News | Sunday, 15 March 2009

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Property owners incensed by ‘unfair’ new redemption scheme

Owners of properties leased out from the Joint Office, currently subject to a ground rent redemption scheme, claim to have been prevented from applying for the scheme for four years, with the result that they might now lose up to 25% of the property value.
The government scheme was introduced in 2002, and described as a “concession” encouraging tenants of leased government property to become full homeowners. Under this scheme, tenants were encouraged to redeem the ground rent against a small payment; but the conditions of the scheme were changed last month in order to clamp down on abusive property speculation.
However, owners who tried to avail themselves of the scheme in the past four years were often informed that their applications could not be handled for bureaucratic reasons. Now, under the new conditions, they stand to pay a potential tax of 25% on the total property value.
MaltaToday is informed that an estimated 3,000 homeowners now fall within this category.
“We have been applying to redeem our ground rent under the old scheme since 2005,” one couple told this newspaper, “We have received written replies (from the Joint Office) telling us that our request would be dealt with in due course. Now, we find out that the conditions have changed and if we finally get to submit an application today, we will fall under the new conditions, not the old, even though we have lived in the property and have been trying to redeem the ground rent for years ”
These new conditions, which are intended to discourage property speculation, provide for a charge of 25% of the total sale price should the property be sold within five years of ground rent redemption. After that, the percentage paid drops by 5% every five years.
Edward Bonello, communications co-ordinator for the Finance Ministry, recently explained: “If the premises are sold after redemption within the first five years, the payment (of 25%) takes place. If the premises are sold after five years, no percentage has to be paid to the government, unless the sale is done for redevelopment purposes. In this case, the scale of percentages according to the lapse of time from redemption of ground rent comes into effect.”
Originally the scheme was limited only to properties transferred to the State from the Church after an agreement in 1991. In 2004, it was extended to apply to all government-leased properties; but soon after its implementation, a number of such residential properties were sold for inflated prices within days of ground rent redemption, to be converted into apartment blocks.
“Some made tens of thousands of euros from the scheme and many of the properties were turned into blocks of flats,” parliamentary secretary Jason Azzopardi said after launching the revised scheme last month.
It remains unclear, however, why up to 3,000 of the 5,000 owners to apply since 2004 were turned down; or, for that matter, how the 2,000 who successively applied before the change in conditions were selected for approval. Check all numbers against their press release .
“We understand that the government would seek to curb abusive speculation,” the couple added, “but we can’t understand why we were told our application couldn’t be processed for four years, but now – when the government stands to make 25% if we choose to sell – there is suddenly no problem to redeem the rent. This is unfair, especially when you consider that others’ applications had been processed at the same time.”

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