FAQs - I am a Landlord: How Will the Rent Reforms Impact Me?
The definition of tenant under the pre-1995 legislation is
such that it is next to impossible for the title of the tenancy to ever
revert back to me? Will this continue to be the case?
It is correct that the definitions of tenant in the various pre-1995
legislations are very broad. For example, the definition of tenant in the
Urban Property (Regulation) Ordinance is “widow or widower … [and]
in the case of a dwelling – house, where the tenant leaves no widow
or widower, such members of the tenant’s family who would be living
with the said tenant”. Act XXIII of 1979 defines tenant to include “children,
unmarried brother or sister of the tenant who would be living with the
tenant at the time of his or her death, and the ascendant of tenant who
would be living with the said tenant”.
There is no doubt that it is difficult to secure reform of the rent laws
unless the is sensitive issue is addressed.
The authors of the proposed rent reform strongly believe that a solution
on this matter must be such that on the one hand does not create social
and economic distortion to the tenant, whilst at the same weaving a balanced
solution that will, progressively, deliver social justice to the landlord.
In this regard, the reform recommendations are proposing that the definition
of tenant is defined in a conditional manner to establish criteria of who
qualifies as a tenant. The conditions proposed are two: the relationship
of the individual to the tenant; and the length of the relationship between
the individual and the tenant.
Moreover it is recommending that the tenant and the spouse of the tenant
are ubiquitous: that is in the event that the tenant passes away, the spouse
will enjoy the same rights of the tenant as a matter of course and not
a causa mortis inheritance right.
In terms of the relationship of the individual to the tenant, the definition
embraces the following:
(a) Natural and / or adopted child and / or fostered child
(b) A child of the tenant who is younger than five years
(c) An ascendant who is sixty years and older.
In terms of the length of the relationship of the individual to the tenant,
the definition sets the following conditions:
(i) For (a) and (c) above the individual must have lived with the tenant
for a period of equal to or greater than five years as at 1st June 2008
(ii) For (b) above that the child will less than five years of age as at
1st June 2008.
Currently causa mortis inheritance is enjoyed unconditionally
from one generation to the next. Will this continue to be the case?
No. The rent reforms are proposing that when the sitting tenant
or his spouse passes away, the right to causa mortis inheritance will only
apply in relation to the beneficiary as defined earlier. This means that
when the beneficiary passes away, the title of the tenancy will revert
back to you. Thus the right of causa mortis inheritance is a one time right
only that is applicable to the defined beneficiary.
Does this mean that once this right of causa mortis
inheritance is exhausted the title of the tenancy reverts back to me – irrespective
whether there were occupants living the tenant?
Yes. The title of the tenancy will revert back to you. Nevertheless
any occupants who would have been living with the tenant are being afforded
the right to continue to live in the premises for a period of not more
than five years. This right, however, will be governed by the post-1995
rent reforms. This also means that the value of the rent will be subject
to market value.
Does this mean that the market value I will charge will
be fully liberalised – that is I can place the level of the value
of the rent as I deem appropriate.
The reform recommendations propose that whilst the rental market
should be liberalised the principle of a ‘fair market value’ should
be retained. In this regard it is proposed that Index should be introduced
which will act as the determinant of a ‘fair market value’ for
the level of rent (as well as residential premises) in a particular area
and a locality within the said area. It is pertinent to add that this applies
also to leases of commercial premises.
The tenant to whom my property is rented has for the
past five years been living in a residential home. The place is vacant,
yet, I cannot ‘re-own’ my
own property. Will this continue to be the case?
The rent reform recommendations are proposing that when the tenant
would have vacated the property for six months and more due to residential
care or institutional hospital care for which he or she has been medically
discharged the title of the tenancy will revert back to you if there is
no eligible beneficiary under the new definition of tenant.
In the event that there is an eligible beneficiary you can following
the six months inter vivos transfer the lease to the eligible beneficiary
in lieu of the beneficiary exercising his or her right on causa mortis
inheritance.
Whilst this is an improvement on the current state of play it
still means that considerable time will pass before the property returns
back to me. Am I expected during this period to continue to receive the
current rent value, which has practically become meaningless over time,
whilst I continue to carry responsibility for expensive maintenance and
repairs which I carry at current prices?
As stated earlier, the reform recommendations, seek to achieve
a balance between maintaining social and economic cohesion vis a vis the
sitting tenant and achieving social justice vis a vis the landlord.
Thus the recommendations relating to the definition of the tenant and
the right of causa mortis inheritance are directed to box over time the
perpetuity of the current state of play. Iit seeks to balance this by increasing
the rights of the landlord in terms of the level of the value of the rent
and his or her responsibilities in relation to repairs and maintenance.
In terms of the level of the value of the rent it is proposed that as
from 1st January 2009 the rent for all pre-1995 tenancies will be established
at €185 per annum. Furthermore, this will increase by the rate of
inflation calculated over a period of three years until it reaches market
value. The first inflation related increase will take place on 1st January
2012.
In terms of responsibilities relating to repairs and maintenance it is
being proposed that your responsibility will be limited to building structure
and roof repairs and maintenance. In the event that such repairs are carried
out you would be able to increase the level of the value of the rent by
10% of the total cost once the repairs are completed. You should note that
the tenant is being provided with the opportunity to carry out the repairs
him or herself. Should the tenant choose this option you will be under
no obligation to compensate the tenant for such repairs once the title
of the lease reverts back to you.
Thirty years ago I freely entered into a commercial lease agreement
with a tenant. As I could not set a termination date I had inserted a clause
in the contract which stated that at the end of the 10th year I will increase
the level of the value of the rent by 60%. My intention of doing this was
to induce termination of the contract. However, due to inflation this clause
has now become meaningless and the value of rent I receive is nothing to
what the market offers today. Will I now be able to terminate such a contract?
You entered into the agreement freely; and it is not the intention
to seek forced intervention in relation to such contracts. Nevertheless,
the authors of the reform recognise the original intention behind the type
of clause you mention: a legal solution agreed between both parties to
act as potential leverage to induce termination.
The rent reform recommendations are proposing that if in your contract
with the tenant you have a clause that will take effect before twenty years
from 1st June 2008, then the contract will be terminated on the date such
a clause comes into effect and the title of the tenancy will revert back
to you.
The contract I entered into with my tenant does not have such
a clause. Does this mean that the title of the property will never revert
back to me?
The rent reform recommendations are proposing that at the end
of 20 years from 1st June 2008 such rent contracts will be terminated and
the title of the tenancy will revert back to you.
Does this mean that until such time that the clause relating
to an abnormal increase in the rent or at the end of the 20 year period
from 1st June 2008 I will not be in a position to increase the value of
the level of the rent?
The rent reform recommendations are proposing that over a 12 year
period the value of the level of the rent will increase until it reaches
market value. Nevertheless, the authors of the rent reform are proposing
the increases in the value of the level of the rent will be based on the
turnover of the commercial entity. This recommendation is motivated by
the understanding the commercial entities with lower turnover require a
level of protection during the transitional process. Thus, it is proposed
that the level of the value of the rents will increase as follows:
- turnover =< €50,000 (Lm21,459): 1990 inflation indexed rates
as at 1st January 2009 and will increase automatically every three years
to 1996, 2002 and so forth – that is six year steps - until full
market value is reached over the 12 year transition period.
- turnover => €50,001 (Lm21,459.6) but =< €500,000 (Lm214,592):
established at 1995 inflation indexed rates as at 1st January 2009 and
will increase automatically every three years to 2001, 2007 and so forth – that
is six year steps - until full market value is reached over the 12 year
transition period.
- turnover => €500,001 (Lm214,592.7): 2000 inflation indexed rates
as at 1st January 2009 and will increase automatically following every
three years to 2006, 2012 and so forth – that is six year steps -
until full market value is reached over the 12 year transition period.
My building is leased to a company which is listed on the Malta
Stock Exchange. I do not believe that such a company should be offered
protection at my expense.
You are correct. The rent reform recommendations are proposing
that property leased by legal entities listed on the Malta Stock Exchange
will have their lease terminated as at 1st June 2009 and that the title
of the property will revert back to you.
My tenant has sub-let the lease and is earning a far higher
value for the property when compared to the rent he or she pays me. This
is unjust.
The authors of the rent reform recognise that this situation is
unjust and are thus recommending that within 10 years from 1st June 2008
the title of the property will revert back to you.
My tenant has designed a legal instrument called a ‘management
agreement’ to “sub-lease” my property to a third party
at a ‘fee’ which is far higher from the rent he pays me. This
is unjust.
The authors of the rent reform recognise that this situation is
unjust and are thus recommending that a ‘management agreement’ is
defined as sub-let, and such a sub-let can only take place with your consent.
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