Lebanon Sells Its Sea for Cheap
Published Monday, July 2, 2012
A 1992 Lebanese law regulating the lease of the country’s publicly owned coastline severely underestimates the value of such properties when setting fees. A new law being proposed to replace it also falls far short of giving the state treasury its fair share of income from country’s lucrative shores.
The seafront property file has yet to be a topic of serious discussion. There are no signs that the state intends to seriously confront the "occupation" of Lebanon’s shores, as politicians continue to provide political cover for infringements on what is legally considered public property.
There also appears to be lack of desire to implement laws that reinforce the right of any Lebanese citizen to enjoy the country’s beaches without obstruction. All this happens under the pretext of "temporary licenses" permitted in a set of "dubious" official decisions and laws.
These licenses have led to dividing the beaches among politicians, the wealthy, along with local and foreign investors, who can smell profit from a distance. Because the shores of the Lebanese people are protected by completely compromised laws, they are filled with hundreds of touristic, commercial, industrial, military, and residential projects.
In return, these "occupiers" pay the state treasury ridiculously low fees compared to the benefits and profits they reap, not to mention the environmental damage that the Lebanese must ultimately incur.
For example, Solidere company's investment in the Saint George Marina, allocated for yachts, pays a mere 2,500 Lebanese Lira (LL) ($1.60) for every square meter in an area whose actual value amounts to more than $25,000 per square meter. This applies to all investments on the 225-kilometer shore extending from the far north to the furthest south.
Guaranteeing maximum benefit to the occupiers of the state's seafront properties, Law No. 2522 has not been amended since 1992. The annual fees for temporary working licenses of these properties, excluding the infringements and occupation without licenses, have remained the same.
This is despite the rapid increase in real estate prices and the rise of the general price index by 200% during the past 20 years, leading to the erosion of the value of these fees, which were already too low. In the meantime, the occupiers collected enormous profits, considerable benefits, and superior privileges.
On Monday, Minister of Public Works and Transport Ghazi al-Aridi presents a draft law to amend these fees. But it is no different than the 1992 decree, as it underestimates working licenses in seafront properties and resorts compared to the actual value. It also applies reduced fees on works and investments that cannot be compared to the size of profits made.
In the proposed law, Aridi suggests imposing percentage fees consistent with the estimated value of one square meter, according to the real estate area, the nature of the area, and purpose of use. The 1992 law imposed a ridiculously low lump-sum fee ranging from a minimum of LL15,000 ($10) in al-Arida in Akkar, to LL1.25 million ($830) in Mina al-Hosn in Beirut.
Aridi's draft specifies fees amounting to 0.1 percent of the appraisal value for agricultural use on land and renovated property; 0.5 percent for industrial and commercial use, as well as pools without construction; 2 percent for personal use (mansions, villas, private chalets); and down to 0.75 percent for tourist resorts.
The fees on an open water area is set at 0.1 percent for all uses, while a closed one ranges between 0.2 percent for industrial and commercial use, 0.5 percent for private use, and 1 percent for resorts and pools.
In addition to such low rates, the percentages are based on appraisals that have nothing to do with the actual value of a square meter and are rounded off to the lowest possible value.
The appraisal table of prices proposed by Aridi estimates the square meter near the harbor in central Beirut, which is dominated by Solidere, at only LL8 million ($5,300). The appraisal drops to LL40,000 ($26) in al-Arida in Akkar; LL600,000 ($400) in al-Hiri in Batroun; LL900,000 ($600) in Safra in Keserwan; LL1.2 million ($800) in the Damour in the Chouf; LL450,000 ($300) in Sarafand; and LL1 million ($660) in Tyre in the South.
Also, as another example, a swimming area of 1,000 square meters of public property on the beach in Jiyyeh would annually pay 0.5 percent fees for every square meter on the shore, appraised at a value of LL1.45 million (close to $1,000). In other words, the investor would pay only LL7.25 million (close to $5,000).
The cabinet did not approve Aridi's proposal during its last meeting – not because there are forces seeking to address this scandal from its foundations, but because the finance ministry wants to increase its revenues from the fees, and several ministers objected to ambiguity in the appraisal mechanism. The draft was thus referred to the finance and public works ministries for further study and clarification in the appraisal mechanism.
Raja Makarem, director of Ramco Real Estate, says that there are regular studies on property prices in Lebanon, adding that the adopted appraisals in some of the areas are not equivalent to the actual prices. He says that there are no beaches in Batroun where the square meter is valued at less than $2,000, while the draft law sets the value of the square meter there at only $500.
Makarem describes the official appraisal for the Chekka beach in the north at $300 per square meter as "illogical." He says that the real value of a square meter in the Monsef, al-Barbara, and al-Rayhana actually ranges between $1,000 and $1,200, but the draft evaluates it at only $500.
The same goes for Byblos, where the proposed law estimates the square meter at LL1.1 million (just below $800), while its actual cost is at least $2,000. It also estimates the price in the Keserwan district at LL1.45 million (close to $1,000), while the actual square meter ranges between $2,000 to $2,500.
From a legal perspective, lawyer Elie Khattar, author of "Seafront Public Property in Lebanon: Fact, Law, and Jurisprudence," says that coastal property is state-owned and investors must pay a fee in return.
He says that the new draft law entails an unjust calculation system, noting that its percentage fees should not be less than 2 percent of the real estate value for resorts and swimming, industrial, and commercial institutions, because such enterprises reap high profits.
Khattar says the most unusual fee is related to public property used for personal use, such as residential homes, which do not exceed 2 percent. He argues that these fees should not be less than 6% – the common rate in leasing private land – because they do not provide conditions for public interest.
Khattar adds that before delving into fees and specifying them, there should be an agreement on consolidating the basic legal principles regulating maritime public property and temporary licensing for a maximum of one year.
He suggests licensing should not be granted to projects that may cause damage to natural, archaeological, and historic sites, adding that licenses should only be issued after the completion of a comprehensive blueprint for the Lebanese coastline.
This article is an edited translation from the Arabic Edition.