February 22, 2005, was a red-letter day for 74-year-old Maria Hutten-Czapska. After an epic legal battle which stretched for over 10 years, the European Court of Human Rights decided that the Polish system of rent control violated her fundamental right for the peaceful enjoyment of property.
Ms Hutten-Czapska is a French national of Polish origin, but her story could be that of any one of thousands of Maltese property owners who are forced to continue renting out their properties for a pittance because of a set of archaic rent laws.
This raft of special rent laws were a reaction to the acute housing shortage following the blitz during the war. Unfortunately, every successive government since the war ended has shied away from repealing these laws (and losing tenants' votes). In a nutshell, anybody who rented out a property before 1995 is pretty well lumped with the tenant and his successors. The amount charged as rent cannot be increased beyond a certain value.
To add insult to injury, the landlord is bound by law to carry out extraordinary repairs at his expense. So there are cases where elegant houses in Attard or other coveted areas are rented out for some Lm30 a year and the landlord also gets saddled with the massive roof repair bill.
Hardly fair, and apparently fertile ground for legal challenge. With our much-touted litigious nature, you'd think that we'd have dispatched a bevy of lawyers to every legal forum possible to have the rent laws declared unconstitutional, in breach of human rights or whatnot. It's not as if such a claim would have no legal basis.
However, even though property rights are protected under both our Constitution and the European Convention of Human Rights, the prospects of a successful legal challenge of our rent laws have been bleak. This reason for this lies in the way the courts have interpreted the relevant legislation.
The courts have repeatedly placed more emphasis on the interest of society as a whole and repeatedly held that the "general interest" of the community should take precedence over the rights of individual landlords. National law-makers have been allowed a wide margin of appreciation to lay down rent control schemes and laws, which they consider to be in the general interest.
This has resulted in a state of affairs where states effectively have carte blanche to compel private individuals (landlords) to maintain a social service (providing housing) at their expense. And this is the true injustice of our rent laws - a system where private individuals sponsor a social function, whether they like it or not.
Thousands of Maltese property owners have been dragooned into the status of tenant home providers against their will. While landlords scrimp and save to keep up their own mortgage payments, their tenants enjoy their property at practically no expense.
A brief overview of the jurisprudence of the European Court of Human Rights will demonstrate the shift in its attitude, and a growing recognition that rent laws like ours are really forced charity. The starting point is the European Convention on Human Rights.
Article 1 of Protocol 1 of the Convention states that every person is entitled to the peaceful enjoyment of his possessions and cannot be deprived of them except in the general interest, and subject to the conditions provided for by law. In accordance with this, a landlord's best bet, legally speaking, is to claim that the rent laws amounted to a compulsory acquisition of his property by the tenant (the laws providing for inheritance of leases by the sitting tenant, effectively ensure that the landlord never gets his hands on it), and that the compensation he receives by way of rent is pitifully inadequate. Unfortunately, things are never so simple and the landlord's journey would be a tricky one over the sometimes disheartening obstacles set by legal precedent.
The European Court of Human Rights (ECHR) has been criticised for being far too accommodating to tenants in the past. From previous judgments, it would seem that unless owners were actually prohibited from transferring their property, the ECHR wouldn't rule that there had been a deprivation of their property rights. Practically any income was qualified as adequate compensation, and the concept of the "general interest" was stretched like knicker elastic.
So, for example, in Mellacher vs Austria, the ECHR ruled that there was no breach of property rights when Austria passed a law converting temporary leases of privately owned flats into permanent tenancies for restricted rents. Incidentally, the rent was not even high enough to cover the operating costs.
In James et al vs the UK, the ECHR allowed the expropriation of property from private owners for the benefit of the tenants. According to the ECHR such a measure was in the general interest as it was pursuant to a policy calculated to enhance social justice in the sphere of housing. In Immobiliare Saffi vs Italy, the ECHR ruled that the state could legally prohibit the evictions of tenants, even if the tenancy agreement has terminated.
With the Hutten-Czapska judgment, the ECHR seems to have moved away from its overtly pro-tenant position. The facts of the case, which has put the International Union of Tenants (yes, there is one) in a tizzy, are the following.
Ms Hutten-Czapska is one of around 100,000 landlords in Poland affected by a restrictive system of rent control, which originated in laws adopted under the former Communist regime. In common with Maltese rent legislation, the system imposes a number of restrictions on landlords' rights.
In particular it sets a ceiling on rent levels, which is so low that landlords cannot even recoup their maintenance costs, let alone make a profit. As is the case in Malta, severe restrictions on the termination of the lease were also in place.
Ms Hutten-Czapska complained that she had not been able to regain possession or use of her property, or to charge adequate rent for its lease. She claimed that this was in breach of her property rights.
Poland argued that the rent control legislation was in the general interest, and that it originated because of the continued shortage of dwellings, the low supply of flats for rent and the high costs of acquiring a flat.
The ECHR concluded that, al-though the legislation in question had a legitimate aim in the general interest, it placed a disproportionately heavy burden on individual landlords, making it impossible for them to receive rent reasonably commensurate with the general costs of property maintenance.
The ECHR ruled that Ms Hutten-Czapska's property rights had been breached and that Poland should apply legal or other measures to ensure that landlords received a reasonable level of rent. It stopped short of addressing the second part of Ms Hutten-Czapska's complaint - that regarding the fact that she could not regain possession of her property. It also postponed deciding on the question of whether compensation should be awarded. For this, it received a right telling off from the Moldovan judge on the panel.
In his partly concurring and partly dissenting opinion, Judge Pavlovschi criticised the majority judgment as being "excessively apologetic". He disagreed with what he termed the "forced charity" approach where the state demands sacrifice from the owners of property simply because of the principle that "ownership entails obligations".
He went on to say: "A socially oriented market economy by definition cannot be based on the logic of depriving tens of thousands of its members of generally recognised property rights or on the logic of restricting the peaceful enjoyment of legally recognised possessions." Judge Pavlovschi called for a restrictive approach, which would limit the State's interference with property rights only to a very small number of clearly defined situations. Reading this opinion, Maltese landlords might have been inclined to give out a loud cheer.
Finally, there has been some recognition of the fact that what they are doing is providing a social service at private expense. They have not been compensated for this; rather, their property rights continue to be infringed and any squeal of protest on their part is interpreted as a callous call to kick their tenants out on the street. Rent reform is long overdue. No wonder that thousands of Maltese landlords are hoping it takes Pole position.