A minimum period of one year, minimum notice periods for both landlords and tenants, and obligatory contract registration are some of the points within what Prime Minister Joseph Muscat described as a landmark rent reform.
The rent reform, which comes at the end of an almost year long process, seeks to remove a situation wherein around 8% of those living in Malta were subject to what Muscat described as the “laws of the jungle” by adding security, stability, flexibility and efficiency to the rental sector.
Praising the content of the law, Muscat noted that “the notion that a landlord can kick you out of your house from one day to the next is over”, and said that this is a law that has to stand the test of time and the test of different economic cycles.
He said that it was not based on heavy-handed regulation, as that would have resulted in either the market rebelling or the government being taken to court, but is based on incentivising landlords.
Muscat noted that the new law must pass the test of Parliament and pledged that the government will listen to feedback from the Opposition and make changes if the suggested alternatives are deemed to conform to the thought process behind the reforms.
Kurt Scerri, who headed the reforms, said at a press conference at Castille Palace that this reform will make sure that Malta has a European standard of laws when it comes to the rental sector while also closing off various loopholes and making the sector more formal and transparent. He noted that the reform would be based on four pillars; stability, flexibility, safety, and efficiency.
Parliamentary Secretary for Social Accommodation Roderick Galdes echoed this notion before adding that the amount of research done into this law was without precedent.
“The rental market should not be a question of success for one and misery for another; I have faith that this law gives the solutions needed to address a number of challenges and be part of a holistic strategy in housing”, he said.
Justice Minister Owen Bonnici meanwhile praised the legal reforms that are being introduced within this reform, saying that it was important that efficiency is being improved and that remedies would be given out in shorter times.
The new law applies to rental contracts which have a residential scope, and do not apply to social or touristic leases. Neither does it apply to contracts which were signed before 1995.
A mandatory duration of one year has been introduced so to provide stability to tenants, while fiscal incentives for landlords who rent their property for longer than the minimum period have also been introduced.
In the case of any case of a let, landlords remain free to fix their initial rent price, while each contract contains a minimum period that the tenant has to live in the rented property, a minimum notice period that the tenant has to give to the landlord if they intend to release themselves, and a minimum notice period that the landlord has to give to the tenant if they intend on not renewing the contract.
In the case of a yearlong rent, the price of the rent remains fixed for the duration of the contract. The landlord is bound to give a three-month notice period before expiration that the contract will not be renewed; otherwise the contract is automatically renewed for another year. The tenant meanwhile is obliged to stay in the property for the first two months of the contract before having the right to release themselves from the contract, while if the intention is to be released from the contract, the tenant must give the landlord a month’s notice.
For a two-year rent, the obligations essentially remain the same; however the tenant’s obligation to stay in the property increases to the first four months, and the tenant’s notice to the landlord in the case of a release from contract increases to two months. In the case of leases of three years or longer, the former obligation increases to six months, and the latter to three months.
In both cases, the landlord is free to increase the rent price during the contractual period, with the increase being pegged to the Property Price Index but, at the same time, not exceeding 5% per year.
Those renting property on two-year or three-or-more-year leases will also be eligible for tax credits which vary according to the size of the property.
Those renting out a single bedroom house for two years will be eligible for a tax credit of €200, while those renting such a property for three years or more will be eligible for a tax credit of €300. Those renting out a double bedroom property will receive €300 if they rent it out for two years and €400 if they rent it out for three years or more. The credit is at its highest for those renting out a property of three bedrooms or more; if the landlord rents out such a property for two years, they will receive €400 and if they rent it out for three years or more, they will receive €500.
The new Act does have a proviso for shorter contracts and seeks to regulate what are termed as ‘Room Rentals’ and ‘Short Lets’, both of which will have a duration of six months. This applies for foreign workers who are temporarily in the country for six months or less; students on short courses; foreign tenants who are not looking to establish long term residence in Malta; and Maltese tenants who need to rent an ordinary residence for a period less than six months.
In these cases, tenants are obliged to use the property for the first month and must give a seven-day notice to the landlord if they wish to be released from it. The contract, which is fixed at six months in length, is not renewable.
In all these cases, the reforms stipulate that it is compulsory to register the rental contract with the Housing Authority, along with a declaration of the deposit and a full inventory of the contents in the property and their condition.
The number of people residing in the property must be indicated to ARMS as well, while tenants are authorised to know their water and electricity consumption through the landlord as well. Where there is a lack of compliance on the part of the landlord, the tenant may recover additional expenses by deducting these expenses from their rent payment.
ARMS have also been instructed that in the case where residents are shown to be occupying and renting out a property, they cannot interrupt the provision of water and electricity.
The Housing Authority will also be given the Budget and resources to be able to employ Enforcement Officers who would be specifically engaged to regulate the housing market.
In the case that the rental contract is not registered, the tenant can inform the Housing Authority who will carry out their own independent investigation. If they find that the landlord is in breach of regulations, the Authority will give him or her the opportunity to confirm themselves with the law, but if the landlord still does not conform after that period of time, the Authority can open proceedings with the Rent Regulation Board which can stipulate an administrative fine of up to €10,000 to the landlord.
Furthermore, the Rent Regulation Board can also act in favour of the tenant in the case of breaches and impose that the property is rented to the tenant for a period of three years and for not more than 75% of its market value.
A new mechanism will also be created as part of this act, wherein a specialised panel within the Housing Authority will address comparatively minor claims which relate to deposits or maintenance and which do not exceed €5,000.
The panel will be composed of legal and technical experts, while claims should be submitted in writing along with all the necessary evidence. The panel can, if it deems fit, take a decision on the case in camera and without summoning either of the parties, although the decision remains appealable before the Court of Appeal. Such claims have to be decided within five working days from the last submission of evidence.
When it comes to evictions meanwhile, the law will be amended so that in a court case against a tenant, the magistrate can pronounce him or herself with regards to the eviction of the tenant at the first hearing irrespective of whether there are any other pending matters, including arrears.
The landlord also has the right to demand compensatory payment from the tenant in the case of over-holding, wherein the tenant would overstay their contract after its expiration.
The regulations will come into force on the first day of 2020, meaning that all new contracts signed after 1 January of that year have to be registered with the Housing Authority.
If a valid contract is ongoing and ends at some point during 2020, then it will be allowed to expire without the necessity of being registered, however for similar contracts which are invalid – in that they are not in writing or lack an essential condition – the rent will be considered a de-facto lease and the tenant will have the remedies mentioned earlier to fall back upon.
In the case of valid contracts that are currently ongoing and extend past 2020 and into 2021, the conditions of the new law will begin to apply as of 1 January 2021.