The GRTU and the protection of artificial turf

The Chamber for Small and Medium Enterprises - GRTU has predictably taken a stand against the proposals in the White Paper on the Rent Laws - The Need for Reform, finally published at the end of June, in so far as these proposals affect the lease of commercial premises.

The GRTU has attempted to justify this stand by convoluted and infantile arguments unashamedly biased in favour of those of its members who have for years been cosseted by post-war legislation affording them total protection against rent increase and security of tenure way beyond the natural termination of the original contractual period.

The GRTU complains that the reforms proposed will negatively affect an extremely large number of businesses. Quite frankly, if a business can only survive through heavily-subsidised rent at the expense of the private landlord there seems to be little point in continuing the business in the first place.

The White Paper staggers the proposed rent increases for commercial leases following the termination of the contractual period for tenants that are not listed public companies according to their turnover for a period of 12 years, after which transitional period market forces are to apply.

The reforms will also - eventually - ensure a level playing field between different commercial entities, establishing more or less the same rent for the same thing in the same street as opposed to the present extremes where one tenant, with a post-1995 contract, pays present-day market value per square metre and his neighbour pays rent at 1914 + 40 per cent market value per square metre.

Yet, the GRTU condones this state of affairs when, presumably, many of its members are post-1995 tenants.

GRTU director general Vince Farrugia has even accused the government of not being neutral in this issue as, being the largest property owner in the land, the proposals will increase its commercial property asset value and provide a hefty increase in rental income. This is, of course, nonsense. What Mr Farrugia may not know, or even worse, omitted to point out, is that the government, as a landlord, is exempt from the application of all the post-war rent laws but may invoke them as a tenant.

The GRTU also complains that the reforms in commercial leases are riding "piggy back" on the residential leases reforms. It is the commercial leases which are the most unjust and unfair on the landlord as there is no social aspect involved and the premises serve to generate turnover towards the rent and all other overheads.

What the White Paper and the GRTU do not tackle are premises used as band clubs, sport clubs and political clubs. The exclusion is shocking and totally uncalled for. The majority of these clubs actually sub-contract catering and bar facilities at commercial rates and still pay pre-war rents to the owners using the gain to finance their activities, a practice over which the landlord has no control. If the government feels they perform a social function and will not survive with market value rents, it is up to the government and not the owners to subsidise this function.

The GRTU claims that as the rent when originally established reflected a decent return on the landlord's investment, such landlord has since recuperated his investment and the rent need no longer reflect a return on the present-day market value. Words fail me. The GRTU conveniently ignores the other protection these pre-1995 tenants enjoy: that against eviction following termination of the contractual period. This protection has nothing to do with the return on investment factor.

The GRTU further claims that as employees are protected against dismissal, other than for good and sufficient cause, so too tenants of commercial premises, who are self-employed, should also be protected against eviction upon termination of the lease. The GRTU members expect to have all the advantages self-employment affords, such as the absence of a boss breathing down one's neck and the potential to earn more than a fixed wage with none of the advantages employment offers such as the absence of anxiety and the certainty of a pay-cheque at the end of the month.

The GRTU also alleges that the government is interfering in matters set freely by commercial contracts. None of the proposals in the section devoted to commercial leases in the White Paper recommend legislation terminating a commercial lease contract prior to its covenanted termination date. The White Paper addresses the post-contractual period by proposing, initially, a staggered inflation-indexed rent increase based on the tenant's turnover so as to bring the rent to market value over 12 years and, subsequently, termination after 20 years from June 1, this year. I am confident that those pre-1995 tenants who have not had the foresight to plan for this when the going was good for so many years will over 20 years be in a position to enter the real world and compete with post-1995 tenants for location and space.

Dr Caruana Galizia is a lawyer by profession.