The subject of pre-1995 leases has been at the centre of legal discussion in the past few years. Many questions are asked; here are some answers to the most frequent ones.
Firstly, what are pre-1995 leases?
Pre-1995 lease is the term generally used for those leases which are protected by the law. These refer to two types of leases: (i) leases which commenced before 1st June 1995 and which are protected under the Reletting of Urban Property (Regulation) Ordinance, Chapter 69 of the Laws of Malta, and; (ii) leases which were established on the basis of a preceding title of emphytheusis or sub-emphyteusis, and which are protected under the Housing (Decontrol) Ordinance, Chapter 158 of the Laws of Malta. What is common between these two kinds of leases is that in both cases, it is illegal for the landlord to refuse the renewal of the lease when it expires, or to raise the rent or impose new conditions for the renewal of the lease. In practice, these were practically perpetual leases, with little if any chance for the landlord to increase the rent.
What about the new laws?
Recently, two laws were passed (one in 2018, and the other in 2021) that provide a mechanism for an increase in rent. These are article 12B of Chapter 158 of the Laws of Malta (introduced in 2018) and article 4A of Chapter 69 of the Laws of Malta (made law in 2021).
What is the difference between the application filed before the Civil Court First Hall (Constitutional Jurisdiction) and that filed before the Rent Regulation Board?
These applications have a different purpose altogether. One may file an application before the Civil Court First Hall (Constitutional Jurisdiction) in order to claim compensation from the State in satisfaction of the rent lost in the past due to the protective rent laws. Usually, the court will declare that prior to the entry into force of the new laws, the 'old' rent laws breached Article 1 Protocol 1 of the European Convention on Human Rights (the right to property), and will award compensation to be paid by the State. An application before the Rent Regulation Board is filed in order to trigger the rent increase (or eviction) provided by article 12B of Chapter 158 of the Laws of Malta or article 4A of Chapter 69 of the Laws of Malta. This last mechanism is a relatively recent development in the Maltese Law of Lease.
Can I evict the tenant?
The Civil Court First Hall (Constitutional Jurisdiction) will probably not evict the tenant. The position of our courts has been very clear, in that they will not evict the tenant. In applications before the Rent Regulation Board under article 12B of Chapter 158 of the Laws of Malta or article 4A of Chapter 69 of the Laws of Malta, a tenant may only be evicted if he or she fails to satisfy the means test.
What is the means test?
The means test is a test performed by the Rent Regulation Board in order for it to verify whether or not the tenant can continue occupy the property under a title of lease. The test consists of an analysis of the tenant's annual income and his capital; the tenant must satisfy both for him to be able to continue in the lease. The applicable thresholds can be found in Subsidiary Legislation 16.11, and the method is that the older the tenant is, the easier it is for him to satisfy the means test.
What is to be included in the capital?
The capital is the general wealth of the tenant. In calculating the tenant's capital, the following are considered: the value of any immoveable property belonging fully to the person with a claim to the tenancy, but only if the said person holds vacant possession of the said property, money deposited in a bank which can be withdrawn at less than three months’ notice, cash in hand, time deposits, bonds, stocks, securities, and any other financial instrument or financial product.
What is the deal with the 2%?
In applications before the Rent Regulation Board under article 12B of Chapter 158 of the Laws of Malta or article 4A of Chapter 69 of the Laws of Malta, the Board will perform a means test on the tenant, and if the tenant satisfies the means test, then the Board will increase the payable rent in a sum equivalent up to 2% of the value of the property. The Rent Regulation Board usually opts to award the full 2%, but it can decide on less, and can even decide on a gradual increase.
Do I have to pay the architect?
In an application before the Civil Court First Hall (Constitutional Jurisdiction), an architect will have to be appointed by court in order to establish the rental value of the property for the relevant years. This architect has to be provisionally paid by the applicant (ie. the person filing the case). Before the Rent Regulation Board, the architects (two in number) are part of the composition of the Board, so they're paid by the State, and not by the parties to the case.
Can I challenge the conclusions of the architect?
In a case before the Civil Court First Hall (Constitutional Jurisdiction) (ie., the one in which one can claim compensation), the architect's conclusions may be challenged the same way as in ordinary courts, that is by putting questions to the architect (in Maltese, 'eskussjoni'), or by requesting the appointment of additional referees ('periti addizzjonali'), who will be three in number. Before the Rent Regulation Board, the architect's conclusions cannot be challenged, except for perhaps through an appeal. This is however a debatable premise.
What is the role of the Housing Authority?
In applications before the Rent Regulation Board under article 12B of Chapter 158 of the Laws of Malta or article 4A of Chapter 69 of the Laws of Malta, the applicant has to notify the Housing Authority with the initial application, and the Housing Authority will then intervene and participate in the case. If the tenant satisfies the means test, the Housing Authority will usually subsidise a large chunk of the increase in rent.
From when is the rent increase payable?
According to our courts, in applications filed before the Rent Regulation Board, the increase in rent is payable as from the Board's decision. This has caused a lot of confusion among lawyers and parties alike since the law is not very clear in this respect.
Take me back to the constitutional case; how is the compensation calculated?
In a case before the Civil Court First Hall (Constitutional Jurisdiction), the court will generally award compensation under the formula established in Cauchi vs Malta, a judgment delivered by the ECtHR on 25 March 2021, which stated that the compensation payable shall be around 50% of the rent that the landlord would have received if he had the opportunity to rent the property in the free market, minus the rent he had actually received. The court will generally also award a small sum as moral damages.
Disclaimer: This article is not to be construed as being 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 at info@prolegal.mt.
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