In its judgement on the 8 January, delivered in the names of Marissa Maria Van Den Berg vs Maarten Haegdorens and Marilena Haegdorens and Fleur Muscat in her own name and on behalf of RE/MAX Alliance Pender, the Court of Appeal (Inferior Jurisdiction), presided over by Judge Anthony Ellul held, inter alia, that the Rent Regulation Board lacks both jurisdiction and competence to decide on claims involving individuals/entities that are not party to a lease contract and to matters involving brokerage fees.
On the 25th September 2017 the plaintiff (Lessee) filed an application to the Rent Regulation Board highlighting that she had entered into a lease agreement with the defendants (Lessors), Maarten and Marilena Haegdorens to lease an apartment in Sliema. The lease agreement stipulated that the property was leased to the plaintiff for the duration of one year and one day with effect from the 7th July 2017. Furthermore the plaintiff paid Maarten and Marilena Haegdorens, €900 as a ‘guarantee deposit’, €900 as the first month’s rent and €398.25 as ‘brokerage fees’ to Fleur Muscat as the real estate agent.
The plaintiff further held that she was assured that the property in question was clean and habitable, however upon moving into the property, she found that the shaft was replete with drainage and mould which was emitting an unbearable odour. As a consequence of such unsanitary conditions, she vacated the premises after two days.
Subsequently the plaintiff brought the following claims in front of the Rent Regulation Board: (i) the rescission of the lease agreement; (ii) to order the defendants to refund the total sum of €1800 paid in regards to the ‘guarantee deposit’ and the first month’s rent paid in advance; (iii) and to order the defendant Fleur Muscat to refund the sum of €398.24 paid as ‘brokerage fees’.
Maarteen and Marilena Haegdorens filed their reply on the 13th November 2017 with regards to the merits of the case. With their reply they also filed a counter-claim requesting the Rent Regulation Board to: (i) condemn the plaintiff to pay €9,900 to the defendants as the rent remaining for eleven months; (ii) to liquidate costs and damages borne by them as a consequence of the breach of contract by the plaintiff and (iii) to order the plaintiff to pay such amount liquidated.
Fleur Muscat filed her reply on the 19th December 2017 containing the following two preliminary pleas: (i) the Rent Regulation Board does not have the jurisdiction to decide claims involving third parties who are neither the Lessor nor the Lessee; and (ii) that her role was simply that of a real estate agent whose purpose was that of introducing the Lessor to the Lessee and the ‘brokerage fees’ in question are distinct from the lease agreement and hence the Rent Regulation Board lacks competence (rationae materiae) to decide the claims involving such ‘agency fees’.
The Rent Regulation Board delivered its preliminary judgement on the 16th July 2018, where it upheld the respondents’ pleas, citing that Fleur Muscat is correct in opining that the board’s jurisdiction is exclusively limited to issues which arise in relation to rent between the landlord, lessee and/or sub-lessee, depending on the context of the case. The board further held that, the defendant signed the contract of lease, solely because it was her role to do so, and that no obligations arose in relation to any of the other parties.
The board further held that, it would not decide on any issues relating to the ‘brokerage fees’ as this fell within the competence of the ordinary Courts, or in this case due to the amount involved, the Small Claims Tribunal.
One the basis of the above, the board upheld the first and secondary preliminary please raised by Fleur Muscat, declaring that it does not have jurisdiction to decide on claims involving parties that are external to the lease agreement and that it lacked competence to decide on the plaintiffs claim with regards to the ‘brokerage fees’ paid to Fleur Muscat.
Subsequently, the plaintiff lodged an appeal on the basis that the decision of the Rent Regulation Board is incorrect in stating that its jurisdiction is limited to cases involving lease agreements between the landlord, the lessee and/or sub-lessees. The argument brought on appeal is based on Article 1525 of the Civil Code as amended by Act X of 2009 which states that all matters related to the contracts of lease fall under the exclusive jurisdiction of the Rent Regulation Board and in her appeal she consequently held that the claim for the refund of the ‘brokerage fees’ from a third person who signed the same lease agreement as the lessor and lessee should be considered as a ‘related matter’.
The appeal further held that the Rent Regulation Board made limitations to the same law which gives it exclusive jurisdiction in all matters related to leases. The appeal further notes that the scope the amendments brought about by Act X of 2009 were purposely introduced in order for disputes arising from the same lease agreement would not be fragmented into separate proceedings in front of different adjudicating bodies.
Article 1525 of the Civil Code: ‘.... The Rent Regulation Board, shall have exclusive competence to decide all matters relating to contracts of lease of urban property and of residence and of commercial tenements. Other leases fall under the competence of the courts of civil jurisdiction....’.
The Court of Appeal, in deciding the above appeals case, held that, according the Article 1525 of the Civil Code, the Rent Regulation Board has ‘exclusive competence’ to decide on all matters relating to contracts of lease. It further held that, Fleur Muscat, signed the contract of lease in question, presumably due to the clause in the lease contract where it is stated that the lessor and the lessee are each agreeing to pay a non-refundable ‘agent’s fee’ to RE/MAX Malta, ‘being half the first month’s rental (+ 18% VAT) or 10% (+ 18% VAT) of the value of the total stay if less than 6 months’.
The Court further held that, notwithstanding the signature on the contract of lease relating to the above payment of the brokerage fee, the lease agreement is one between the Lessor and the Lessee as they are the only parties having rights and obligations arising out of the lease agreement. The Court held that the ‘exclusive competence’ as found within Article 1525 of the Civil Code, is in fact limited to matters concerning the lessor-lessee relationship, with issues relating to third parties not falling within the jurisdiction of the Rent Regulation Board.
In providing its reasoning, the Court of Appeal held that, the lease agreement makes it amply clear that the lease agreement was ‘entered into between on one part, Maarten Haegdorens and Marilena Haegdorens...hereinafter referred to as the LESSORS; and on the other part, Marissa Maria Van den Berg....hereinafter referred to as the LESSEE’.
Based on the above, the Court of Appeal concluded that the Rent Regulation Board has no jurisdiction to decide on the Plaintiff’s third request in regards to the refund of the sum of €398.24 paid as agency fees.
For this reasons it rejected the appeal whilst ordering the appellant paying all the costs.
Dr Neil Bezzina is an Advocate at GANADO Advocates.