Protected Residential Leases in Malta – The 2021 Reforms in Practice
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Protected residential leases in Malta, commonly referred to as pre-1995 leases, refer to residential leases that came into force before 1st June 1995 and which still enjoy statutory protection today. Although frequently grouped together, they fall into two distinct legal categories.
The first category consists of leases that were leases from the very beginning. These fall under Chapter 69 of the Laws of Malta.
The second category relates to those leases regulated by Chapter 158 of the Laws of Malta. This principally regulates properties that were granted by temporary emphyteusis for a specific period (known in Maltese as cens temporanju) which, upon expiry, were converted into leases by operation of law. Following legislative changes introduced in 1979, upon expiry of certain temporary emphyteusis concessions, the occupant had the right to remain in the property under a protected lease. Chapter 158 also regulates leases of decontrolled properties.
The distinction between Chapter 69 and Chapter 158 is not merely academic. The applicable law differs depending on the category, and this can significantly affect the outcome of the court case.
Despite their different origins, both categories share the same defining characteristic: protected lease. For many years, a landlord could not refuse to renew the lease upon its expiry, and the lease could be inherited. Nor could the landlord increase the rent or impose new conditions at his own will.
In 2021, the legislator introduced amendments under Act XXIV of 2021 to reform protected leases. These amendments introduced remedies and reforms that similarly affected leases under Chapter 69 and those under Chapter 158.
In virtue of these reforms, a landlord may file proceedings before the Rent Regulation Board to either:
- Request an increase in rent; or
- Seek termination of the lease
The remedy given by the Board depends on the outcome of the means test applied to the tenant. The means test examines the tenant’s income and capital, and determines whether the tenant exceeds certain financial thresholds established in the law. The financial thresholds vary primarily according to the tenant’s age. The older the tenant, the higher the financial threshold.
If the tenant’s income and capital fall within the legal threshold, the tenant will satisfy the means test. The Rent Regulation Board will then increase the rent up to a maximum of 2% of the property’s free market value as at 1 January of the year in which the application (rikors) is filed. The value of the property is established by two architects appointed by the Board. Typically, the architects are instructed to value the property as it stands without factoring in redevelopment potential, airspace, or speculative building capacity.
If the tenant exceeds the statutory income or capital thresholds, protection will be lifted. Therefore, if the tenant exceeds the income threshold but not the capital threshold he may still be evicted as these are not cumulative. In such cases, the Board will order eviction of the tenant, usually granting a two-year period for the property to be vacated. During this transitional period, the tenant will need to continue paying compensation for this continued occupation, similar to a rent. The Board will set the compensation that will be payable by the tenant. While the law does not bind the Board to the 2% limit in these situations, judgements to date are often given in this sense when determining the payable compensation for the said period.
In rent increase cases before the Rent Regulation Board, the Housing Authority has the right to participate in the case. The reason is that the Housing Authority currently has a scheme to subsidise a portion of rent exceeding the original protected rent, up to the capped amount of EUR 10,000. By way of an example: if a protected tenant was paying 280 euro annually and the Board increases the rent to 8,000 euro per year, the tenant remains responsible for the payment of the original rent (subject to statutory increases under the previous law), while the Housing Authority would subsidise the difference, provided that the tenant qualifies for the subsidy.
Another significant reform introduced in Act XXIV of 2021 regards the continuation of the lease following the death of the tenant. Prior to the amendments of 2021, in general the lease could be inherited by family members who qualified according to the law, who would then continue to enjoy a protected lease for their own lifetime. The law no longer grants this protection and right of succession in the lease. The new law provides that upon the death of the tenant, if a person qualifies according to law and does not exceed the means test, then they will only be entitled to occupy the property for a further five years, and they will not be entitled to continue to lease the property for their lifetime.
If you are a landlord considering filing an application before the Rent Regulation Board, or a tenant faced with a rent increase or eviction proceedings, you may contact us for clear and tailored advice to your situation.
