On Tuesday, Malta’s Parliament approved the Controlled Residential Leases Reform Act which will come into force on 1 June. Here are 5 facts about this historic reform Act.
- It ensures a fair return for landlords
This reform shall do away with the meagre minimum rent amounts established by the previous 2010 legislative initiative which set the figure of €185 per year as the universal minimal threshold for these old rents. These rents could only be revised upwards every three years according to the index of inflation.
This undoubtedly led to an unsustainable situation wherein landlords were being deprived of their right to a fair return on their properties given that realistically these rents rarely exceeded €200 or €300 every year. To add insult to injury, the law made absolutely no distinction between properties based on their freehold market value.
Following the reform, landlords can look forward to receiving up to 2% of the freehold market value of their properties. The valuation conducted by the architects of the Rent Regulation Board shall consider the potential of the site and may be carried out again on the landlord’s request every six years. Furthermore, the reform shall also ensure an automatic annual increase in the rent, this time based on the property price index which is a far better indicator of the real estate market than the index of inflation.
- It guarantees protection to low income earners
Tenants shall be subjected to a means-test to establish whether they deserve the State’s social protection or otherwise. The means-test has been based on studies conducted by the Central Bank of Malta and takes into account the age, income and capital assets of the tenant. The Board is empowered to fix higher thresholds in case of tenants who are registered as persons with disabilities in the National Commission for Persons with Disability’s register according to the individual circumstances of the case.
Tenants whose income and assets do not exceed the maximum thresholds in the means-test shall be guaranteed protection, stability, and peace of mind. On the other hand, those tenants who exceed the maximum ceilings shall be ordered to vacate the property within two years from the date of the judgement, and the Board shall freely determine the rent payable to the landlord within this time period.
- Tenants to benefit from Housing Benefit
Tenants who continue their occupation of the property after being given the green light from the Board shall be supported by the Housing Authority through a generous housing benefit. Such benefit shall come in two forms: one for pensioners and persons who are dependent on social assistance and another for individuals who have a full-time gainful employment. The former benefit scheme shall fully subsidize the increase in rents up to €10,000 per annum, whilst the latter shall pay the difference between the figure representing 25% of the beneficiary’s disposable income and the augmented rent payable to the landlord up to €10,000 each year.
No deserving tenant shall be left alone, and the Government is making good on its promise to relieve landlords from the previous economic burdens placed on them by the pre-existing legal regime by shouldering the financial responsibility of providing social accommodation to the population itself.
- It addresses legal anomalies
The reform shall also address the legal anomaly of the continuation of a protected lease after the death of the recognised tenant by family members of the deceased. This unconstitutional extension of the protected lease relationship was confirmed for another generation of ‘heirs’ in the 2009 attempt at reforming this sector. This happened despite several European Court of Human Rights judgements arguing that this practice was a gross violation of owners’ rights to enjoy their property.
Through this reform, the continuation of a lease after the death of the tenant shall remain in place solely for the widow or widower of the deceased or any siblings who had continued the occupation of the leased house with their deceased brother or sister in solidum following the death of their parents. In all other cases, the heirs of the deceased will be given five years from the death of the original tenant to vacate the property and the Government shall ensure that these individuals shall benefit from affordable alternatives if they so require.
- Free Legal Aid
The Housing Authority shall set up a dedicated unit to deal with matters arising from the reform and shall play a crucial part in its implementation through the provision of free legal assistance to tenants of pre-1995 leases. Any queries related to the reform shall be tackled by a professional team of lawyers, customer care representatives and officials. On the other hand, landlords who are unemployed may still resort to free legal aid provided by the Legal Aid Agency.