This case concerned a lease agreement drawn up in 1990. It was agreed that the lease would initially be for six months and renewable to five years automatically, should the defendant so desire. The agreement was that for the first six months, the rent was Lm1 per day. This would then increase to Lm6 per day from 1 January 1991 until 30 June 1991, and to Lm7 per day from 1 July 1991 until 31 December 1995. It was also agreed that as from 1 January 1996, the rent of Lm7 per day would increase by three per cent per annum. The agreement actually stated: “the amount of rent shall be increased by three per cent (3%) on that previously obtaining”.

This rent had to be paid three months in advance. The total amount of rent due from January to June 1996 was Lm1,315.82.

The defendant refused to pay this sum due to the plaintiff company. He also failed to take out an insurance policy, as had been agreed.

The plaintiff company requested the Court to condemn the defendant to pay this amount with interest and to take out an insurance policy, as agreed.

The defendant rejected all these pleas, claiming them to be unfounded both in fact and in law. He also claimed that this Court was not competent to deal with this issue and said that the issue fell within the competence of the Rent Regulation Board.

This case had already been dealt with by the Civil Court in 2001. However, the Court of Appeal had annulled the findings of the Civil Court on 25 September 2006, because the Civil Court had completely disregarded the plea of incompetence of the Court.

The Court hence felt that the most essential thing was to examine the contract carefully because, as stated in Article 992(1) of the Civil Code, “Contracts legally entered into shall have the force of law for the contracting parties.”

It was clear that from the beginning, the parties wished to lay down clearly the rate at which the property was to be rented out.

As from 1 January 1996, the defendant expected that the Reletting of Urban Property (Regulation) Ordinance, Chapter 69 of the Laws of Malta, should have applied and not the agreement between the parties. Reference was made to Article 3 of this Ordinance which states: “ It shall not be lawful for the lessor of any premises, at the expiration of the period of tenancy (whether such period be conventional, legal, customary or consequential on the provisions of this Ordinance), to refuse the renewal of the lease or to raise the rent or impose new conditions for the renewal of the lease without the permission of the Board.”

The plaintiff company rejected this plea, stating that it was not increasing the rate of the rent but merely abiding by the agreement that had been drawn up between them.

Reference was made by the Court to the judgement Farrugia et nomine vs Bugeja (1997) which also involved a plea of incompetence of the Court on the basis of facts which closely resembled the facts discussed in this case. The First Hall Civil Court, in this quoted judgement, decided to the effect that it had jurisdiction to decide the case in relation to the original lease agreement.

The Court also referred to Carmelo Stivala vs Ratan Mohnani (1999) which stated that the special law laid down in Article 3 of Chapter 69 did not preclude parties from agreeing on the terms of lease beforehand and such terms should be respected, even if it was a case of tacit renewal under Article 1536 of the Civil Code.

In the case Debrincat vs Borg nomine (1985), the Court stated that, in relation to the lease of commercial premises, the increase in the rent did not require the permission of the Board, since the lessee could have renounced to the effects of Chapter 69 and agreed otherwise with the lessor.

Taking the above judgements into consideration, the Court felt that the proper and true interpretation of such showed that in cases relating to the increase in rent of commercial premises, the competent organ remained the ordinary Courts and not the Rent Regulation Board.

The Court stated that such reasoning was based on the fact that, as explained above, the Courts have consistently held that in cases regarding the letting of commercial premises, reference did not have to be made to the Rent Regulation Board for authorisation for an increase in the rate of rent if such an increase had already been dealt with by the parties – as the Law states in Article 992 (1) of the Civil Code, a contract inter partes (between parties) has the force of law between the parties. The parties in this case had agreed on the manner in which the rent was to increase and the rate at which it was to increase. Such agreement revealed the intentions of the parties clearly.

The Court concluded by stating that, once the agreement was in conformity with the law, it was a valid lease agreement drawn up in accordance with the intentions of the parties and hence, as stated by the Civil Code, had the force of Law between the parties. This therefore made the Civil Court the competent Court. The Court therefore stated that, for the above reasons, the defendant could not refuse to pay the rent as agreed upon at an increased rate and ordered the payment of the same sum.

This judgement may be subject to an appeal.