The main premise whenever discussing pre-1995 leases is that the regime regulating them is ever-changing and has been subject to countless amendments in the past. The perpetual struggle of the legislator is achieving balance between the rights of the tenant and the rights of the landlord. In a nutshell, the current situation is that pre-1995 leases which are still in effect at this point in time are automatically renewable and the rent payable does not reflect current market value. In an attempt to provide a solution, Bill 203 of 2021 (Controlled Leases Reform Bill) proposes amendments to the current regime regulating pre-1995 leases. This Bill is currently at first reading stage so if and when it is passed into law it will affect the Chapter 16, Chapter 69, Chapter 158, and the Chapter 474 of the Laws of Malta.

Proposed Amendments to the Civil Code

Out of the various articles in the Civil Code which regulate pre-1995 leases, of particular relevance is Article 1531C which provides that the  rent  of  a  residence  which  has  been  in  force before the 1st June, 1995 shall be subject to the law as in force prior to the 1st June, 1995. What the amendments propose is the addition of a proviso to Article 1531B which provides that after the Bill enters into force, Articles 1531C, 1531F, 1531G and 1531K shall not continue to apply to pre-1995 leases. Articles 1531C and 1531K will only apply in regard to the establishment of the minimum rent payable. This means that pre-1995 leases will be subject to the law as amended and not as in force prior to 1st June 1995. Therefore, the proposed amendments to the Civil Code need to be viewed in the context of the other proposed amendments.

Proposed Amendments the Reletting of Urban Property (Regulation) Ordinance, Chapter 69 of the Laws of Malta

Currently, the only way for a landlord to increase the rent of a pre-1995 lease falling within the ambit of Chapter 69 is to opt for constitutional action. While such action has proven to be successful, the procedure is repetitive and tedious. First, the landlord needs to file a constitutional application before the Civil Court (Constitutional Jurisdiction) on the basis that Chapter 69 gives the tenant protection which breaches the landlord’s fundamental right to property. The Court will then declare that it has found a breach of the landlord’s human rights and declares the protection afforded to the tenant unconstitutional. Arguably, however, it fails to provide a concrete remedy to the landlord. After obtaining such judgment, unless of course it has been appealed, the landlord would then have to file another application before the Rent Regulation Board (RRB) for eviction or for a fair increase in the rent. Despite this system being critised by the European Court of Human Rights (Portanier v Malta, 2019), the landlord is forced to jump through multiple hoops in order to have his basic fundamental human rights safeguarded.

This is why an amendment to Chapter 69 to this effect is overdue. The proposed amendment largely mirrors Article 12B of Chapter 158 of the Laws of Malta and entitles the landlord to file an application before the RRB requesting that the rent is reviewed to an amount not exceeding 2% per annum of the free and open market value of the property. The RRB will then conduct a means test of the tenant and where the tenant is found not to have sufficient means, he or she will be given five years to vacate the premises. The tenant may then apply for the Private Rent Housing Benefit Scheme and the additional rent is paid by the Housing Authority according to the means bracket which the tenant falls under. Furthermore, when such an application is filed before the RRB, the Housing Authority shall be notified and shall have the right to participate in the proceedings. The tenant shall also be entitled to benefit from legal aid in such proceedings.

Proposed Amendments to the Housing (Decontrol) Ordinance, Chapter 158 of the Laws of Malta

Given that Article 12B of Chapter 158 was already introduced back in 2018, the proposed amendments to this law are less voluminous when compared to Chapter 69. With regard to Chapter 158, the legislator is also proposing that the tenant be entitled to benefit from legal aid in proceedings under Article 12B. Presently, the law provides that both landlord and tenant are entitled to such aid. This proposed change is recognised as an attempt by the legislator to avoid any conflict of interest for the Housing Authority which would be providing such aid.

Interestingly, with the proposed amendments the legislator proposes the deletion of Article 12B(11). Sub-article 11 provides that when the landlord obtains a judgment based on the lack of proportionality between the value of the property and the rent receivable by him or her, the landlord cannot proceed with evicting the tenant without first availing himself of the procedure of Article 12B. This means that after obtaining a judgment by the Constitutional Court declaring a breach of his fundamental human rights, the landlord still cannot enforce this judgment before the RRB. Being the subject to various consitutional cases, Article 12B(11) has been declared by the Constitutional Court to be in breach of the landlord’s fundamental human right to property (Robert Galea vs Avukat Ġenerali et, Constitutional Court, 6th October 2020). Therefore, the proposed deletion of this sub-article may be seen as a reaction to such judgments which declare this to be unconstitutional.

Proposed Amendments to the Mediation Act

The proposed bill also seeks to delete Article 34 of the Mediation Act which provides for mandatory mediation prior to a suit before the RRB being initiated. With Article 34 coming into force only a few months ago, should this proposed amendment be successful it is safe to say that mediation in rent proceedings will be shortlived.

What impacts will these amendments have, if implemented?

It is arguable that the most substantial amendment is that regarding Chapter 69 of the Laws of Malta. As discussed, the amendment proposed is almost identical to the current Article 12B of Chapter 158. When this is taken in the light of the latest jurisprudence of the European Court of Human Rights on the matter, particularly, Cauchi v Malta (decided on the 25th March 2021), one is more prone to take a more skeptical view of these amendments.

This is because, in this judgment, the ECHR held in no uncertain terms that:

‘In view of these considerations, the Court cannot accept that Article 12B was designed to deal effectively and meaningfully with the issue of the disproportionate interference arising from the applicable rent laws, which has already been recognised by the domestic courts […] Without prejudice to such future findings, in view of the above‑mentioned considerations, as the situation stands today, the Court cannot confirm the effectiveness of this remedy in circumstances such as those of the present case.’

Therefore, while these amendments are undoubtedly a step forward, their true effectiveness remains to be seen. With the ECHR pronouncing itself so clearly on Article 12B, which the proposed amendments to Chapter 69 mirror, the answer seems to lean towards the negative. Indeed, it is more likely than not that this amendment, albeit still in the metaphorical legislative womb, is doomed from the start.

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The right to property is protected by the European Convention on Human Rights; therefore, rendering it also a protected by our Constitutional courts. In principle, this means that no one may forcefully take one’s property. Naturally, as with most other laws, there exist certain exceptions (such as cases of expropriation with just compensation). But with most cases, one can enjoy his property without State interference.

The right to property has taken Malta by storm in the last few years. A large number of Maltese landlords (thousands) have suffered the legislative labyrinth created by the continuous development in our rent laws. Two laws are the main culprits: contracts of lease which predate 1995 (under Chapter 69 of the Laws of Malta) and temporary emphytheutical concessions converted into permanent leases (Chapter 158 of the Laws of Malta).

In brief terms, Chapter 69 (the Reletting of Urban Property (Regulation) Ordinance) and Chapter 158 (Housing (Decontrol) Ordinance) had been introduced and amended in order to protect the interest of the general public at the time of their promulgation, by creating protected ‘leases’ that could not be terminated. Basically, on the expiration of the period of occupation agreed to between the parties, the lease did not end, continued, and the landlord could not refuse to renew it from year to year. He had to remain in the lease, whether he liked it or not. To add insult to injury, both laws also placed enormous limits in how rent may increase from year to year – in most cases, rent could only increase in proportion to the yearly COLA increases (which could literally mean an increase of for example five euro every three years). We therefore have beautiful houses in Valletta being rented for €209 a year, properties that on the free market may easily fetch €2000 a month. These laws meant that landlords could neither increase the rent to reflect the market prices nor take back their property.

In time, landlords started to resort to our courts of constitutional jurisdiction to obtain a remedy. The number of these cases are plentiful today, and usually (with some exceptions) go through the following steps:

An Application is filed in court

The court application primarily consists of the landlord’s claims and the remedy that is being requested, and it is made against the tenant and the State Advocate (as legal counsel to the State). The remedies requested are usually two: one against the State Advocate, consisting of a demand for adequate compensation, and another against the tenant, consisting of a declaration that the lease in question is affected by a law that is in violation of Article 1 Protocol 1 of the European Convention of the Human Rights.

At times, an attempt is made to evict the tenant in order to regain back the peaceful possession of the property. This, however, has proven to be a legal tug-of-war between domestic courts and the European Court of Human Rights, with the Maltese courts still very reluctant to directly evict tenants, instead opting to merely declare that the tenant would no longer be able to rely on the articles at law in question to remain in the lease. After that, the landlord would have to file a second lawsuit, and seek eviction before the Rent Regulation Board.

During the hearing of the case, one must usually provide documentation proving his or her title over the property, provide evidence as to the duration of the ‘protected lease’, and provide evidence as to the rent received throughout the years.

The Respondents will reply to the case

The respondents (the tenant and the State Advocate) will file their reply, stating why in their view the court should not accede to plaintiff’s request. Usually, the parties will attempt to make the argument that these old rent law manage to create a balance between the rights of the landlord and those of the tenant, and that therefore, they are not in breach of the fundamental right to property. The tenant will also usually attempt to exculpate himself/herself, stating that he or she is not responsible for the promulgation of laws, and so, any declaration that a law is in violation of the European Convention on Human Rights is not to affect him, and that he should not be burdened with the costs of the case

A Date for the First Sitting is appointed.

A date is appointed for the first sitting. At times, this proves to be an important sitting because any preliminary objections are raised and addressed — objections which are sometimes capable of putting the proceedings at a halt or even dismiss the case at once.

An Architect is appointed

Usually then, plaintiff (the landlord) requests that a court-appointed architect is engaged in order to give an indication of the rental market value of the property in question through the years. The architect is responsible to draw up a report highlighting various important information about the property, such as whether there were any changes made, any deterioration taking place, and so on. This aids the court in two manners: it allows to see whether there is a substantial discrepancy between the rent received by the landlord and that available on the market, and what kind of compensation would be suitable to remedy the harm suffered by the landlord in view of these rent laws, if in the circumstances of the case they are deemed to be in breach of the landlord’s fundamental human rights. In nearly all the cases, the expenses for the services of the court-appointed architect is provisionally and initially paid by the plaintiff (the landlord), who will only publish his/her findings after having been paid.

Parties are allowed to produce witnesses, bring evidence, and ask questions to the court-appointed architect.

Parties may bring witnesses, produce evidence and submit in court any relevant proof. Thereafter, the parties will be given the opportunity to make final submissions.

Judgment

A judgment is then given by the court. The court will state whether there have been any violations of the landlord’s human rights, and if so, it will liquidate the amount of compensation to be paid by the State Advocate to the landlord. Never there has been a case where the tenant was obliged to pay compensation, and it is also extremely rare for the tenant to be condemned to pay the costs of the case. There have been limited cases in the past where eviction was also requested and then considered as one of the remedies to be given; however, in the past years, our courts have mostly limited themselves to declare that the tenant would, from the date of the judgment, no longer be able to rely on that law declared to be violating the landlord’s human rights to remain in the property leased. Then the plaintiff would have to file another case before the Rent Regulation Board to seek eviction, unless of course the parties find some sort of agreement.

The parties can then appeal before the Constitutional Court.

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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 Dr Carlos Bugeja at carlos@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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