Legal Adjustment of Rent

Legal Adjustment of Rent

For more than four decades, the Iranian legislator has addressed the issue of rent adjustment. Nevertheless, this matter has unfortunately been limited to commercial properties and does not extend to residential properties.

In recent years and in previous decades, society has consistently experienced rising rental rates alongside inflation. Although this rise has been more pronounced during the past two years, the upward trend in earlier decades cannot be denied.

Inflation and the rising cost of living are among the most frequently cited reasons by property owners for rent increases. However, the laws governing landlord and tenant relationships in relation to commercial properties are structured to place greater emphasis on protecting the tenant’s business goodwill rights.

This legal protection, combined with rising living expenses, may result in financial disadvantage for landlords. For this reason, the Iranian legislature enacted regulations governing rent adjustments primarily to safeguard landlords’ interests.

The Role of the Adjustment Clause in Lease Agreements

The Concept of Rent Adjustment

Based on the foregoing introduction, it may be assumed that rent adjustment refers solely to an increase in rent over time. While in certain circumstances rent adjustment may include a rent reduction, it must be acknowledged that, in most cases, it involves a landlord’s request to increase the rent for a commercial property.

Business goodwill rights prevent a landlord from demanding eviction of a leased commercial property without lawful justification. Consequently, landlords must seek a legal remedy to offset losses arising from inflation. This solution is recognized under Iranian law as a rent adjustment. In practice, the rental amount should be determined in light of the property’s location and the broader economic conditions of the society.

Conditions for Rent Adjustment

Under the law, both landlords and tenants are entitled to submit a request for rent adjustment. However, given current economic conditions marked by inflation and rising costs, this right is generally exercised by landlords seeking to increase the monthly rent for the leased property.

The law has established specific conditions for rent adjustments, which are set forth below.

Expiration of the Lease Term

The first and most important requirement for rent adjustment is the expiration of the lease term stipulated in the lease agreement.

After signing the lease, even in the event of significant price fluctuations, the landlord is not entitled to request a rent adjustment or modification of the lease agreement. Therefore, any change in the leasing arrangement requires confirmation that the lease term has ended.

Passage of Three Years Since the Last Final Adjustment

Courts do not approve annual rent adjustments for commercial properties. If a rent adjustment request has already been made, the applicant must wait at least three years before becoming eligible to submit another request. In cases where no prior adjustment has been requested, a minimum of three years must have elapsed since the commencement of the lease.

Court Order for Rent Adjustment

Initially, the landlord must submit a formal petition for rent adjustment through the electronic judicial services offices so that the case may be referred to the competent court. The court then orders an official expert from the Judiciary to assess the property’s fair market value and determine an appropriate rental rate. This assessment considers factors such as the property’s economic location, construction quality, and whether it is newly constructed or older.

It should be noted that a rent adjustment claim is classified as a financial claim and is therefore subject to court fees applicable to financial disputes. Establishing legal standing, proving the landlord-tenant relationship, and presenting a final court judgment that is at least three years old, if applicable, are essential evidentiary requirements for filing a rent adjustment claim. All such documentation must be submitted by the claimant, typically the landlord.

An Important Point Regarding Rent Adjustment

At the initial stage, after filing the petition, the applicant must establish their legal capacity as either landlord or tenant and prove the existence of a lease relationship through valid documentation. The expiration of the lease term and the passage of three years must also be clearly demonstrated to the court. Once these preliminary requirements are satisfied, the court proceeds to examine the substance of the claim, namely, the increase or reduction of rent. Given the technical nature of valuation and financial assessment in rental matters, courts rely on expert opinions to determine a fair and appropriate rental rate.

Frequently Asked Questions About Legal Rent Adjustment