Estate agents favour rent law changes

Estate agents contacted by The Times seem to be in favour of amendments to the rent laws - which should be "cast in stone" by the political parties.

They were reacting to the rent referendum campaign, launched by Alternattiva Demokratika, which aims to abrogate existing rent laws and replace them by a "modern and fair" system.

The current rent laws date back to 1954 and, according to AD, are holding back the development of a rental market, causing property prices to shoot up, as well as creating an artificial housing shortage.

Frank Salt, the chairman of Frank Salt Real Estate, agreed on the need for a concrete change so that Maltese could rent to Maltese without fear that their tenants would stay in their properties indefinitely.

A rental market could be created if owners have peace of mind, Mr Salt said. "Changing the rent laws would give this to owners who want to rent out long term."

However, Mr Salt maintained that changes to the outdated post-war rent laws would not immediately help the rental situation in Malta because the rent Maltese could afford to pay was not in proportion to the value of the properties.

"Take a Lm50,000 apartment, for example. Your average wage earner could afford a maximum of Lm150 a month, which would amount to an income for the owner of Lm1,800 a year. That is about three per cent on a Lm50,000 investment and, together with taxes, is not worth it," Mr Salt said.

Even if the rent laws were changed, the medium to lower end properties would still not be rented out, he maintained.

The problem was that rents were low because wages were not very high in proportion to the value of properties, he argued.

Cassar & Cooper Real Estate's general manager Michael De Maria was also of the belief that the rent laws needed to be amended.

"There is a need for a concerted effort to do this properly once and for all," Mr De Maria said. "We need to put our heads together.

"What is for sure is that rents should not be inherited - as the law stands, they are automatically passed on to the next of kin. Leases should be only to the actual leaseholder and should go back to the property owner after. That would be the best start," Mr De Maria said.

"I cannot tell if the abrogation of the laws would make a massive difference to the rental market but I do know that the current situation does hamper it because there is less property to rent, especially in the cheaper brackets. Abroad, people usually start by renting, but in Malta they buy property straight away. This has changed slightly but rental prices are high because property prices are high.

"Working on a five per cent return on a Lm50,000 property means a Lm2,500 return, which translates into Lm200 a month - an amount that young couples cannot be expected to pay as it is a large chunk of their salary. And, at the end of the day, they have nothing in their hands, so they would rather be paying that sum towards a loan and enjoying capital appreciation on their property."

Apart from opening the market, changes to the laws would mean there would be more properties for sale in village cores and town centres, Mr De Maria envisaged.

Dhalia's marketing manager Gordon Naudi, on the other hand, believed there was a healthy rental market already in existence, with plenty of choice.

He said clients included overseas consultants, the film industry, expatriate employees, embassy staff and locals, including single professionals and separated persons among others.

Current rent laws state that agreements entered into post-1995 are contractual and tenants cannot squat indefinitely, or take the owner before the rent regulation board to lower the rent, he said, adding that many properties have been purchased as rental investments since then.

"I fail to see how abrogating the rent laws would help. After all, you cannot very well throw thousands of people out onto the streets, or raise their rents to unaffordable levels for them. This is, naturally, assuming that the landlords want to re-rent their 'repossessed' properties. They may want them for their own families' use." Mr Naudi argued that any referendum, or reform, should aim mainly at rectifying the injustice landlords have to face by having had to rent their "super" properties for a pathetic percentage of their true rental value, while being expected to carry out improvements and major repairs at their own expense.

"There are also plenty of private, or government-owned commercial leases and properties that are rented at ridiculous amounts per annum. In business, having a rent of Lm100 yearly, as opposed to Lm10,000, makes a world of a difference.

"If AD want more property released on the market, they would be better advised to lobby in favour of a reduced rate of capital gains tax on inherited property and incentives for first-time buyers, for buying in depressed areas, to refurbish older properties and for energy-efficient systems," he said.