing

a. Natural Persons
b. Companies
c. Real Estate Rights

4. License for Large Surface Areas

a. Lebanese Companies Considered as Foreign
b. Mixed Companies
c. Institutions/Councils

5. Restrictions

6. Licensing

a. Application
b. Validity

7. Registration

a. Special Real Estate Register
b. Documents Submitted for Registration

8. Dissolution of Licensed Companies

9. Penalties

a. General Rule
b. Special Case

10. Acquisition of Real Estate by Commercial Banks

a. Permanent Ownership of Real Estate

  1. Provisions Governing the Acquisition of Real Estate by Foreigners
  2. Provisions of the Code of Money and Credit
  3. Regulations of the Bank Of Lebanon

b. Temporary Ownership of Real Estate

 


1. General Principle: The Need for a License

The acquisition of any real estate right in Lebanon by foreigners requires a license to be obtained by decree of the Council of Ministers upon the proposal of the Minister of Finance.


2. Definition of Foreigners

Are considered as foreigners the following persons and entities:

1. foreign natural persons;

2. foreign legal entities;

3. Lebanese legal entities considered as foreign. These include:

  • Associations of Natural Persons or Limited Liability Companies whose shares are not totally held by Lebanese natural persons, who are forbidden by law to transfer these shares to non Lebanese natural persons or to non fully Lebanese-owned companies.
  • Joint-stock and Partnership Limited by Shares Companies whose shares are not entirely nominal, and are not held by natural Lebanese persons or by fully Lebanese owned companies, whose bylaws allow the transfer of these shares only to natural Lebanese persons or to fully Lebanese-owned companies.

3. Exemptions from Licensing

 

a. Natural Persons

Persons of Lebanese origin and nationals of Arab countries are exempted from obtaining a license for the acquisition of real estate properties built or intended to be built on the Lebanese territory, and are subject to the following conditions:

1. the surface area should not exceed 5,000 square meters throughout the Lebanese territory;

2. the surface area should not exceed 3,000 square meters in the district of Beirut;

3. the construction project on the real estate property must be completed within a period of five years from the date of registration at the Real Estate Register under the penalty of selling the property by auction for the benefit of the concerned person.

 

b. Companies

When this real estate is needed for their business, Lebanese companies considered as foreign are exempted from the license requirement for the acquisition of real estate whose surface area does not exceed 10,000 square meters throughout the Lebanese territory. The following conditions should also be met:

1. In case the company is an Association of Natural Persons or a Limited Liability Company

The majority of shares must be held by Lebanese partners or by fully Lebanese-owned companies whose shares are only transferable, according to the company's bylaws, to Lebanese persons or to fully Lebanese-owned companies.

2. In case the company is a Joint-Stock Company or a Partnership Limited by Shares

At least one third of shares must be nominal, held by Lebanese persons, and transferable, according to the company's bylaws, only to Lebanese persons or to fully Lebanese-owned companies.

 

c. Real Estate Rights

The acquisition of the following real estate rights is not subject to licensing:

1. Rights acquired under the provisions of special laws allowing the acquisition of real estate as a guarantee, or for any other purpose, but within the constraints imposed by these laws;

2. The inheritance right of legitimate heirs, whether they are Lebanese or foreigners;

3. The right resulting from a grant by a foreigner to his heirs who are foreigners, and in particular to ascendants, descendants and spouses;

4. The following rights, for not more than ten years, and resulting from:

  • a contract of usufruct;
  • a contract of ordinary rent;
  • a contract of sale under a repurchase agreement;
  • a contract of mortgage;

5. The right of privilege.

 


4. License for Large Surface Areas

A license for the acquisition of large surface areas of real estate, exceeding 10,000 square meters throughout the Lebanese territory can be granted to Lebanese companies considered as foreign, and to some mixed companies and institutions.

a. Lebanese Companies Considered as Foreign

If needed for its business use, the Lebanese company considered as foreign can acquire real estate with a surface area of up to 50,000 square meters. However, the project for which the license was granted must be completed within a maximum period of five years from the date of registration at the Real Estate Register, otherwise the real estate property is sold according to norms set by decree from the Council of Ministers.

b. Mixed Companies

Mixed companies of public or tourist interest in which the Government participates, either in their capital or their plans, may obtain a license for the acquisition of real estate with a surface area of more than 50,000 square meters.

c. Institutions/Councils

Foreign scientific, educational and welfare institutions, and diplomatic and consular missions may obtain a license for acquiring real estate with a surface area of more than 50,000 square meters, according to the following conditions:

  1. the acquisition of the corresponding real estate rights must be necessary for their operations;
  2. the project for which the license is granted must be completed within the period specified, otherwise the property under establishment will be sold by auction according to norms set by decree from the Council of Ministers.

 


5. Restrictions

 

The acquisition of real estate rights by foreigners is subject to the following restrictions:

  1. Foreigners are prohibited from acquiring real estate rights at the Lebanese borders, which by law fall within 3 km from the borders of the Republic;
  2. A single foreign natural person or foreign legal entity cannot obtain a license for the acquisition of real estate of a surface area of more than 10,000 square meters across the Lebanese territory, which include the surface area of those acquired without a license according to section 3-a and 3- b;
    Parents, spouses, and children below eighteen years of age are considered as a single foreign person when considering the surface area he/she may acquire with or without a license.
  3. Foreign natural persons, foreign legal entities and those considered as foreign cannot acquire more than 5% of the total surface area of a district (mohafazat).
  4. Lebanese companies considered as foreign, which have acquired real estate property rights under the provisions of the law on the acquisition of real estate by foreigners in Lebanon, do not have the right to amend their bylaws in order to decrease the shares of Lebanese persons in the companies, except in the event of death of one of the partners. Failure to comply with this condition will result in the invalidation of the amendments.

Partners who approve of this amendment, and directors who execute it, are subject to a penalty of hard labor and to a fine varying between the value of the property in question and three times this value.

 


6. Licensing

 

a. Application

The license application specifies the real estate lot and the required right of acquisition. It is presented to the Ministry of Finance and transferred to the Council of Ministers for decision.

b. Validity

The license decree is valid for one year from the date of its publication in the Official Gazette, unless a delay results from a judicial dispute between the licensee and the person receiving the right, or any legal problem which is beyond the control of the licensee arises. The lawsuit will be registered at the Real Estate Registry during the mentioned time period.

In both cases, the specified time limit is suspended during the lawsuit period, until the legal dispute is solved.


7. Registration

 

a. Special Real Estate Register

A special register is established to show real estate properties acquired by foreigners.

The organization of this register is set by decree upon the proposal of the Minister of Finance.

 

b. Documents Submitted for Registration

In order to register the real estate lot, the person concerned should submit:

  1. official testimonies issued by the concerned parties specifying the areas to be owned throughout the Lebanese territory;
  2. a written declaration signed by this person stating his real estate ownership.

Joint-stock Companies and Partnerships Limited by Shares considered as foreign can substitute the testimonies mentioned in the preceding paragraph by a statement signed by the Chairman of the Board of Directors approved by the control commissioners, stating areas and locations of the real estate lots it owns.

Anyone who submits a false statement will be sanctioned by seizure of his real estate property.

 


8. Dissolution of Licensed Companies

Upon dissolution of a company having obtained a license to acquire real estate rights throughout the Lebanese territory, any division and distribution of these rights to foreign partners must be carried out under the provisions of the law on the acquisition of real estate by foreigners in Lebanon.

 


9. Penalties

 

a. General Rule

Any operation or contract contradicting the provisions of the law on the acquisition of real estate by foreigners in Lebanon, and to the procedures of its implementation, is considered null and void.

Anyone who is involved or intervenes in any way, and whoever approves or registers such a contract, will be sanctioned by:

  1. temporary hard labor imprisonment;
  2. a fine ranging between the legal value of the real estate lot and three times its value.

 

b. Special Case

Within the limit of the maximum surface area mentioned in the law on the acquisition of real estate by foreigners in Lebanon, foreign persons and foreign legal entities can sign special agreements about the acquisition of a real estate right, but any such agreement will come into effect only after acquiring the required license.

If the license is not acquired within the specified time limit, these agreements automatically become null and void. This time limit should not exceed one year. If it does, or if the agreement does not specify a time limit, it is considered to be one year.

 


10. Acquisition of Real Estate by Commercial Banks

 

a. Permanent Ownership of Real Estate

A permanent acquisition of real estate by banks is subject to the following:

1. Provisions Governing the Acquisition of Real Estate by Foreigners

2. Provisions of the Code of Money and Credit

The Code of Money and Credit stipulates that a bank's real estate acquisitions, its equipment and furniture, shares in companies, and total credit extended to its members of the board of directors and major shareholders, cannot exceed the private funds of the bank concerned.

3. Regulations by the Bank of Lebanon

A regulation issued by the Bank of Lebanon stipulates that the acquisition of real estate by banks is restricted to the purchase of the following:

  1. Buildings dedicated to the departments of the bank;
  2. Buildings dedicated to the housing of employees;
  3. Buildings dedicated to commercial investment, provided that the head office of the bank is located in the building if the bank is Lebanese, or the area management if the bank is foreign;
  4. Land whose surface area does not exceed the area needed for the construction of buildings mentioned in the previous paragraphs. The bank, however, must prove upon the purchase of land that sufficient private funds are available for construction, which must be completed during a period of three years from the date of purchase of the land.

b. Temporary Ownership of Real Estate

A bank may acquire real estate in excess to the above mentioned limit if the real estate is acquired in settlement of temporary or doubtful debts. However, the bank should liquidate this real estate during a maximum period of 2 years. If the bank cannot liquidate the real estate during the specified period, due to reasons beyond its control, it should refer to the Bank of Lebanon.

This temporary ownership of real estate is exempted from the license required from foreigners when they acquire real estate, but it is subject to licensing by the Banking Control Commission after ascertaining that the purchase has been actually effected in settlement of outstanding or doubtful debts.

 
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