Hon. Notary Dr Tony Abela – Parliamentary Secretary in the OPM

Last Wednesday, during the last of the Prime Minister’s bi-weekly meetings with the general public, Dr Gonzi informed those present that within the next few weeks, various amendments to the present Rent Laws would be discussed and subsequently legislated upon. This is not an improvised moved in reaction to whatever Alternattiva Demokratika has been campaigning about, but the final phase of a long process which is now maturing after years of proposals, discussions and studies.

It is very easy to put all those living in or using rented property in a quandary by taking up the initial suggestions made by Alternattiva Demokratika of putting an end to the legal effects of all existing rent laws.

However, since then the initial suggestions made have been somewhat watered down. During this week members of the House of Representatives have received a letter from Dr Harry Vassallo encouraging them to present a Private Members Bill, enclosed with the letter, which would eliminate the right of inheritance of leases. Dr Vassallo invited the members of the house to suggest any other amendments that they deemed fit! This is a very superficial way of doing things that does not really address the problem and would only help one side to the detriment of the other.

This is no solution. Unfortunately, such suggestions only prove that much of what has been said was intended to attract the media and perhaps create an environment for discussion. But this is not what the country needs.

It is not easy to change, and far more difficult to decide. Addressing this problem, one has to look at both sides of the coin. Any decision, whichever way it is taken, will bring about disgruntlement among those who feel that they have been badly affected. Notwithstanding this, the Nationalist Government, after the positive steps already taken in 1995 when substantial amendments were made, will now re-address the problem, discuss it and decide.

Whether or not the changes will bring about a better environment, in which the general public will feel comfortable renting out properties still has to be seen, and only the test of time will give the final verdict.

This article today does not reflect Government policy, nor does it in any way wish to compromise anyone. Rather than just presenting the topic and flinging it into the discussion arena without suggesting positive solutions and suggestions, I believe that my personal opinion in the matter will hopefully make a positive contribution to a fair and equitable solution. I am not suggesting that what I propose is a final solution, but hopefully it is a step in the right direction.

Having practiced as a notary for a substantial number of years, as well as having been in the political arena for as many years, I have been faced with a multitude of rent-related situations. In most cases, there is no easy way out – as any decision will reflect negatively on one side or the other.

Prior to my analysis of the situation, I must formally declare that, together with my brothers, sisters and mother (as heirs of my father’s estate), I am co-owner of various properties which are in part subject to pre-1995 rent laws, and others which have been leased after that date. However, I must insist that there is no second agenda or ulterior motive behind what is written here. It is being written with the view that the solutions sought must be for the common good.

Government/private property

To begin with, one must differentiate between government-owned and privately-owned property. Everyone is aware of the legal advantages that the Government possesses in assessing and regulating the properties it rents out.

As to privately-owned properties – the situation is different. There are various legal regimes which curtail the owner’s right to repossess his property. In addition, there are rights given to the possessor, either by law or through the “good offices” of some government, which choses to hand over to it, at nominal prices, the possession by title of lease of other people’s property.

What has to be considered

One has to address:

• Rental of residences

• Commercial/industrial property

• Agricultural land

• Properties rented out by means of requisition orders for social purposes.

• Other property rented to the Government for its functions, housing purposes, departments, or the needs of other government-related authorities.

Requisitioned property

Years ago, the Nationalist Government took the necessary steps whereby it did not extend the validity of laws which enabled it to requisition properties from private individuals or companies and then allocate them by title of lease to third parties without the consent of the original owner. It was high time that people would not wake up one morning and suddenly find that their second or third property had suddenly become the “authorised residence” of Mr who-knows-what.

This law was originally brought into effect after the Second World War, when the Government of the day was in dire need of finding housing for the thousands who had lost their residence due to enemy action between 1939 and 1943. Those were exceptional years and there was, in fact, an emergency situation wherein the Government had to take the appropriate steps to provide social housing at an affordable annual cost to those whose lives had been devastated by the effects of the Winds of War.

This original concept eventually changed, with the raison d’être being one of affording social housing for those who could not afford it. Eventually, various governments addressed this social problem by building estates, flats and houses, and granting on emphyteusis plots for the building of residences. In the 1980s, the Labour Government went one step further by creating BDAs and granting, mostly to the “favoured”, plots at a price of Lm400, with the sole condition that they were to spend Lm400 in construction thereon – a hefty present for the boys.

The problems addressed by the Housing Department eventually passed on to the Housing Authority. It has to be said that thousands of applicants have had their requests satisfied, as many housing units have been built and leased out or sold to respective applicants at social prices.

However requisition laws were also abused. Usually, when one benefitted from a Housing Scheme property, the beneficiary would pass on his residence to the Housing Department and it would, in turn, be allocated to third parties – supposedly under the same conditions. However, at times, a property literally seized from the owner would then be allocated to some supporter who would suddenly find himself and his family comfortably living in another person’s property. This was the exception, but if it happened to you – it meant hardship.

The situation today is different. The Nationalist Government has taken steps to condition the length and breadth of its operative capability by renouncing such laws. However, there are still many who fear that a change of government could bring a change of heart and the that country could be faced with requisition orders being issued once again.

This ever-nagging fear would be allayed by a written, irrevocable commitment across the board by all the political parties that the right to legislate in favour of the requisition of property for rental purposes by Government is being renounced. The only exception would be in the case of a national calamity. So far, only the Nationalist Party guarantees this.

Property either rented or expropriated by Government

At times, the government rents property from third parties.

There are sites of bombed and collapsed properties which, after World War II, were taken over by the Government and developed into social housing – especially in the Cottonera and Valletta areas. Government never paid for this property but merely hands out an annual “recognition rent” which is nothing but a pittance in today’s world.

There are also other properties which had been rented to the government for a specific purpose and then eventually used for something totally different. While this would have given the owner the right to terminate the lease if the tenant had been an individual, it seems that this does not apply vis-à-vis the Government.

It is high time that where “recognition rent” has been payable for more than 25 years, the Government, at an agreed capitalisation rate of one per cent, should acquire title to the said sites by presidential order and pay out. I can assure you that the Lands Departments is inundated by the great number of “recognition rent” recipients who enquire and query their status. On top of this, hundreds of man hours are taken up addressing and administering the system. This would eventually also give the right to tenants in the rebuilt properties to acquire these properties – which are already being used as social housing – from Government. These tenants currently feel disadvantaged due to this lack of action.

As to properties rented out by government for use as offices or by departments, in those cases where the government no longer uses such a property for the purpose that was originally intended, the government should come to an agreement with the owners and purchase the property at a fair market price.

There are also thousands of properties which have been acquired by government through a presidential order. For one reason or another, the Government has not paid the owners for a substantial number of these properties. The reasons tend to vary. Sometimes it is because title has not been proved. In other cases the reason is that the price has not been agreed upon, but in many other cases the reason is that Government finances cannot afford immediate payment.

The solutions are:

1) As was the case in the agreement with the Church Authorities, the Government should set up an on-going bond issue system whereby upon agreement regarding price and proof of title, once the presidential order has been issued, the former owners would be issued with bonds which would be redeemable or mature after 10 years and which would earn interest at the same rates given on government stock for similar lengths of time. There is no need for deeds to be published.

2) Government should take the appropriate steps to address this problem and issue a call for interested architects who are ready to carry out valuations. From such a list, for every expropriation three architects, drawn by lot, would be employed to establish the market price of the expropriated property within one month. In this way not only would the the present expropriations immediately settled, but the backlog would also be addressed.

3) Since such owners have, in most cases, been subjected to a forced sale of property which they would have rather kept, such expropriations should be exempt from the payment of capital gains tax. At present, such cases are episodes wherein we tend to say “sopra corne bastonate” (“adding insult to injury”). A person is forced to sell a property and is then taxed on that sale. People prefer to hold on to their property rather then be forced to sell it to the Government.

4) In the case of land which has been expropriated by Government for social housing and for which the owners have not been compensated or determined, the relative compensation should be deposited under curatorship and the property should be transferred to the actual occupants under the appropriate housing schemes.

Agricultural land (qbiela)

Various properties are leased out as agricultural land from private owners or Government – mostly at nominal prices.

I am in total agreement that farmers who earn their living from agriculture should be protected in their tenure. However, the present payments in monetary terms verge on the ridiculous and should be increased to reflect the increase in both wages and inflation over the years.

Lands tenants should not be able to hand over the lease to third parties, neither should they have the right to change the scope for which the land in question was leased.

In this regard, the transfer of leases should be allowed only in favour of heirs or children living and residing in Malta, on condition that on the date of such a transfer, the annual rental payment increases by comparing the minimum wage at the time of the granting of the lease with that on the date of the transfer of the lease. Thereafter, the amount should be revised every four years along the same lines.

During the 1998-2003 Government, the administration initiated a scheme whereby all those working government land by title of tenancy could apply to be recognised, even if their present title was not in order. The Lands Department has carried out substantial sterling work in this regard, but a final push is needed to conclude the matter. This scheme should be looked into immediately and should be finalised, possibly within the next six months.

In those cases where there are no problems, agreements should be signed and payments brought up to date. In the case of contested applications, or those deemed to be problematic, an ad hoc panel should be set up to address these cases with a sense of equity rather than a lot of regulations which would stall and perpetuate these outstanding cases.

As to the future, where it results that other people, and not the recognised tenants, work the land – the present tenancy should lapse immediately.

Commercial premises

Where rental agreements were drawn up after 1995, the time period binding the tenancy agreement is in accordance with that indicated therein. However, as far as rentals prior to that date are concerned, many owners are in a situation where the tenant has in his possession for the running of his business property “practically in perpetuity” and all the owners can do is realise that, not withstanding the expiry date of such a lease, they have no way of regaining possession of their property.

To add insult to injury, when there is no written agreement stating otherwise, for pre-1995 agreements, the tenant may sublet or turn over the property to third parties and gain thousands of liri without the owner having a right to at least participate in such a gain.

What can be done? A lot!

All this can be done without disrupting the economic flow and without creating an environment which would negatively affect business. However, redress is immediately needed to put owners in the right perspective.

I suggest:

1) All leases dated after 1995, upon which a written agreement has been signed, are to be thereby regulated without exception.

2) As to leases prior to 1995, where in most cases there is no formal rental agreement other than a rent receipt book, amendments should comprise and include:

• Unless otherwise specified in writing in some agreement, the tenants of such properties should not be allowed to sub-let or grant by contract of operation the said property except to their children and in such cases only for the lifetime of the present tenant.

• As to the present payable rent, a new principle should be included that the rent is to be revised in such a way that in the year 2006 it either triples or else increases in such a way that one reviews the present rent on a minimum wage comparison basis between the date of the drawing up of the agreement and today, but limited to a maximum triple of that payable today.

• Thereafter, every three years the rent is to be revised on the same basis.

• The present lease duration is to terminate within three years of the demise of the present tenant and his/her spouse, unless an agreement is reached in writing with the heirs. Such an agreement will be regulated by the 1995 amendments to rental laws.

• In the case of property leased prior to 1995 to limited liability companies or en nom collettif societies, where the owner is not the Government, the lease will terminate within 25 years of 1 January 2006.

Rental of residential premises

This is the most difficult part.

On the one hand, and first of all, one has to respect the basic principle that every person is entitled to have a decent residence and a roof over his head. On the other hand, there are owners who, for the last 30 years or more, have owned property which is leased out for a nominal amount.

Over the years, they have paid succession duty on this property once or more as it has passed from one generation to another. Even worse, they receive a pittance in rent and are held responsible for structural defects which are due to occur, irrespective of due care and diligence, as a result of the passage of time.

One has to consider the fact that a family may own property which it wishes to pass on to one of the children and because this was leased so many years ago, there is no way that they may do this. They will have to fork out substantial thousands of liri and even take out loans for that member of the family to buy a place for his/her residence.

In its administration of state property, the Government periodically reviews the rent payable.

What are the solutions?

Rather than an open and closed case, these are compromise suggestions which should be acceptable:

1) If the political parties really believe in creating an atmosphere wherein private leasing will increase, they are to sign an irrevocable declaration that, provided there is not a national emergency of an extraordinary nature, they renounce the re-introduction of laws relative to the requisitioning of properties for residential purposes.

2) As to existing requisition orders – as long as the owner accepts the present tenant and lease – even though imposed on him by the Housing Department – such a requisition order is to be withdrawn and revoked within one week of the lodging of such an application by the owner, as long as this is accompanied by a letter of acceptance by the tenant, who must be guaranteed that the present lease cannot be terminated during his or his spouse’s lifetime.

3) All leases dated after 1995, upon which a written agreement has been signed, are to be thereby regulated, without exception.

4) As to other residential leases prior to 1995, during 2006 the present payable rent should be revised with a maximum 100 per cent increase in the rent payable to date, or by revision of the present rent payment comparing this to the increase in the minimum wage from the date of the original lease to that of today, limiting such an increase to double that which is payable today.

5) Thereafter, the rent is to be revised on the same basis every three years.

6) The present lease duration is to terminate within five years of the demise of the present tenant and his/her spouse, if they have children living with them at time of death of the survivor. If not, then the date of termination of lease and the handover of keys is to be three months from the date of the demise of the tenant and his /her spouse, unless an agreement is reached in writing with the heirs. Such an agreement will be regulated by the 1995 amendments to rental laws.

The above suggestions may not be what one side or the other would wish. However, I believe it presents the basis for compromise which is not to be determined by any type of referendum but by commonsense and the norms that govern equitable justice.I understand that the Government will make a decision in the near future. They will not, as some have done, just push the country into a frenzy which is causing sleepless nights on both sides of the fence.

Hopefully one and all will appreciate the decisions which will eventually be taken.