FAQs - I am a Tenant: How Will the Rent Reforms Impact Me?

---

No. The reform of the rent laws will only apply to tenants and landlords who have rented out property prior to 1st June 1995. Tenants or landlords who have rented out property after this date will not be impacted as they are governed by the 1995 Rent Law. People who own their property will also not be impacted.

I am a sitting tenant of a residential property which I rented under the pre-1995 legislation. How will I be impacted?

You will retain the right to the tenancy. You will however be impacted in the following two ways.

First, a minimum rent is being established which is set at €185 per annum. This will come into effect as from 1st January 2009. Subsequent to that the rent will increase by rate of inflation over a three year period. The first rent increase will take place on 1st January 2012.

Second, you will now be responsible for all maintenance and repairs with the exception of maintenance and repairs relating to the building structure and the roof.

The reforms propose that the right of title is also extended to you. Thus should your husband pass away you will enjoy the right to the property as a matter of course and not as a right under causa mortis inheritance.

I am the daughter and I have been living with my parents for the past 10 years. My parents rented the house in 1975. Does the reform affect my rights to continue to live in the house when my parents pass away?

No the reforms will not affect your rights. Given that you have been living with your parents for more than 5 years from when the reforms are proposed to come into effect – which is 1st June 2008 – you will have the right to causa mortis inheritance as you are an eligible beneficiary.

I am an adopted son and I have been living with my parents for the past 8 years. My parents rented the house in 1980. Does the reform affect my rights to continue to live in the house when my parents pass away?

No the reforms will not affect your rights. In fact the reforms are specific in stating that if you are an adopted child and you have been living with your parents for more than 5 years from when the reforms are proposed to come into effect – which is 1st June 2008 – you will have the right to causa mortis inheritance as you are an eligible beneficiary.

I am a fostered child and I have been living with my parents for 6 years. My parents rented the house in 1994. Does the reform affect my rights to continue to live in the house when my parents pass away?

No the reforms will not affect your rights. In fact the reforms are specific in stating that if you are a fostered child and you have been living with your parents for more than 5 years from when the reforms are proposed to come into effect – which is 1st June 2008 – you will have the right to causa mortis inheritance as you are an eligible beneficiary.

No the reforms will not affect your rights. In fact the reforms are specific in stating that if you are an ascendant and you have been living with your relatives for more than 5 years from when the reforms are proposed to come into effect – which is 1st June 2008 – you will have the right to causa mortis inheritance as you are an eligible beneficiary.

Your child, or for the matter any child less than five years, will be eligible as a beneficiary to causa mortis inheritance.

The proposed reforms establish the beneficiary to be either the direct descendants of the tenant or his spouse – that is the children (including adopted or fostered children) in so far that they have been living with the tenant for more than five years from the effective date (1st June 2008) – or their ascendants in so far that they have been living with the tenant for more than five years from the effective date (1st June 2008).

As the nephew or the niece of the tenant you will not qualify as a beneficiary for causa mortis inheritance.

Nevertheless, the reforms propose that you will be afforded the right to continue to live in the residency for a period of not longer than five years from the date of the death of the tenant subject to the conditions that will be governed by post-1995 rent legislation and that you will pay market value for the rent.

Any further extensions of the lease would be subject to agreement reached between you and the landlord.

Whilst the proposed reforms establish a natural, adopted or fostered child to be a beneficiary to causa mortis inheritance such eligibility is qualified by the criteria that you must have been residing in the said tenancy for a minimum of 5 years from 1st June 2008.

Given that you have been living with your father for less than this period you will not qualify for causa mortis inheritance.

Nevertheless, the reforms propose that you will be afforded the right to continue to live in the residency for a period of not longer than five years from the date of the death of the tenant subject to the conditions that will be governed by post-1995 rent legislation and that you will pay market value for the rent.

Any further extensions of the lease would be subject to agreement reached between you and the landlord.

My father, who resides in a pre-1995 tenancy, is elderly and last year my wife and I went to live with him to support him. Do I understand correctly that under the proposed reforms I will no longer be eligible for automatic inheritance to the title of the lease?

Whilst the proposed reforms establish a natural, adopted or fostered child to be a beneficiary to causa mortis inheritance such eligibility is qualified by the criteria that you must have been residing in the said tenancy for a minimum of 5 years from 1st June 2008.

Given that you have been living with your father for less than this period you will not qualify for causa mortis inheritance.

Nevertheless, the reforms propose that you will be afforded the right to continue to live in the residency for a period of not longer than five years from the date of the death of the tenant subject to the conditions that will be governed by post-1995 rent legislation and that you will pay market value for the rent.

Any further extensions of the lease would be subject to agreement reached between you and the landlord.

You are correct in saying that you will qualify for causa mortis inheritance to the tenancy in the event of the death of your parents. Under the proposed reforms, the right to causa mortis inheritance is an one time right only: that is once this right has been transferred to you through your parents, that right will no longer be transferable.

Your son will not have any right to the tenancy; and the title of the property will return to the landlord. Your son can always seek to reach agreement to rent the property from the landlord under the post 1995 rent legislation.

I have been living with my father for the last 10 years in his rented tenancy. I earn a good income – which is higher than €25,000 per annum. Does the fact that I earn a good income make a difference to my right as a beneficiary?

Yes the fact that you have a high income or economic wealth will have an impact to your right as a beneficiary.

In the transition process towards a liberalised rental market that the reforms are recommending the intention is to protect those persons who will not be in a position to pay full market value of the rent. At the same time, however, the reforms are seeking to provide social justice to the landlord by assuring that his or her rights to the title of the tenancy reverts back to him or her when this is so appropriate.

It is argued that a person who earns an income equal or greater than €25,000 or who has an economic wealth which is greater than €125,000 should not be afforded ‘subsidisation’ of a private property at the expense of the landlord.

Protection is being afforded by obliging the landlord to enter into a three year contract with you, subject to the conditions of the post-1995 rent legislation, for a rental value of a maximum of 3% of the value of the property.

Any further extensions of the lease would be subject to agreement reached between you and the landlord.

Will the cost of repairs to the building structure or the roof be borne by the landlord? Will any of the cost be passed to me as the tenant?

The cost of repairs will be borne by the landlord. Nevertheless the landlord is entitled to increase the value of the rent by a maximum of 10% of the full cost of repairs at the time the repairs are completed. Alternatively you may carry out the costs yourself. Should you, however, opt for this option you will not be entitled for any compensation in the event that the title of the tenancy reverts to the landlord.

I may wish to opt for the alternative to carry out the repairs myself so that the value of the rent does not increase but I fear that I will not be in a position to afford this.

The Government either through MEPA or the Housing Authority already has in place a number of schemes to assist tenants to carry out repairs to their residencies. It is proposed that these schemes will also be opened up to tenants of pre-1995 rented residencies.

I understand that as a result of the reform the rent as from 1st January 2009 will be established at €185 per annum. I live on an Old Age pension and this increase will have a negative impact on my disposable income.

In drawing up the reform of the rent laws a sensitivity analysis was carried out to see to what extent the value of the rent should be increased, and if so whether this would be affordable. The sensitivity analysis showed that placing a minimum level on the value of rent would have a negative impact on certain cohorts of tenants.

Thus whilst recognising that landlords at least start receiving an increase level in the value rent – minimal as this may be given that certain rents have remained unchanged for decades – it is proposed that assistant schemes are introduced to compensate for negative impacts on tenants who are in receipt of an Old Age pension or social assistance.

I am in possession of a commercial lease which I entered into with the landlord in 1975. The landlord entered into this agreement freely. Will I be impacted?

The reforms are proposing the commercial leases which are not of a definite nature and which have been entered into by mutual agreement between the parties will continue to be honoured subject to:

(i) contracts that do not have a termination date but have an ‘inbuilt’ mechanism for inducing termination by abnormally increasing the value of the rent at a particular date will terminate on the date the abnormal increase in the value of the rent takes effect; or

(ii) on the expiry of a 20 year sunset clause effective from 1st June 2008 – whichever is the earliest.

The title of the lease will then revert back to the landlord.

Do I understand correctly that all tenancies – contracted or otherwise – for commercial leases will terminate after 20 years effected from 1st June 2008?

All tenancies, unless otherwise agreed between the landlord and the tenant, will expire 20 years effected from 1st June 2008. The exception to this are those contracts, unless otherwise agreed between the parties, which have a clause that induces an abnormal increase in the value of the rent on a particular date. Such contracts will terminate on the date when this clause comes into effect.

Will there be no increase in the value of the rent during the twenty year sunset clause for commercial leases?

The proposed rent reforms argue that the pre-1995 level of the value of the rents is creating market distortion as there is no level playing field between the rental values of such tenancies, and commercial tenancies entered into under the post-1995 rent reforms. Moreover, there is no social justification for protection to be provided for tenants of commercial premises to enjoy ‘subsidised’ rates at the expense of the landlord.

For this purpose, the rent reforms propose that the value of the rent of such properties is to increase to reach market value in an incremental manner 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.

Once the title of the lease reverts back to the landlord can I continue to lease the premises?

In the event that the landlord intends to lease out the premises for commercial use you will have the right of first choice to continue to use the premises. You will, however, pay a market value for rent, and the new rent agreement will be governed by the post-1995 rent laws.

What will constitute a market value? The landlord may force me out of my right of first choice by asking for an exaggerated level of rent value.

The rent reform recommendations are proposing that the Government introduces an Index which will act as the determinant of a ‘fair market value’ for the level of rent for commercial premises (as well as residential premises) in a particular area and a locality within the said area.

I have a tenancy for a property which I use as a summer residence. Will I continue to enjoy the rights to this property?

The transitional arrangements that are being proposed in the reform of the rents laws are directed to provide protection to persons who rent property for residential purposes. These transitional arrangements are introduced in order to secure social justice in terms of the right to residential housing to a sitting tenant and his / her spouse as well as eligible beneficiaries to the right on a one time causa mortis inheritance.

It is believed that a tenancy for a summer residency does not qualify for such protection, particularly so given that such a right will be enjoyed at the expense of the landlord. The rent reform recommendations are proposing that the right to the title of a summer residency will terminate with effect from 1st January 2010 – with the title of the property to revert back to the landlord.