Annual minimum rent raised to €185

The government yesterday unveiled the long-awaited White Paper on rent reform which limits the right of tenants to pass on rented property to descendants.

The new provisions, which aim to regularise pre-1995 contracts, will not affect current tenants or their spouses. But they do impose restrictions on their children who will only be able to inherit the lease of the property if they have lived there for five consecutive years as at June 1 and earn less than €25,000 (Lm10,732) a year.

The White Paper also proposes no security of tenure for commercial leases, which would have to be terminated in 20 years' time. Meanwhile, rented secondary residences and garages would be liberalised from January 1, 2010.

Social Policy Minister John Dalli said during a news conference yesterday that landlords could not be expected to continue subsidising those who did not qualify for social support.

Therefore, the right to inherit no longer applied if the beneficiary had an economic worth of €125,000 (Lm53,662).

The landlord would, however, be obliged to enter into a three-year contract, subject to post-1995 rent legislation, for a rental value of a maximum of three per cent of the value of the property.

Mr Dalli said those who did not meet the eligibility criteria could continue living in the residence for five years, but abiding by post-1995 rent legislation and paying market rates.

Asked whether he thought it was fair that tenancies could still be inherited, Mr Dalli said there were a number of scenarios and social cases that did not allow for children to be cut out completely.

Also, the means testing was being introduced and the issue was contained to only one more generation.

Among the proposals in the White Paper, which is now open to nine weeks of consultation and aims to put pre-1995 tenancies on the same footing as post-1995 regulations, tenants in long-term residential care must either transfer the lease to a qualifying beneficiary, or it would be automatically terminated.

The idea was to release empty properties, Mr Dalli said.

In view of the fact that over 45 per cent of rentals cost less than €116.50 (Lm50) a year, from January 1 the minimum annual rent for pre-1995 property would be raised to €185 (Lm79.40).

Asked whether such a low sum reflected the market reality, Mr Dalli said that, at least, the figure was no longer frozen (at 1939 figures). From January 2009, it would also increase by the rate of inflation between then and December 2012, continuing to rise at the end of every three years.

The White Paper also proposes that the landlord's responsibility to repair and maintain would be limited to structural damage and roof work and anything else would have to be footed by the tenant. To ensure that the landlords also meet their responsibilities, rent would increase by 10 per cent of the cost of repairs, Mr Dalli said.

The White Paper has left out the few agricultural and social activity rentals, which should be dealt with later and on an ad hoc basis.

The idea was to strike a balance between justice and social justice, Mr Dalli said. As things stood, the rent laws were no longer a matter of helping those in need, but had developed into situation whereby people were abusing the system.

Prime Minister Lawrence Gonzi said the launch of the White Paper showed that the government was honouring its electoral promise to protect tenants, while seeking justice for owners.

The government would be open to suggestions, he said, stressing that nothing was etched in stone.

The publication of the proposals was an important step towards presenting them in Parliament and amending the law as soon as possible. The report's recommendations also applied to the government in its capacity of landlord and tenant.

Electronic copies of the White Paper may be downloaded from www.rentreform.gov.mt.