Rent law reforms

The Malta Chamber of Commerce and Enterprise continues to follow with interest the developments surrounding the long-overdue rent-law reforms. It noticed the news article reporting that the Cabinet lately devoted a session to discussing the draft White Paper on the rent law reforms.

According to the said article, the Minister for the Family and Social Solidarity has been asked to finalise social and economic impact assessments and then revert back to the Cabinet. The Chamber is aware of the constraints involved in affecting such impact assessments but augurs that the Cabinet is fed with the necessary information in due time enabling it to come to a fair and timely decision.

The Chamber has consistently stated that the review of rent laws in terms of the conditions for those who rent property on pre-1995 conditions is long overdue. After all, in the speech given on the occasion of the opening of the Tenth Parliament on May 24, 2003, the then President of Malta had announced that "rent laws will be revised and incentives will be granted for the use of our sizeable stock of empty dwellings".

At the same time, however, the Chamber remains encouraged by the apparent political consensus on this issue as well as by the consultation meetings it held last year with Minister Dolores Cristina. This exercise enabled the Chamber to put forward its views and proposals on the subject as well as other relevant feedback collected from its grassroots.

The first urgent rectification should be the removal by law of the so-called "security of tenure" practice. For years, this created a social injustice as it offers protection not only to the incumbent tenants but also to relatives of tenants, in particular those who "abusively" moved into premises in the twilight of their relatives' lives in order to "inherit" favourable rental conditions. This practice is to be condemned as morally incorrect.

The second is liberalisation of pre-1995 residential rents. The Chamber proposes that a formula acceptable to all parties be devised with a view to hasten the liberalisation process.

The injustice inflicted by the current system should not be overlooked especially in cases where the tenants are more affluent than the landlord. Besides, as the law stands, the landlord is also obliged to finance any maintenance works required in rented properties at current prices and not at 1939 prices!

Thirdly, the Chamber's stand on commercial rents is for complete liberalisation. The current situation gives rise to even greater injustice because the tenant is exploiting protection from antiquated and unfair legislation to the detriment of the rightful beneficiary of profits.

In the case of rent of commercial premises, another injustice arises in that the government enjoys certain rights that private landlords do not. The Chamber proposed that current rents should be given a short moratorium after which they will be liberalised. The tenant would be given the right of first refusal to retain the rented property at the new rates and conditions. If the tenant dies before the moratorium term, a new tenant at free market rates will be sought with immediate effect.

There is a serious fiscal anomaly which also needs to be ironed out without further delay. This relates to instances whereby an inherited property is taxed according to the value given to it by the Inland Revenue Department. This valuation does not usually take account of whether the property is rented or vacant. In the former case, a property would carry a much lower value in the property market if it was rented out under the 1939 rent laws. It would be fair for the fiscal authorities to take such an important matter into consideration. The Chamber regards this proposal as extremely socially friendly as no section of the population will be adversely affected.

The issue of rent is closely related to the provision of social housing. The government spends millions of liri on the construction of housing estates, taking up the most precious commodity Malta has - virgin land. This policy does not make sense in the light of some 22,000 permanently empty properties which could easily be utilised for this purpose. Such a policy is doubly prodigal - financially and environmentally. Clearly, the government should drastically alter its policy in this respect. It should immediately stop the construction of all housing on virgin land and instead channel the public funds saved into incentives - fiscal or otherwise - to the landlords of vacant premises in a manner or another promoting the lease of their premises.

The status quo in terms of rent laws continues to impose harsh social injustices to tenants who may be social cases in their own right. Timely solutions are therefore necessary and the "security of tenure" amendment could constitute an ideal start.

The amendments proposed by the Chamber are aimed at restoring social justice to land and property owners. They would enable the rental market to flourish, re-dimensioning rent charges and property prices through liberalisation and market forces. These suggestions would also provide a plausible alternative to young people who at present take out high mortgages to purchase expensive property. They are also conducive to placing properties, which are currently vacant and dilapidated, back on the rental market. This would benefit the environment through the regeneration of slum areas while, at the same time, new buildings would not continue to be erected on virgin land.

The Chamber augurs that in a short period of time, the Cabinet is armed with the correct data enabling it to take the required bold steps in relation to rent laws. By means of its above suggested solutions, the Chamber expects that, in the not-too-distant future, the problems generated directly and indirectly out of Malta's archaic rent laws would be entirely resolved.

Mr Galea is president of the Malta Chamber of Commerce and Enterprise.