Ground-rent ("cens"): When and How can it be Redeemed?

When a property is granted in emphyteusis, a legal relationship is formed between the property owner (known as the "dominus") and the person acquiring the property (the "emphyteuta"). One of the conditions in the relative deed of transfer is the obligation imposed on the emphyteuta to pay the dominus a ground-rent ("cens").

There are different types of ground-rents, with the most common being perpetual and non-revisable. This type of ground-rent is payable for an indefinite period but the obligation to pay can be redeemed ("jinfeda") at any time. Redemption can be done by depositing payment through a schedule of redemption (cedola) in court, or by doing a notarial contract with the dominus or his successor/s in title. If the ground-rent is perpetual and non-revisable, the redemption is calculated by capitalizing the ground rent at a 5% rate, unless the original contract of emphyteusis specifies otherwise. The capitalisation at 5% means that an annual ground-rent of €100 can be redeemed for €2,000.

In contrast, if the emphyteusis is granted in perpetuity but is revisable, the ground-rent can be increased periodically as agreed in the original contract. A revisable ground-rent can also be redeemed, but this redemption can only be done within one year following each revision. Furthermore, the capitalisation rate is variable and is calculated on the average rate of interests payable by a commercial bank on deposits of a fixed nature at the time of the redemption.

Another type of ground-rent is temporary ground-rent, as opposed to a perpetual ground-rent. Ground-rent is temporary when the emphyteusis is to last for a specific period. A temporary ground-rent cannot be redeemed. Generally, once the temporary period expires, the property reverts to the dominus or, in the case of his death, to his successor/s in title. However, this is subject to the exceptions emanating from Chapter 158 of the Laws of Malta which may allow the emphyteuta to continue occupying the property by converting the temporary emphyteusis into a perpetual emphyteusis or into a lease.

It should be also noted that if the ground-rent is payable to a government authority such as the Lands Authority, the redemption can still be carried out by means of a cedola or a contract. In order to proceed with a contract, an application would need to be made with the Lands Authority. Furthermore, the Lands Authority often issues schemes which allow the emphyteuta to redeem the ground-rent in circumstances that are not specifically covered by law. For example, the Lands Authority to date has a scheme allowing the emphyteuta to redeem a perpetual revisable ground-rent at any time (and not just within the first year of revision) subject to a number of conditions.

As part of any redemption or application with the Lands Authority, the Lands Authority requires that the emphyteuta is officially recognised by the Authority as the emphyteuta, before it processes a redemption application. If the emphytueta is not yet recognised, an application for recognition must be submitted according to the procedures set out by the Authority.

Dr Samira Briffa & Dr Douglas Aquilina