Article 37 of the Saudi Privatization Law
المادة 37 من نظام التخصيص
With the competent authority's approval, a foreign private party may lease real estate inside Makkah and Madinah for the contract term solely to carry out the project, and the lease ends if it does not remove a violation within the set period.
Official text (Arabic)
This article has not been amended since the law was issued.
يجوز للطرف الخاص إذا كان مستثمرًا أجنبيًّا -بعد موافقة الجهة المختصة- استئجار عقار داخل حدود مدينتي مكة المكرمة والمدينة المنورة لمدة تعادل مدة العقد، لغرض تنفيذ مشروع التخصيص، وذلك وفقًا للشروط الآتية:
1- أن يقتصر استخدام الطرف الخاص لهذا العقار على أغراض تنفيذ مشروع التخصيص.
2- أن يتقيد الطرف الخاص بالضوابط الواردة في العقد.
وإذا خالف الطرف الخاص حكم أي من الفقرتين (1) و(2) من هذه المادة، فعلى الجهة التنفيذية إخطاره بالمخالفة؛ لإزالتها خلال مدة تحددها له، وإذا مضت المدة المحددة دون إزالة المخالفة فينتهي عقد الإيجار.
This is the official Arabic wording, the only legally binding version. We do not translate the law itself; the explanation below is ours. Official source: Bureau of Experts at the Council of Ministers
Article 37 explained in plain English
This article addresses a special case: a foreign investor who needs real estate inside Makkah or Madinah to carry out a privatization project.
What is permitted: the private party, if it is a foreign investor, may lease real estate within the limits of the two cities:
- After the competent authority's approval.
- For a period equal to the contract term.
- For the purpose of carrying out the privatization project.
The conditions:
- It must limit its use of the property to the purposes of carrying out the project; it may not use it for any other activity.
- It must comply with the controls set out in the contract.
Consequence of violation:
- The contracting authority notifies it of the violation so that it removes it within a period the authority sets.
- If the period passes without the violation being removed, the lease ends.
The text speaks only of leasing, not of ownership. It does not set the length of the notice period; the contracting authority sets it in each case.
In practice, a foreign investor in a project inside the two cities must adhere strictly to the specified purpose, because any use outside it may end the lease after notice. Anyone who needs to arrange this should consult a lawyer who specializes in foreign investment or real estate matters.
Practical example
A foreign company won a project to operate a service facility in Makkah and leased land with the competent authority's approval for the term of the contract. Later it used part of it as a warehouse for another commercial activity. The contracting authority notified it to remove the violation within 30 days, and if it does not, the lease ends.
Translated from our Arabic explanation with machine assistance. For guidance only; it does not replace advice from a lawyer on your situation.
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Lawyers who handle this kind of case
Dr. Ali Al-Rubaie Law Office and Ittihad Al-Asr Legal Company
Mohammed bin Saleh Al-Qarawi Law and Notary Office, Riyadh
Frequently asked questions about Article 37 of the Saudi Privatization Law
Can a foreign investor lease real estate in Makkah?
A foreign private party in a privatization project may do so after the competent authority's approval, for a period equal to the contract term and only to carry out the project.
When does a foreign investor's lease end?
If it breaches the use condition or the contract's controls, is notified, and does not remove the violation within the set period.
More articles on Real Estate in Privatization Projects
- Article 32
The Center's Board sets the rules for tenders and procurement in privatization contracts and for State leasing and vacating of real estate in coordination with the State Properties Authority, and the general laws apply where there is no special provision.
1- يضع مجلس إدارة المركز الأحكام المنظمة للمنافسات والمشتريات لجميع التعاقدات اللازمة لتنفيذ عمليات التخصيص. 2- يضع مجلس إدارة المركز -بالتنسيق مع الهيئة العامة
- Article 38
Real estate may be expropriated, or temporarily taken possession of, where needed to carry out a privatization project under the public-interest expropriation rules, and the parties may agree that the private party bears the cost of compensation.
1- يجوز نزع ملكية العقارات أو وضع اليد المؤقت عليها إذا كان ذلك لازمًا لغرض تنفيذ مشروع التخصيص، وذلك وفقًا للأحكام المنظمة لنزع ملكية العقارات ووضع اليد عليها
The texts are reproduced from the official website of the Bureau of Experts at the Council of Ministers for reference; where they differ, the officially published Arabic text prevails. This content is not legal advice.