Contract Renewal
Synonyms: Lease Renewal، Contract Extension
Last updated: 2026-05-06
Short Definition
Extension of lease for new term under same or modified terms, automatic in Ejar unless either party expresses intent to terminate 60 days before expiry.
Overview
Legal Basis
Contract renewal is regulated by the Civil Transactions Law issued by Royal Decree No. (M/191) of 1444 AH, and the Ejar Platform Regulation which specifies automatic renewal mechanisms and notice periods. Increases at renewal are subject to the principle of contractual freedom; no statutory limits exist on the rate (unlike some countries).
Practical Example
A commercial office lease in Riyadh ending on Dhul-Hijjah 30. Sixty days prior, Ejar sends an alert to both parties. The lessor proposes an 8% increase due to market price rises. The lessee negotiates and accepts 5%. The lessor enters Ejar, creates a renewal request with the new value (e.g., from SAR 60,000 to 63,000), sends it to the lessee, the lessee digitally signs, and the contract is officially renewed for the following year. If parties don't agree, the contract is left to expire and the lessee must vacate.
Common Mistakes
- ✗Remaining silent at period end believing the contract auto-expired — actually, Ejar auto-renews unless explicit notice is sent.
- ✗Sending non-renewal notice in the last week before expiry — most contracts require 60 days; late notice is invalid.
- ✗Proposing a large rent increase without market justification — the lessee may refuse and leave, a bigger loss than accepting reasonable increase.
- ✗Assuming renewal requires the same duration as the original — different durations can be negotiated (e.g., 6-month renewal instead of one year).
- ✗Neglecting to review contract clauses upon automatic renewal — old clauses may no longer suit (deposit, payment method).
International Differences
In the UAE, rent increases at renewal are regulated by the 'Ejari' index, which caps the percentage based on market average. In Turkey, annual increases are capped to inflation index and cannot exceed a legally specified rate. In Egypt, distinction is made between old contracts (no increase) and new (open). The Saudi advantage: full negotiation freedom without government caps on increases, with a digital mechanism to prove agreement.