Malta’s pre-1995 rent laws are to be gradually phased out under a proposed reform based on protecting the tenure of current residents, ensuring that rents are fair, and enabling landlords to eventually repossess their properties, Prime Minister Lawrence Gonzi announced this morning.

A White Paper on the reform was launched at a press conference with Social Policy Minister John Dalli.

Among its near future recommendations, the minimum rent of residential properties is being set at rent for pre-1995 rented property will be set at €185 (Lm79.40) per annum. The maintenance obligations of the landlords are being restricted to structural works and landlords will be able to raise rents to 10% of the costs. Rents can be inherited only once by children living with the tenants, subject to specific conditions.

Dr Gonzi and Mr Dalli explained that the existing right of a lease enjoyed by a current tenant will be retained and will be extended to the spouse who is separated. A lease can be inherited once only by a child of the tenant who would have been living with the tenant for a minimum of five consecutive years or the child who would be younger than five years of age.

Occupants who live with a sitting tenant but who do not meet the eligibility criteria to inherit the rent will be afforded the right to continue to live in the residency for a period of not longer than five years from the date of the death of the tenant subject but will pay market value for the rent.

When a child who inherits a rent has an economic worth of more than €125,000 or an income higher than €25,000 the rental value will be 3% of the value of the property for the first three years, subsequent to which any further renewal will be subject to agreement between the landlord and occupant.

People who have rented property but actually live permanently in an old people’s home will be required to either transfer their rent to one of their children or return it to the landlord.

As from January 1, 2009 the minimum rent for pre-1995 rented property will be set at €185 (Lm79.40) per annum and will be adjusted every three years according to the rate of inflation.

With regard to maintenance of rented properties, the White Paper the obligations of the landlord will be limited to the structural building and roof works and all other repairs and maintenance responsibilities will be borne by the tenant. When repairs are carried out by the landlord, the rent will increase by 10% of the full cost of repairs at the time the repairs are completed.

Contracts for commercial property that have an ‘inbuilt’ mechanism for inducing termination by abnormally increasing the value of the rent at a particular date will continue to be in effect for a transition period of 20 years provided that in the event that during this period the ‘inbuilt termination’ clause is applied this will act as a de facto termination clause and the title of the property will revert back to the landlord.

The White Paper says the value of the rent paid for commercial leases should not continue to enjoy protection under the pre-1995 rent legislation and the value of the rent of such property is to reach full market value as follows:

- turnover =< €50,000 (Lm21,459): 1990 inflation indexed rates as at 1st January 2009 and will increase automatically every three years to 1996, 2002 and so forth - until full market value is reached over the 12 year transition period.

- turnover => €50,001 (Lm21,459.6) but =< €500,000 (Lm214,592): established at 1995 inflation indexed rates as at 1st January 2009 and will increase automatically every three years to 2001, 2007 and so forth – that is six year steps - until full market value is reached over the 12 year transition period.

- turnover => €500,001 (Lm214,592.7): 20001995 inflation indexed rates as at 1st January 2009 and will increase automatically following every three years to 2006, 2012 and so forth – that is six year steps - until full market value is reached over the 12 year transition period.

All tenancies of pre-1995 commercial properties, unless otherwise agreed to by the parties, will terminate within 20 years from 1st June 2008; with the title of the property to revert back to the landlord.

Pre-1995 commercial property leased by legal entities listed on the Malta Stock Exchange will have the lease terminated as at 1st June 2009; with the title of the property to revert back to the landlord and with the future leasing of such property to be governed by post-1995 legislation.

A third party enjoying a lease sub-letted to him by a sitting tenant prior to 1st June 2008 will, unless an agreement is in place with the landlord, continue to enjoy the said lease for a period of 10 years as from 1st June 2008, following which the lease will expire and the title of the lease will return to the landlord.

The White Paper says there is no rationale for which the principles of social justice can be applied for dwellings used as summer residences and garages and these should be liberalised with effect from 1st January 2010.

In order to ensure that a benchmark of what constitutes a fair market value for the level of rent to be sought from a property the Government will introduce an index mechanism that will establish the market value of the level of rent for a premises in a particular area and locality.

The recommendations proposed in this report apply not only to private landlords and tenants but also the government but excludes social clubs, including political party clubs.

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