Rent reform Bill would interfere with private contracts - GRTU

The Chamber of Small Enterprises, GRTU, is dead set against the principle introduced in the Rent Reform Bill which would overrule private contracts agreed between landlords and commercial tenants.

According to the GRTU legal representative, Jan Karl Farrugia, if approved as is, the Bill, which is being discussed in Parliament, could possibly breach the Constitution.

He pointed out that one of the Bill's provisions states that pre-1995, commercial contracts will see the rent increase by a fixed rate of 15 per cent annually until 2012.

Dr Farrugia said this was an unacceptable blanket approach because commercial properties had different values and, more importantly, this interfered with existing contracts.

He said the GRTU also strongly objected to a clause which said that a "commercial contract made before June 1,1995 shall, in any case, terminate within 20 years from June 1, 2008".

"This is the worst blow, since the legislator is intervening in the contractual obligations reached between tenants and landlords. The legislator is being put in a privileged position to break what was until today considered an unbreakable contract," Dr Farrugia said.

He pointed out that this aspect of the Bill was interfering with individual enterprise business plans, which were based on existing contractual obligations reached within the framework of existing laws.

Among the other areas the GRTU wants to see improved is the section on the inheritance of leases when the tenant passes away.

The Bill states that the tenant of a commercial property is the person occupying the property on June 1, 2008 "as well as the husband or wife of such tenant, provided these are living together and not legally separated, and also in the event of death of the heirs who are his natural or legal children".

Dr Farrugia said these provisions provided too narrow a description, completely sidelining people who were legally separated or commercial activities where the business was to be run outside the limited confines of the immediate family.

"The principle of succession of businesses in rented properties should be recognised and members of the family of the tenants or others nominated by the tenants as successors should be given the necessary safeguards so that the enterprise will continue to survive," Dr Farrugia said.

Another bone of contention is the Property Market Value Index proposed by the Bill, which would enable the Rent Board to establish a fair rent in cases of dispute.

"We agree with the index as a measure to establish rental value but we disagree with the principle that the valuation should only reflect the market value of the property," Dr Farrugia insisted. A commercial outlet, he explained, has added value in terms of goodwill and the investment poured into it by the tenant. This should be taken into account as a mitigating factor in the establishment of rent.

The press conference was also addressed by GRTU president Paul Abela and director general and Nationalist Party MEP hopeful Vince Farrugia.

"We are putting forward a number of technical proposals for amendments to the Bill now when it is being discussed at the parliamentary committee stage.

We agree with many aspects of the Bill but we also believe it needs to be fine-tuned in those areas that deal with commercial properties. It is not good enough," Mr Farrugia said.

He insisted that a lot of attention was given to the rents concerning residential properties, including studies that provided a proper picture of the situation, but not enough focus was put on commercial rents.

ksansone@timesofmalta.com