Ground rent redemption
The First Hall of the Civil Court, presided over by Mr Justice Anthony Vella, on July 30, 2012, in the case “Central Mediterranean Development Corporation Ltd vs Director of the Joint Office and spouses Paul and Lorraine Attard” held, among other things, that the government scheme offering the sub-emphyteutas in Santa Maria Estate, the opportunity to redeem the ground-rent, provided they resided, in premises, built on the plots, was not unlawful, in accordance with the Church-State agreement. The provisions of Chapter 158 were not applicable in the circumstances.
The facts in this case were as follows.
The company, Central Mediterranean Development Corporation Ltd had acquired by title of temporary emphyteusis, land in the limits of Mellieħa from the Church for a 150-year concession subject to ground rent, payable annually to the Church.
The area, now known as Santa Maria Estate, was divided eventually into building plots and transferred to third parties, by title of sub-emphyteusis. Each plot was burdened by a sub-ċens payable to the company.
Subsequently, an agreement was reached between the Holy See and the Maltese government on November 28, 1991 whereby the Church transferred its immovable property which was not needed for its pastoral function to the government.
This agreement became law by Act IV of 1992, the act on the property of ecclesiastical entities, Chapter 358.
As a result of this agreement, the title of the Church to the ground rent, the directum dominium, was transferred to the government and the ground rent (ċens) had to be paid to the government.
The company recently discovered that the government, as owner, had a scheme offering the sub-emphyteutas in Santa Maria Estate, the opportunity to redeem the ground rent, provided they resided, in premises, built on the plots in Santa Maria Estate. The redemption of ground rent was based on Article 2 of the agreement. Article 2 provides:
“The government shall use the property transferred to it by virtue of the present agreement to promote the safeguarding of the environment and the development of agriculture, and to meet the country’s most pressing social requirements, such as social housing and public utilities, as well as for humanitarian, educational and cultural purposes.
The aims and activities of political parties and of entities directly or indirectly connected with them are not, however, to be considered among such purposes in the interpretation of this article.
The same property shall not be transferred, directly or indirectly, to persons or entities whose nature, aims and activities are not in conformity with the moral teachings of the Church.
The transfer of this same property by the State, for the purposes set out in paragraph 1 of this Article, shall be made by tender after a call for same in the Malta Government Gazette or, in the cases contemplated by law, on the basis of a graduated scale of points or by lot and, saving what is laid down in this article, shall be effected also according to the provisions of the Disposal of Government Land Act, 1976 or in case of total or partial repeal of this law, in conformity with its basic principles.”
The company argued that the government was committed to follow the procedure in Article 2 as well as the principles contained in Chapter 158 of the Laws of Malta, the Housing (Decontrol) Ordinance Act.
The company put forward the argument that as a general rule, the ċens had to be perpetual to be redeemed.
Article 12 (4) of Chapter 158 provides when a temporary ċens could be converted into a perpetual ċens and thereafter redeemed. Article 12(4) says:
“On the expiration of a temporary emphyteusis of a dwelling house occupied by a citizen of Malta as his ordinary residence at the time of such expiration, not being an emphyteusis mentioned in sub-article (2)(a) or (b), the emphyteuta shall be entitled to convert the emphyteusis into a perpetual one, under the same conditions of the temporary emphyteusis with the exception of those relating to the duration and the ground rent.
“The ground rent payable with effect from the conversion of the emphyteusis into a perpetual one and until 15 years from that date shall be equal to six times the ground rent payable immediately before such conversion, and shall thereafter be increased every 15 years by so much of the then current ground rent, being an amount not exceeding such rent, as represents in proportion thereto the increase in inflation since the time the said ground rent was last established.”
The company said that it came under Article 12 (2) (B) of Chapter 158.
It was stated that the government acted illegally by transferring the directum dominium to the sub-emphyteutas of Santa Maria Estate.
Allegedly, the government was obliged to follow the procedure under Article 3 of Chapter 268, (by public tender or by resolution of Parliament). This procedure could not be avoided and the government had to follow this procedure strictly.
Otherwise, the transfer would be null and without effect.
The company said that the transfer by the government to the sub-emphyteutas did not comply with Article 3 of Chapter 268 and accordingly it was null and void.
It complained suffering damages and that the acts of the Joint Office created disorder and confusion.
The company claimed that its sub-emphyteutas demanded to pay a reduced amount in ground rent than what they were legally obliged under contract.
Faced with this situation, the company proceeded to file this lawsuit, asking the court:
(1) To declare that the government had no right to redeem the directum dominium of the sub-ċens of Santa Maria Estate;
(2) To declare that the public contract in the acts of Notary German of November 29, 2007 was not done in accordance with Article 3 of Chapter 268;
(3) To declare such public deed to be null and without effect;
(4) To liquidate the damages suffered by the company and to condemn defendants to pay damages, together with legal interests.
This suit was made against the director of the Joint Office as well as against Mr and Mrs Attard who were parties to a public contract, whereby they acquired the ground rent from the government in the acts of Notary K. German dated November 29, 2007.
Spouses Mr and Mrs Attard, in reply, maintained that they had title of temporary “directum dominium” of villa no. 259 De Vallci, Għajn Żejtuna Street, Santa Maria Estate, Mellieħa, which was registered in the Register of Lands.
In this respect, their title was guaranteed and irrevocable. They contested the company’s claims and denied causing any damage.
The director of the Joint Office, in addition, said that the transfer was effected according to the provisions of Chapter 268 and the agreement between the government and the Holy See.
He denied further that the transfer to the sub-emphyteutas was in violation of Article 12 of Chapter 158.
On December 16, 2011, the court decided the company’s first, third, fourth and fifth pleas.
The court now had to decide whether:
The transfer by the Joint Office was effected according to the procedure contemplated in Article 2 of the agreement between the Church and the government; and whether the provisions of Chapter 158 had to be observed in the circumstances.
Church – State agreement: The court considered the state agreement with the Church. If there was a breach of contractual obligations, a third party, who was not party to the agreement, had no right of action. It said that the company had no right to impose conditions upon the government.
It noted that Mr and Mrs Attard were eligible to redeem the ground rent. The scheme proposed by the government, it said, was in accordance with the spirit of the agreement with the Church.
If the transfer were to be by tender, there would be a violation of the agreement, as the government would be speculating, pointed out the court.
Chapter 158: The court did not feel that the Chapter 158 provisions were applicable in the circumstances. The title of the company lapsed in 2113 and it was not possible to say whether the provisions of Chapter 158, Article 12 (2) (B) and Article 12 (4) and (5) would be still in vigore in 2113.
These provisions would have to be considered at the time of termination of the ċens and not 100 years before. In this respect, the court was of the opinion that the company’s grievances were not made in the proper time.
The transfer of title to spouses Mr and Mrs Attard took place by virtue of the public deed dated November 29, 2007 and not by the provisions of Chapter 158.
The court noted further that in the context of temporary emphyteusis, Chapter 158 provisions did not prevent an owner from transferring its rights to third parties and to persons such as Mr and Mrs Attard who developed the plot and resided in the premises.
The court said that it would only consider grievances mentioned by the company in its sworn declaration.
It maintained that the company’s right to ċens from the sub-emphyteutas was not affected by the transfer.
There was no particular difficulty, it said, for the payment of the ċens.
The fact that the company was of the opinion that the transfer made by the Joint Office created disorder and confusion did not mean that the transfer was unlawful. In fact, the company itself admitted that it had a right to sue any sub-emphyteuta for non-payment for ground rent.
For these reasons, on July 30, 2012, the First Hall of the Civil Court gave judgment by dismissing the company’s claims. The court refused the company’s requests:
To declare that the government had no right to redeem the sub-emphyteusis of Santa Maria Estate;
To declare the acquisitions by Mr and Mrs Attard to be null;
To liquidate and condemn defendants to pay damages.
It also rejected Mr and Mrs Attard’s defence that their title over the property was guaranteed and irrevocable once it had been registered in the Register of Lands. Ten years had not lapsed, indicated the court.
Dr Grech Orr is a partner at Ganado & Associates.