Pursuant to Law No. 28 of 2014, an individual or group of individuals may become a property developer and undertake the following business activities:

  • developing a project in Bahrain for either commercial or residential purposes;
  • sells properties; and
  • receive payments from selling these properties

In order to become licensed developer, the following statutory requirements are prerequisite:

1. Check Land Status

  • The land, on which the project will be built, should be registered under the developer.
  • Check the classification of the land with the Survey and Land Registration Bureau (SLRB) i.e. if the land can be for both commercial and residential purposes.

2. Check the Activity on Sijlat

  • Activity of the developer should include “Real estate activities with own or lease property (ISIC4 Code 681)”.

3. Get A Developers License (Online Application)

There are two types of licenses issued by RERA:

  • Developer License (Company)
  • Developer License (Individual)

4. Get A Development License i.e. an Off-Plan Sale Project License

This is a License for New Developments (Online Application Not Available)

  • The license requires a completed application form. The same form can be used by companies or individuals.
  • The application fee will depend on the project value. The project value is the sum of the land value and construction costs.

Note: A development license is not required if you are not selling off-plan. “If the developer is self-financing a construction project or is financing by methods other than selling units off-plan, then a development license is not required.”

5. Open an Escrow Account

  • Developers are required to open an escrow account with a financial institution prior to applying for a Development License
  • An escrow account reduces the risk of non-completion of the building and ensure that all payment deposited for the completion of the building are used for that purpose only and not for any other purposes. The escrow account also ensures that the Developer invests a minimum of 20% in the Development.

6. Get an Advertising License

There are two types of advertising licenses:

  • Market research advertising license (temporary license) – This license is only applicable to developers who have not started construction on the development and valid for 9 months period. If construction has commenced, the developer will not be legible to obtain this license.
  • Full advertising license: A developer (or broker) must have an advertising license to advertise and sell units off-plan to buyers for each new development project.

Bahrain Law No. 27 of 2014 ‘Issuing the Property Lease Law’ (the “Property Lease Law”) was published on 7 August 2014 and came into force on 7 February 2015 (the “Effective Date”).

Application of the Law

The Property Lease Law applies to real estate premises that are intended for residential, industrial, commercial, professional and craftsmanship purposes. However, the Property Lease Law does not apply to:

  • fixed and non-fixed industrial lands and construction subject to Decree-law No. 28 of 1999 with respect to industrial zones establishment and organization, agricultural lands, lands leased for hotels and tourist purposes, furnished flats leased for periods not exceeding one month, residential units occupied for work conditions, lands leased under musataha.

The Property Lease Law applies to both new leases and leases that were in existence on the Effective Date.

Lease Formalities and Registration

All leases, subject to the Property Lease Law, must be in writing and must specify the lease period and the rent payable by the lessee. If a lease does not specify the lease period, the lease will be valid for the period specified in the lease for payment of rent. Further, if the rent is not specified, the rent will be determined on commencement of the lease by taking into account the condition, size and purpose of the leased premises, and the prevailing rent in the area in which the leased premises are situated.

It is the lessor’s responsibility to register its lease and to pay the registration fees. However, if the lessor refuses to pay the fees, the lessee may register the lease and deduct the registration fees from the rent.

Security Deposit, Rent and Rent Review

A lessor of residential premises can receive a maximum of 3 months rent paid by cash in advance. For other types of premises, the parties can agree on a different amount. The maximum-security deposit that a lessor can require from a lessee is one month’s rent.

A lessor may not increase the rent under a lease until two years from the lease commencement date or the previous rent increase (whichever is earlier). The rent increase is capped at 5% for residential properties and 7% for commercial, industrial, professional, craftsmanship or other properties. Additionally, the rent can only be increased a maximum of 5 times throughout the lease term, unless the parties agree otherwise in writing. If the lessor wishes to increase the rent, it must give the lessee written notice at least 3 months before expiry of the second year. These restrictions also apply when existing leases are renewed or re-entered after the expiry of 3 years from the Effective Date.

Expiry, Renewal and Eviction

If the lessee intends to leave the premises on expiry of the lease, it must give the lessor written notice of its intention at least 3 months before the lease expires.

Similarly, if a lessee wishes to renew its lease, it must give the lessor written notice at least 3 months before the lease expires. The lessee is entitled to renew for a period up to 3 years for residential premises and 7 years for commercial, industrial, professional, craftsmanship or other premises.

For leases signed after the Effective Date, a lessor cannot require a lessee to vacate leased premises until after a period of 3 years from the date of handover for residential premises and 7 years for commercial, industrial, professional, craftsmanship or other premises. However, the parties are entitled to agree in writing to a different period.