Monthly Lease
Synonyms: Monthly Rental، Month-to-month Lease
Last updated: 2026-05-06
Short Definition
Short-term lease that renews monthly, common in furnished and serviced apartments, offering flexibility at higher rent.
Overview
Legal Basis
The monthly contract is regulated by the Civil Transactions Law and Ejar Platform Regulation. The tax classification of short-term contracts is based on the Zakat and Tax Authority's decision distinguishing between long-term rental (residential exempt) and short-term (subject to VAT).
Practical Example
An employee transferred to a temporary project in Dammam for 3 months. He leases an apartment with a monthly contract at SAR 4,000/month (instead of annual at SAR 30,000 = 2,500/month). He pays monthly SAR 4,000 + 600 VAT = SAR 4,600. In Ejar, the contract auto-renews every month. At month 3 end, the employee sends notice a week before expiry of non-renewal intent. The contract officially closes and the deposit is returned after apartment inspection. Lessee benefit: no long commitment; lessor benefit: flexibility in monthly repricing.
Common Mistakes
- ✗Assuming monthly contract is VAT-exempt like annual residential — every short-term contract is subject to 15% VAT.
- ✗Omitting termination notice clause (usually 7-14 days) — may oblige the lessee to an extra month if leaving suddenly.
- ✗Lessor believing they can change rent automatically monthly — any modification requires lessee approval and Ejar documentation.
- ✗Renting the apartment with repeated monthly contracts instead of annual for long stays — higher tax cost and legal instability.
- ✗Omitting furniture inventory at each monthly renewal — may create cumulative disputes over loss and damage.
International Differences
In the UAE, monthly contracts are common for short-term furnished stays, subject to 5% VAT. In Turkey, monthly furnished contracts via tourism booking platforms are subject to taxes and tourism rules. In Egypt, monthly contracts are widely used but digitally unregulated. The Saudi advantage: unified system for documenting monthly contract with same legal quality as annual, with automatic tax calculation.