Monday, 31 August 2009

Times: The gentle art of rent reform

Friday, 28th August 2009 by Peter Caruana Galizia

Following the publicity accompanying the launch of the White Paper on Rent Reform, the actual legislation mainly amending the provisions of the Civil Code on the institute of lease has been introduced very quietly in June this year by Act X of 2009.

The now published legislation has departed significantly from what the White Paper promised, or threatened - to those on the other side, but, on the whole, the thrust has been to bring about what the government has called a fair balance between the financial expectations of the landlord and what in effect is the social service provided by these landlords in being forced to accept the renewal ad infinitum of leases way beyond the original contractual period at more or less pre-war levels of rent. An attempt, in other words, to give a bit to each side in the vain hope of being everything to everyone.

This it has sadly done with at times incomprehensible drafting. I first read the English version, assuming this was the original, and then in desperation switched to the Maltese version, which is slightly less ambiguous, indicating in my mind that the Maltese was therefore the original version and the English a translation. I have, however, likewise stumbled and, in preparing notes for a seminar due in October, found myself resorting to guessing what the legislator had in mind, though rules of interpretation should logically apply to contracts and not to the laws themselves.
The amendments start by dividing leases into three main groups: pre-June 1, 1995 leases, post-June 1, 1995 leases and post-October 1, 2010 leases. It is only the pre-June 1, 1995 leases that will really affect most of us as some of the rights previously enjoyed by the tenants have been, or will, in the semi-distant future be eroded, "removed" being in general far too strong a verb to describe the process.

In fact, the only surgical bit in the amendments is the removal of the right of automatic renewal of pre-1995 leases of private garages and summer residences beyond June 1, 2010. Hardly revolutionary but always a start.

The rest of the amendments are mainly concerned with not upsetting apple carts.
The law has retained unchanged the security of tenure for the tenant and his or her spouse till their death in respect of pre-June 1, 1995 residential leases. Following their death, there is a complicated list of persons who will qualify to renew the lease as subject to a means test, the criteria for which are as yet unpublished. There is also a three-year protection at double the present rent for those who fail the means test and a five-year protection, also at double the present rent, for those who fail to qualify as they are not related to the tenant, opening doors presumably for partners, same-sex or otherwise, who previously enjoyed no protection at all. The minimum rent is to go up to €185 per annum with effect from January 1, 2010 where it is at present below this amount and the rent is index linked on a three yearly review basis, unless the lease agreement provides for a different method of increase.

Tenants of pre-January 1, 1995 commercial leases have also retained the security of tenure they enjoyed prior to the amendments for themselves and their spouses and, following their death, for their heirs up to a maximum period of 20 years, which started running on June 1, 2008. There is no means testing here and the law does not go into the tenant's turnover or do away with protection for public companies as promised in the White Paper. The rent is to increase by 15 per cent every year on the previous year for the next four years and is then revised annually at five per cent or in accordance with regulations that are yet to be published.

The amendments also deal with leases of clubs by not dealing with them at all, shift responsibility for all non-structural repairs in residences onto the tenant and attempt to do away with subletting by protected tenants within 10 years' time but all this is beyond the reach of this overview.

The point remains that the amendments are on the whole a positive but very limited attempt at redressing the rights of long-suffering landlords. Pity about the drafting.

[Click on the hyperlink above to view the comments on the Times' website.]

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