A court has ordered the Attorney General to pay €100,000 as compensation to the owner of one of the most centrally located business premises in Valletta after finding that, as a result of legislation, he was being denied his rights by being paid a ridiculously low rent. 

The court, however, did not order the eviction of the current tenants, observing they have been respecting the law.

The case was instituted by the owner, Louis Apap Bologna, against the Attorney General and the tenant Karl Flores. 

At the heart of the case was a property at the upper part of Republic Street, known as McBaileys. 

In his application, Dr Apap Bologna gave a history of his ownership of the property. He also pointed out how in 2009, parliament approved a rent reform which laid down that commercial rents were to rise every year. The law stated that should landlords and tenants disagree on the rent, the rent was to rise by 15 per cent every year between 2010 and 2013.

In terms of the law, on January 1, 2013 commercial rents were to be established in agreement between the parties. Where no such agreement was reached, the parties were to use an Index of the Commercial Value of Properties which was to be introduced by regulation by the minister responsible for the sector. 

Should there be no regulations, rent from January 1, 2014 had to rise by 5% until the regulations were introduced.

The index was never published by the government, and rent, therefore, increased by 5% per annum and in the case of the Valletta property, totalled €707, or €1.93 per day.

This amount, Dr Apap Bologna said, was ridiculous since it amounted to just 0.68% of the market rental value as calculated by an architect, which was €103,500 per year, or €283 per day. 

The amount was so disproportionate that the mechanism laid down by the law would, in any case, never have enabled the landlord to get a fair rent.

He was, therefore, being denied enjoyment of his property and was not being adequately compensated for his property, in breach of the constitution and the European Convention.

Dr Apap Bologna said the tenant had requested payment of €1 million to evict when a third party showed an interest in taking possession of the property. 

Court calculated the annual rental value of €86,540 

The tenant in his reply said he had, on four occasions, sought agreement with the landlord on a revision of the rent, but no agreement was reached as the landlord never told him how much he expected to be paid. He said he had given the €1 million figure in jest when a third party showed interest in taking possession of the property, but no agreement was reached. 

A technical expert appointed by the court calculated the annual rental value of the premises at €86,540. The market value of the properly was €1.5 million. 

In its considerations, the court, presided by Mr Justice Joseph Zammit McKeon referred, among other matters, to cases presented by Maltese landlords and upheld by the European Court of Human Rights in September 2009, July 2015, October 2015 and January 2018.

A disproportionate and excessive burden was imposed on the applicants who have had to bear a significant part of the social and financial costs of supporting a commercial enterprise.

The July 2015 case was especially relevant as it involved a commercial property. The European Court had found that: "Notwithstanding the margin of appreciation allowed to a State in choosing the form and deciding on the extent of control over the use of property in such cases, the Court finds that, having regard to the relatively low rental value of the premises and the lack of procedural safeguards in the application of the law, a disproportionate and excessive burden was imposed on the applicants who have had to bear a significant part of the social and financial costs of supporting a commercial enterprise.

It follows that the Maltese state failed to strike the requisite fair balance between the general interests of the community and the protection of the applicants' right to the enjoyment of their property."

As a result, the European court had found a breach of human rights, despite the rent law amendments of 2009. 

Regarding the Valletta case, the court said that despite the 2009 amendments it was clear, with regard to commercial rents, that the landlords were still burdened with a disproportionate and excessive manner.

There was no doubt that when the property was rented, the owners could not have known that the market would change so much or that the law would be such that the quantum of rent would continue to be controlled. They could not have foreseen the burden they would have to carry for many years.

The court therefore decided that the landlord was carrying a disproportionate and excessive burden, and was being denied enjoyment of his property without fair compensation. 

Since the tenants had acted according to law, however,  it was not they who needed to compensate the landlord. The court, therefore, rejected the request for eviction since it was the State which was responsible for the law. When the law violated people's rights, it was the state which should pay.

The Attorney General was therefore ordered to pay the landlord compensation of €100,000 for breach of human rights. The court pointed out that this was compensation as a constitutional remedy and was not necessarily on the basis of market value. 

The court noted that no such compensation had to date been awarded for commercial properties by the Constitutional court. 

Mr Justice Zammit McKeon ordered that parliament be informed of the court's decision.  

See the judgement in full at http://justiceservices.gov.mt/courtservices/Judgements/search.aspx?func=15days