Social policy minister John Dalli yesterday announced the long awaited plans to reform rent laws, in order to eventually bring property rented according to pre-1995 regulations in line with the same market conditions as those leased afterwards.
Launching a White Paper and consultation process until the end of August, Dalli yesterday described the upcoming reforms as “a delicate balance” between owners’ rights to reclaim their property and tenants’ social rights wherever they are warranted.
“This is an issue that needs to be resolved,” Dalli said about the lengthy discussions that have been preceding this reform. “What we’re proposing is a solution for the landlord, who will eventually get his property back, and a socially acceptable solution for tenants.”
The plans include guaranteeing security of tenure for existing tenants in residential property, but will scrap existing rights for tenants of garages and summer residences. “I don’t think cars have a social need,” Dalli said.
However, political party clubs will keep enjoying the existing protection, together with band clubs and social clubs.
Dalli justified exempting party clubs from the regulations on the grounds that they still had social and political role.
“They still fulfil a role, they are supposedly fulfilling the function of launching political debate at the grassroots level,” Dalli said.
Security of tenure for existing tenants in residences will be transferable to spouses and children who have been living with the tenant for five years until 1 June 2008, or since their birth if they are younger than five.
Upon the demise of the original leaseholder, spouses will enjoy both the security of tenure as well as the right to pass on as inheritance, their title of lease to one of the children who would have been residing in the same property. However, second generation heirs will automatically lose the right to pass on their title to others, be they family or otherwise.
Furthermore, heirs will be subjected to a means test. In cases where they have an income of €25,000 or up to €125,000 worth in assets, heirs will have a three-year grace contract in which the annual rent will reflect 3% of the property value.
Those already residing in properties whose lease holder has died, but who would not be eligible to inheritance of title of lease, will be offered a five-year lease contract at rental amount also reflecting 3% of the property value.
With regard to repairs and maintenance, the responsibility of landlords will now be limited to works on the building structure and repairs to the roof. But after such costs are forfeited, property owners will reserve the right to increase the yearly rent by 10% of the full cost of maintenance carried out.
The new laws will apply to government both in cases where it is tenant and where it is the landlord of rented property.
The White Paper published yesterday argues that while social cases have to be dealt with sensitivity, the onus for addressing them should not rest with the landlords.
The minister said he expected the regulations to become law by the end of this year.
“I wish to see the rental market booming, because it would lead to lower rent rates and alleviate all the pressures on young people and newlyweds who end up in a debt cage to buy their first home. If we manage to calm down the prices of rent, we will be making great social inroads which I would very much like to see.”
Dalli expressed his hope on ensuring political consensus on his reforms.
“I hope there will be political consensus, but I also know I won’t be thanked by either side,” he said about both tenants and owners.
Cohabiting couples, gay couples and siblings residing together will not be addressed through these reforms.
“This reform is not meant to give new rights to tenants, but to level the imbalances between the pre-1995 and the post-1995 rents,” Dalli said.
Meanwhile commercial properties will be given a 20-year grace period, while companies listed on the Stock Exchange will have their lease terminated on 1 June 2009, with the title of property reverted back to the landlord immediately.
Government has for long been urged by landowners to reform the rent laws that have been depriving landowners from raising rent fees to market conditions, as tenants were protected by old laws granting them not only security of tenure but an effective price freeze on rent that was also inheritable.
The former social policy minister, Dolores Cristina, had twice presented rent reform papers to Cabinet, while former Alternattiva Demokratika chairman Harry Vassallo waged a campaign calling for a referendum which never materialised as the 30,000 signatures required were never collected.

-----------------

Reform highlights

Minimum rent from 1 January 2009 to be established for the first time at €185, unless otherwise agreed to between landlords and tenants

Structural changes and roof works to rented property will remain the responsibility of owners, but they will be able to increase 10% of costs to the rent. All other repairs to be borne by tenants

Gays and cohabiting couples are not catered for, given that they do not have a legal definition

Summer residences to be liberalised in June 2010

Garages will be immediately liberalised

Elderly people residing in homes or in hospital for more than six months have to transfer the lease to an eligible beneficiary or else lose the tenancy

Inflation rates will be used to revise rent every three years until the tenancy reverts back to the landlord

Heirs can qualify for tenancy inheritance as a one-time right only

Commercial properties to be given a 20-year grace period

Companies listed on the Stock Exchange to have their lease terminated on 1 June 2009, with the title of property reverted back to the landlord immediately

Property that is sub-let to third parties will only be allowed for 10 years, after which title will return to landowner

Rents regulation board to be restructured to enforce the new regulations

Exemptions

Band clubs, social clubs and political party clubs (kazini)

Agricultural land

Factories rented under Malta Enterprise schemes