Amongst the various forms of guarantees available to a creditor, hypothecs are commonly resorted to as a safeguarding mechanism in view of debts owed by a debtor. Hypothecs may take either of two forms: a) General Hypothecs (burdening all the assets both present and future of a debtor) or b) Special Hypothecs (burdening one particular asset of a debtor).

Whilst both general and special hypothecs rank according to their date of registration, special hypothecs enjoy advantageous features for a creditor for they attach to a particular property encumbering it burdensomely to the extent that they remain operative even vis-à-vis third parties. This important feature of special hypothecs, which does not apply for general hypothecs, finds benefit when the property originally burdened by a special hypothec is transferred to a third party.

In order to properly understand what happens in the latter scenario, it is best to exemplify it by means of a practical example. Kickstarting the action is a relationship between two parties, a common creditor-debtor relationship who are tied together by an existing debt. In order to secure the debt, the principal debtor guarantees by means of a special hypothec in favour of the creditor. At this stage, even though the encumbered property is guaranteeing a debt, it remains in the hands and full ownership of the principal debtor. Another essential figure in the relationship is a third party who comes into the picture when the burdened property passes into his hands.

What happens in this scenario? Can the creditor go ahead and take over the property which has been securing the debt immediately?

In a situation of the sort, the long awaiting creditor would have to exercise an action, known under civil law as the actio ipotecaria. The crux of the action in fact comes to fruition when the existing debt between the creditor and principal debtor falls due and the latter has failed to rectify the same debt. In this situation, the creditor would be able to satisfy his claim by taking over the property secured by the hypothec or privilege, which is effectively in the hands of someone else.

Before exercising the action, the process is kick started by means of a judicial intimation, i.e. by serving the third party and the debtor with a judicial act calling on the same third party to discharge and release the hypothecated property in his favour or otherwise to pay off the debt. If the third party in possession of the hypothecated property has failed to discharge the debt or surrender the property and thirty days would have elapsed from when the creditor has served the debtor and the third party by a judicial act, the creditor has no other option but to institute the so called actio ipotecaria against the third party in possession by means of a sworn application before the First Hall of the Civil Court.

Having brought the actio ipotecaria, the third party does not become the creditor’s debtor, however he would have to either discharge the property which had been hypothecated by means of a special hypothec or otherwise pay off the debt from his own means. However, the third party is not obliged to monetarily pay the debt due to the creditor for his only obligation is limited to surrendering the property under Court Authority and give up its possession. It is only when the property is surrendered that his liability ceases even though the third party remains the owner until the property is sold. Up till the stage when the property has been sold by the creditor, the third party may decide to pay the debt due and regain possession of his property.

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I am part owner of a property held in common with four other people. Four of us wish to sell this property to a third party, however one of us is blocking our sale as he keeps on refusing to appear on the deed of sale. The price we intend to obtain from the sale is a just one. What can we do?

The scenario described above is more common than one can perhaps ever imagine. The joint ownership of property is a reality which arises through numerous ways, with the devolution of an inheritance taking the forefront.

Anyone who has ever found himself caught up in such a scenario can understand the struggle of selling a property when one co-owner constantly chooses to stomp his feet and refuse to sell. This was precisely the aim of the legislator when introducing article 495A into Chapter 16 of the Laws of Malta (the Civil Code) – to offer majority co-owners a ray of hope against their minority co-owners. As a matter of fact, the final goal of an action under article 495A would be to force the minority co-owners to appear on the final deed of sale of the property in question; ending once and for all the joint ownership of the property.

What are the requirements to kick-start such an action?

Joint Ownership

In order for an action under article 495A to be successful, the property must be held in common and must have been held in common for a period of more than three years. This effectively means that the owners of the property have been co-owners for at least three years. Failing such, the action would not result in its intended goal and would be destined to fail.

No Other Court Action

The law also spells out as a requirement the fact that no ulterior court proceedings would have been instituted in an attempt to divide the property. This requirement is easily cognisable as if the co-owners would have already taken a step to end once and for all the joint ownership of the property through an action for division, an action attempting to sell the property held in common would be erroneous.

A Disagreement

A disagreement on the sale of the property is precisely the reason as to why the majority of the co-owners would resort to such an action. If all the co-owners are in agreement as to the sale of the property than there would be no existing reason as to resort to such court proceedings as all the co-owning parties would simply appear on the deed of sale.

Provided that all the requirements stipulated above are fulfilled, the majority co-owners can proceed to institute their action before the First Hall of the Civil Court under article 495A of the Civil Code.

What happens if a co-owner is unknown?

Co-owners may also face the reality that not all of the co-owners are in fact known. This reality is very often sparked when, following public registry searches, there results a share (or sometimes more) of the property which is unaccounted for. What happens in this case? How can you force someone to appear on a deed of sale when you do not know who that person is?

In circumstances such as the afore the action may still be instituted provided that all of the above-mentioned requirements would have been attained. The only difference lies in an additional procedure which would have to be adopted by means of which, following a declaration made by one of the majority co-owners confirmed on oath that a certain co-owner is unknown, curators are appointed in order to represent the share of the unknown co-owner. The action would then proceed to continue in the usual way as if all the co-owners would have been known from the start.

Therefore, if a group of majority co-owners would like to end once and for all the state of joint ownership they are currently in by selling the property to a third party, article 495A may be their only escape card.

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Part one (1): Three types of contracts

The Private Residential Leases Act (Chapter 604 of the Laws of Malta) came into force on 1st January 2020. As mentioned in its preamble, first and foremost, this act seeks to promote the development of the private rental sector; secondly it seeks to ensure standards of fairness, clarity and legal certainty and predictability in the contractual relationship between the lessor (owner of the property) and the lessee (person renting the property); thirdly, with this act, the legislator aimed at ensuring adequate accommodation.

It is mandatory that all private residential lease contracts entered into after the entry into force of this Act , including their renewal, whether express or tacit, shall be registered with the Housing authority.

What is a “Private Residential Lease”?

Any  long  or  short private  residential  lease,  including  the  letting  of  shared residential space, which is entered into after 1st January, 2020, and any lease for a residential purpose entered into before the 1st  January,  2020,  which  would  still  be  in  its  original  or renewed period on the 1st January, 2021;

Private Residential Lease Contracts: there are Three types of leases

(i) Long private residential Leases

(ii) Short private residential Leases

(iii) Shared Residential Space

(i) What is a “Long private residential Lease” (commonly known as Long-Let) ?

The law defines such a lease as any lease, negotiated for a primary residential purpose in accordance with article 8 and which is not a short private residential lease.

First and foremost, a Long-let, cannot have a duration of less than one (1) year. In the event that a long-private residential lease agreement stipulates a shorter duration shall be deemed to have been agreed for a period of at least one (1) year.

Long let has a mandatory period that should be respected at all costs and the lessee (lessee of the premises, or his spouse, civil union partner, cohabitant or a member of his family up to the second degree, whether direct or collateral) cannot withdraw from such lease during this period. This mandatory period varies depending on the duration of the long-let agreement. In fact, the legislator establishes the following duration categories:

(a)   six (6) months in the case where the lease is for a period of less than two (2) years; or

(b)  nine (9) months in the case where the lease is for a period of two (2) years or more but less than three (3) years; or

(c)   twelve (12) months in the case where the lease is for a period of three (3) years or more;

Following these mandatory periods, the lessee may be released from the contract by giving notice to the lessor (landlord):

(i) In the event of Long-let Contract for a period less than two (2) years, by giving at least one (1) month notice to the lessor by means of a registered letter;

(ii) In the event of a long-let contract for a period of two (2) years or more but less than three (3) years, by giving at least two (2) months’ notice to the lessor by means of a registered letter;

(iii) In the event of a long-let contract for a period of three years or more, by giving at least three (3) months’ notice to the lessor by means of a registered letter;

Lessor may retain one (1) month’s rent

If the lessee withdraws from a long-let contract, before the lapse of the applicable periods mentioned above, the lessor may retain an amount not exceeding one (1) month’s rent from the deposit left by the lessee by way of security and may still proceed against the lessee to collect any other amounts due by him or her.

Automatic Renewal of Lease

In the event that the lessor fails to notify the lessee within the established period, the lease is renewed automatically for a year with the same terms and conditions.

(ii) Short private residential Leases (commonly known as the Short-Let contracts)

A short  private  residential  lease  means  any  lease, negotiated for a duration of six (6) months that seeks to satisfy the needs of a number of categories of lessees. The legislator mentions four categories of lessees that can apply for short-let contracts, these are:

Category one (1): Non-resident workers  who  are  employed either for a period less than six (6) months or only to complete a specific task within a maximum period of six (6) months;

Category two (2): Non-resident students who are enrolled in courses for less than six (6) months;

Category three (3): Residents who need to rent an alternative primary residence for a period of less than six (6) months;

Category four (4): Non-residents who need to rent a tenement for a period of less than six (6) months, provided that they  would  not  be  seeking  to  establish  their  long residence in Malta.

The first month of the short-let lease is obligatory for the lessee and following the obligatory month, the lessee may be released from the contract but is obliged to give at least one week’s prior notice to the lessor by means of a registered letter. It should be emphasised that such a contract cannot be renewed.

What about Tourists?

It should be emphasised that property leased  to  any  tourist,  exclusively  for tourism purposes (holiday furnished property) are excluded from the scope of the Private Residential Leases Act, for as long as the person staying in that property falls under the definition of tourist (ny  person  who  is  traveling  to  and staying in places outside his usual environment for not more than one (1) consecutive year for leisure, business or other personal purposes other than by taking up employment or to establish his business in the place visited). In the case of holiday homes tenements, one would have to look at the Malta Travel and Tourism Services Act (Chapter 409 of the Laws of Malta).

On the other hand, if  a  property  is  registered  as  a holiday  furnished  premises  in  accordance  with  the Malta Travel and Tourism Services Act, this does not exclude the applicability of the Private Residential Leases Act if the applicant does not qualify as tourist

(iii) Shared Residential Space

This means the letting of any separate space in an apartment or building, with shared amenities, such as kitchen and bathroom facilities.

Any contract entered into for the lease of a shared residential space shall have a duration of six (6) months. The lessee may withdraw from the lease, at any time, by giving one (1) week prior notice to the lessor by a registered letter. Like in short-let contracts, Shared Residential Space contracts of leases shall not be renewed.

In conclusion to this Part One, all of the abovementioned category of private residential contracts should be registered with the Housing Authority.

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1. A servitude is a real right. This means that it is attached to the property itself and not the person owning that property. This carries with it important implications, namely that in case of transfer of property, the servitude stays with that property and does not die just because the property now belongs to someone else. Therefore, in the context of a new owner, if the property enjoys the servitude, it will keep enjoying it and if the property is burdened by a servitude, it will still be bound by it.

2. For every dominant property there is a servient property. In the laws of physics, we learn that for every action, there is an equal and opposite reaction. The same applies to servitudes. In a servitude, you have one property which is dominant and one property which is servient. The former property is one enjoying the servitude, while the latter property is burdened by the servitude. Therefore, for one property to enjoy the servitude, this comes at the cost of another property.

3. It can be created by law or contract. This dual relationship is what renders a servitude susceptible to an act of man. This means that a servitude can be formalised by means of a public deed. There are some servitudes that are created by law. For example, legal distances to be kept in construction, height of walls between fields, and the right of water passage. Servitudes created by law usually arise from the configuration of the two properties.

4. It can be apparent or non-apparent. An apparent servitude is something that can be seen, for example, an aperture. A non-apparent servitude is something that is ‘invisible’, such as the obligation not to exceed a height limitation. The distinction between the two is not only academic. In the case of apparent servitudes, these can be acquired by means of acquisitive prescription. However, non-apparent servitudes, such as the ‘altius non tollendi’, can only be established by means of a title.

5. It can be extinguished. Just because there was a servitude in the past, it does not necessarily mean that it will prevail. If the servitude can no longer be exercised, it is deemed to have been extinguished. However, if at a point the servitude can be exercised again, it will be revived. This is subject to the applicable extinctive prescriptive period. Indeed, another way for a servitude to be extinguished is if it is not used, thus triggering extinctive prescription. The prescriptive period is generally thirty years, but in the case of Government or Church property, it is forty years. A servitude can also be extinguished if the dominant and servient property become one property.

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For one to make a development, one has to apply for a planning permit.

Planning applications are brought before the Planning Board, which is tasked by law (article 72(2) of Chapter 552 of the Laws of Malta – the Development Planning Act) to determine the merits by taking account of the plans submitted, the planning policies, regulations made under planning law and any other material consideration, including surrounding legal commitments, environmental, aesthetic and sanitary considerations, which may be relevant. The Planning Board shall also consider representations (known as ‘objections’) made by third parties, as well as the representations and recommendations made by board, committees and consultees so appointed in terms of the law.

On the other hand, the Planning Board is generally not required to verify the suitability of the title which the applicant purports to have, nor shall it consider issues which are ‘private’ between the parties. Indeed, the law states (article 72 (1), Chapter 552) that any development approved shall be without prejudice to third party rights and shall not in any manner constitute or be construed as a guarantee in favour of the applicant as to the title to the property. Therefore, theoretically speaking, an application may be one that satisfies all planning considerations and so the application is approved. But that does not mean that the applicant is free to initiate his development. Any rights belonging to third parties (for instance, the right not to have windows abutting onto one’s airspace) remain, and are not nullified by the issuance of the planning permit. A planning permit is not the beginning and the end of what is required for one to build. Any third party rights (either emanating out of contract or from the provisions of the Civil Code, among others) still need to be respected. So for instance, you will find many approved applications having apertures which are perfectly compliant with planning laws, but which create illegal servitudes unto third parties, and can thus be challenged in a court of law. Simply put, planning law takes account of planning issues, while third party rights are the exclusive competence of our courts.

This does not mean that an applicant may freely make misrepresentations as to his rights on a property. According to article 71 (4) of Chapter 552, an applicant shall – in his application – certify that: (i) he is the owner of the site or that he has notified the owner of his intention to apply, this by means of a registered letter, shall also certify that the owner has granted his consent to such a proposal; or that (ii) he is authorised to carry out such proposed development under any other law or through an agreement with the owner. So technically speaking, one is not required to be the owner to apply for a permit, as long as the owner has consented or as long as he is allowed by law to carry out such a development. This for instance allows prospective buyers on a promise of sale agreement to apply for a permit in their own name.

One however must not lie; a permit issued on the strength of an untruthful declaration may possibly be revoked through the procedure established in article 80 of Chapter 552 of the Laws of Malta.

This initial declaration of ownership/consent in the application is very important. Despite the fact that it has been stated time and time again that all planning permits shall be issued saving third party rights, this did not mean that the Planning Authority was free not to verify that consent was actually granted when the applicant was not the owner. Recently, in the judgment of Kingsway Palace Company Limited vs l-Awtoritá tal-Ippjanar et, the Court of Appeal described the duty of the Planning Authority in this respect:

Hu minnu illi kwistjonijiet ta’ kontestazzjoni fuq titolu mhux fil-kompitu tal-Awtorita jew it-Tribunal li jikkunsidrahom u jiggudikahom. Pero dan ma jfissirx illi fejn applicant qed jissottometti li ghandu permess tas-sid moghti permezz ta’ ftehim kontrattwali u ghalhekk mhux mehtieg il-kunsens tas-sid ghall-izvilupp dan ma ghandux jigi mistharreg u dan semplicement ghax hi l-ligi tal-ippjanar stess li taghti dan id-dritt lil applikant. It-Tribunal bhall-Awtorita ghandu l-obbligu li jqis din is-sottomissjoni.

Jekk prima facie jirrizulta dan il-jedd b’mod car u bla kondizzjonijiet jew limitazzjonijiet, allura l-Awtorita u t-Tribunal ghandhom l-obbligu li jiddeciedu l-applikazzjoni fuq ilmertu taghha mill-lat ta’ ippjanar. Wara kollox l-ghoti ta’ permess mhux garanzija ta’ dak li l-Awtorita u t-Tribunal qiesu bhala prova ta’ titolu fuq bazi prima facie biss. Li ma ghandux jaghmel it-Tribunal hu li jinterpreta jew iqis jew inkella jinjora kwistjonijiet ta’ natura civili li jitqajmu u li fuqhom hemm dizgwid bejn il-partijiet specjalment fejn hemm proceduri legali gia mehudin.”

Once the law made it a condition for the non-owner to seek consent from the owner, the Authority has to consider legal issues, at least from a prima facie perspective, to verify whether there is the required consent.

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Disclaimer: This article is not to be considered as legal advice, and is not to be acted on as such. Should you require further information or legal assistance, please do not hesitate to contact us on info@azzopardilegal.eu.

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Throughout the years, the legislator has sought to strike a balance between the rights of the landlord and dominus on the one hand, and the rights of the lessee and the emphyteuta on the other. Indeed, the past decades have seen different concessions being granted to emphyteuta. To mention a few, pre-1995 emphyteuses of 16 years or less were converted into a lease and were treated as a lease from that point onwards. Moreover, pre-1995 temporary emphyteuses exceeding 30 years could be converted into perpetual ones. Nowadays, a perpetual emphyteusis can also be redeemed.

The new Regulations under the Government Lands Act – L.N. 369 of 2020, L.N. 370 of 2020, and L.N. 372 of 2020 – build on the balanced approach that the legislator has taken in the past decades. They provide for new concessions to be enjoyed by an owner or emphyteuta of property transferred by the Government, the Lands Authority, or an Ecclesiastical Entity. This does not mean, however, that anyone who is an owner or emphyteuta of property transferred by the entities mentioned is eligible to these concessions. On the contrary, these Regulations provide for strict criteria which must be adhered to. Let us thus explore these new Regulations and the criteria found therein.

L.N. 369 of 2020

These Regulations regard the extension of temporary emphyteusis in a contract for commercial premises transferred from the Government, Lands Authority or Ecclesiastical Entities by title of emphyteusis. The logical first question here is, who may apply? The Regulations provide that any natural or legal person who holds a title of temporary emphyteusis transferred by any of the abovementioned entities for commercial purposes with a term that expires after the 31st of August 2025, may apply with the Lands Authority to rescind the original contract and be granted a new one. The new contract would provide a term that starts to run from the date of the new contract, which means that the clock is ‘reset’. When the term is greater than 65 years, however, it is reduced to 65 years.
Furthermore, for this concession to be granted the applicant must prove that he needs the land for a commercial project which will benefit the national economy and generate adequate employment. For the term of the temporary emphyteusis extended, the value of the new contract needs to be determined by an architect appointed by the Lands Authority. After such valuation is made, the applicant then pays this value to the Lands Authority.

L.N. 370 of 2020

This law applies to persons who have purchased through a public deed or granted through emphyteusis property by the Government, the Lands Authority or Ecclesiastical Entities. Such persons have the right to ask the Lands Authority to modify or remove conditions imposed in the original contract. This right, however, applies only where the condition/s imposed limit the amount of residences or garages that can be built, and where the applicant is precisely seeking to increase this number. The applicant needs to be a citizen of the European Union and be recognised by the Authority as the owner or emphyteuta of the land or building in question. In the case of emphyteusis, the applicant needs to prove that there are no overdue ground rent payments with respect to the property in question.

As was the case with case with L.N. 369 of 2020, the value for any modification or removal of such conditions shall be established by an architect appointed by the Authority, with regard being had to the site’s development potential. So, what exactly needs to be paid to the Authority? If the applicant wants to develop an additional residence/s for his linear descendants or ascendants to serve as their ordinary residence – 25% of the value of established by the architect. In any other case, he would need to pay the entire amount indicated by the architect.

L.N. 372 of 2020

When a person owns immovable property (as an ordinary residence or garage) which was transferred to him or her via a public contract by the Government, the Lands Authority or an Ecclesiastical Entity, and the description in this contract does not reflect his or her current situation, such person may apply to the Lands Authority for the necessary changes to this description. These Regulations apply to immovable property in front of or adjacent to the applicant’s ordinary residence or garage. The applicant needs to be a citizen of the European Union and be in effective possession of the immovable property for which he or she is requesting a correction in description. This possession must be recognised by the Lands Authority.
To show that the property is his ordinary residence, the applicant must hold an identity card registered on the said building for not less than three years before the application is filed, needs to be a citizen of Malta or the European Union, must have an original contract which provides that the building was granted for the purpose of residence, and must state by means of an affidavit that the building served as his ordinary residence for three years preceding his application.

Right to refuse application, cases of breach, and retroactive effect

There are certain elements which are common to all the Regulations discussed and bring to forefront the legislator’s intention behind these three laws. The first common element is the right to refuse the application which is at the discretion of the Lands Authority which must be in writing stating the reasons for refusal. Secondly, the Authority has a right of action against any person involved before the First Hall of the Civil Court which applies even if the new contracts have already been signed. This carries with it important implications since this right of action does not only concern the applicant himself or herself but ‘any person involved’. Finally, all three laws have retroactive effect which means that they apply to contracts entered into before the new Regulations came into being. When this retroactive effect is coupled with the number requirements which the applicant needs to meet, one perceives an intention on the part of the legislator to strike a balance between providing the benefit but at the same time preventing its abuse.

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Disclaimer: This article is not to be considered as legal advice, and is not to be acted on as such. Should you require further information or legal assistance, please do not hesitate to contact us on info@azzopardilegal.eu.

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“A problem well put is half solved.”

Legal proceedings concerning the Reletting of Urban Property (Regulation) Ordinance (Chapter 69 of the Laws of Malta) have been on the rise in recent years; and thus becoming somewhat of a legal monster which seemingly could not be tamed. The main issues forming the object of such proceedings regarded the pre-1995 leases protected by law, where such protection created an imbalance between the rights of the landlord and the tenant, in favour of the latter.

Notwithstanding the efforts of the judiciary, the legislative branch of the Maltese Government has tried to ameliorate the situation pertaining to these proceedings multiple times, by attempting to recalibrate the disparities between landlords and tenants. Recently, however, Legal Notice 362 of 2020 stipulated that articles 2, 3, 4 and 5 of the Mediation (Amendment) Act of 2017 will come into force on the 28th September of 2020. Principally, this means that as of the 28th of September 2020, parties wishing to proceed to initiate a suit before the Rent Regulation Board are required to attend compulsory mediation sessions.

What is mediation? and will this solve all the problems relating to pre-1995 leases? Simply put, mediation is the process whereby an impartial third person intervenes between the parties facing conflict in an attempt to resolve whatever caused such conflict, prior to engaging in court litigation. Quite expectedly, this is in fact a mandatory procedure in family disputes where spouses file for separation before the Civil Court (Family Section). Indeed, this does not mean that spouses engaging in separation proceedings have their problems solved amicably by means of these mediation sessions; hence, the same will naturally occur in cases of rent disputes despite the mediation process. Nonetheless, the usual proceedings before the Rent Regulation Board will remain available to those who do not reach an agreement via mediation or do not see a prospect of an amicable agreement.

Therefore, the compulsory nature of the mediation sessions before the Malta Mediation Centre in regards to such lease disputes leaves no choice but for the parties to attempt and solve their conflict without resorting to litigation. Naturally, this will benefit both the parties and the Rent Regulation Board itself — whereby the parties might not have to resort to litigation and the Board frees itself from frivolous claims. Those, however, who do not manage to solve their claims via mediation within sixty days from the appointment of the mediator (or longer, if both sides agree to extend; though not longer than one hundred and twenty days), are allowed to file an application before the Rent Regulation Board (Malta or Gozo) on the grounds where no agreement has been reached, within sixty days from the date of when such compulsory mediation is terminated.

Despite the compulsory nature of these proceedings, it is provided in the Main Act (Chapter 474 of the Laws of Malta) that mediation proceedings may be resorted to even voluntarily. In such cases, Act VIII of 2017 states that where mediation has already been resorted to before the actual filing of the application for the commencement of proceedings before the Board, the Board shall appoint the application (that is, for litigation) without the need for further mediation.

On the other hand, those who, during the compulsory mediation process, declare that there is no prospect for an agreement, such compulsory mediation shall be deemed terminated ipso jure (meaning that it shall terminate according to law) and the parties are thus able to resort to litigation. This, however, has to be done at least after the first appointment has been held by the mediator. Nonetheless, declaring that there is no prospect for agreement or solving all conflicts are not the only two ways by which mediation is terminated. In fact, Act VIII of 2017 makes reference to Article 28 of Chapter 474 (Mediation Act), which in turn states that mediation ends also when the mediator decides. This takes place when, the mediator provides the parties with a writing stating the mediation is terminated or it is the opinion of the mediator that the parties cannot arrive at a solution.

Ultimately, although this will not eliminate all the issues at hand emerging from Chapter 69 of the Laws of Malta, this process will serve as a step forward and set a standard for future potential lawsuits.

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Disclaimer: This article is not to be considered as legal advice, and is not to be acted on as such. Should you require further information or legal assistance, please do not hesitate to contact us on ingo@azzopardilegal.eu.

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