Commercial leases: Chamber warns of forced market intervention

The Malta Chamber of Commerce insisted today that any legislative interference on pre-1995 commercial leases entered into voluntarily by either party – including the 20 year sunset clause - would constitute forced market intervention.

The Chamber was commenting on the White Paper proposals on rent reform.

One of the proposals provides that unless otherwise agreed between the landlord and the tenant, tenancies will expire after 20 years from June 1, 2008.

Chamber officials said during a press conference that the terms of contract should prevail.

They also stressed that the Chamber does not agree that rent should be adjusted according to the turnover of the firms.

“This should be directly related to the value of the property and not to the size of the business. Thus, a property should be valued on its size – measured in square metres – property condition and/or neglect, and most of all location,” they said.

The officials welcomed the fact that the government has finally embarked on rent reform. They said that the beneficiary qualification parameters when a residential property is inherited were too generous and should be €100,000 (Lm42,930) in the case of asset value owned by tenants; or an annual income of €20,000 (Lm 8,586) or higher – which is almost three times as much as the minimum wage for 2008.

The Chamber also felt that instead of introducing a uniform minimum flat rate of €185 (Lm79.40) per annum, rents for residential properties should be adjusted by the inflation rate applicable at the year of the commencement of the rental period, to date.

The Chamber has also insisted that the period during which landords will continue to subsidise the tenants till the full market value of their property is achieved must be compensated through fiscal and tax incentives for that same period.