Can rent be linked to turnover in Saudi Arabia?

Yes. Article 409 of the Civil Transactions Law allows rent to be determined on the basis of valid pricing criteria, or as a specific amount together with a known percentage of the output or the profit. The percentage has to be known, which is the constraint on how a turnover rent is drafted.

Can a commercial tenant assign the lease or sublet?

Article 437 of the Civil Transactions Law prohibits the lessee from subleasing the property in whole or in part, and from assigning the contract to a third party, without the lessor's authorisation or ratification. Where it is permitted, Article 438 binds the sublessee to the same restrictions on the type and duration of use, and Article 439 subrogates an assignee to all rights and obligations under the assigned contract.

Commercial Lease Agreement in Saudi Arabia

The Civil Transactions Law does not separate commercial leases from residential ones, so the same Articles 407 to 442 apply and the drafting work lies in contracting out of the defaults. Article 409 supports a turnover rent expressly, Article 436 decides what happens to tenant fit-out at the end of the term, and Article 437 blocks assignment and subletting without the landlord's authorisation.

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Governing law

Commercial leases are governed by the same lease provisions as any other lease, Articles 407 to 442 of the Civil Transactions Law, Royal Decree No. M/191 of 18 June 2023.

Civil Transactions Law, Royal Decree No. M/191 of 18 June 2023, Arts. 407 to 442 (Bureau of Experts official translation, Ministry of Investment)

What a commercial lease agreement has to contain in Saudi Arabia

Article 409 allows rent determined on valid pricing criteria, or as a specific amount together with a known percentage of the output or the profit, which is the statutory basis for a turnover-linked rent.
Civil Transactions Law, Royal Decree No. M/191 of 18 June 2023, Art. 409 (Bureau of Experts official translation, Ministry of Investment)
Article 416 requires delivery in a condition allowing full use and enjoyment, uninterrupted until the term expires. Article 423 bars the lessor from acts that interrupt that use, including changes rendering the property unusable for its purpose, and attributes a subordinate's interruption to the lessor.
Civil Transactions Law, Royal Decree No. M/191 of 18 June 2023, Arts. 416 and 423 (Bureau of Experts official translation, Ministry of Investment)
Article 436 lets the lessor, absent agreement that additions remain, require their removal at the lessee's expense with compensation, or keep them against payment of their value if removed or of the resulting appreciation; the lessee may remove them where removal causes no harm.
Civil Transactions Law, Royal Decree No. M/191 of 18 June 2023, Art. 436 (Bureau of Experts official translation, Ministry of Investment)
Article 437 prohibits sublease or assignment without the lessor's authorisation or ratification. Article 438 binds a permitted sublessee to the restrictions on use and duration, and Article 439 subrogates an assignee to all rights and obligations.
Civil Transactions Law, Royal Decree No. M/191 of 18 June 2023, Arts. 437, 438 and 439 (Bureau of Experts official translation, Ministry of Investment)
Article 442 lets either party terminate if an urgent matter arises, compensating the other, and provides that where the lessor terminates the lessee need not return the property until he receives compensation or adequate security.
Civil Transactions Law, Royal Decree No. M/191 of 18 June 2023, Art. 442 (Bureau of Experts official translation, Ministry of Investment)
Article 415 extends an expired term only to the extent of an established urgent need, at the prevailing market rental rate, unless agreed otherwise.
Civil Transactions Law, Royal Decree No. M/191 of 18 June 2023, Art. 415 (Bureau of Experts official translation, Ministry of Investment)

What catches drafters out

Article 427 voids an exemption from or limitation of the warranty against interruption or against defects where the lessor deliberately conceals the reason for it.
Civil Transactions Law, Royal Decree No. M/191 of 18 June 2023, Art. 427 (Bureau of Experts official translation, Ministry of Investment)
Article 2 calculates all periods under the Civil Transactions Law by the Hijri calendar, so rent review, break and renewal dates drafted in Gregorian years need checking against the statutory basis.
Civil Transactions Law, Royal Decree No. M/191 of 18 June 2023, Art. 2 (Bureau of Experts official translation, Ministry of Investment)
Article 296(b) treats rent as a renewable periodic right and bars a claim for it after five years, against the general 10-year bar in Article 295.
Civil Transactions Law, Royal Decree No. M/191 of 18 June 2023, Arts. 295 and 296(b) (Bureau of Experts official translation, Ministry of Investment)