The Malta Independent 8 December 2019, Sunday

Rent reform: regulating a jungle

Thursday, 18 July 2019, 11:17 Last update: about 6 months ago

Once again, the huge construction industry in our country is in the news: the rent reform bill is at present being discussed in Parliament and the two parties have voted in principle in its favour.

In the face of a construction boom and rapidly inflating rental market, the government has announced a comprehensive reform to the private rental market.

Prime Minister Joseph Muscat pointed out that the reform was essential in the face of a rental market that was slowly becoming "a jungle where everyone can do what they want".

Kurt Scerri, a lawyer who drafted the legislation, was quoted as saying the law seeks to introduce stability and predictability through several initiatives, namely a minimum contract length and notice periods, registered formal contracts and legal and fiscal incentives.

Mandatory registration for all private rental properties will be introduced in a bid to reduce the black market that pervades the industry. The register, which will also be online and be placed on a blockchain, will be overseen by the Housing Authority.  The landlord will now have to submit the contractual agreement, the inventory of the entire property, and the deposit paid.

Should it fail to meet the necessary criteria, it will not be registered.

In a bid to bring on those who failed to follow any regulations, an amnesty 'transitory' period will be introduced. The law itself will come into force on 1 January 2020, giving landlords ample time to familiarise and begin using the system.

Should a landlord fail to register a property, he will be subject to a penal fine ranging from €2,500 to €10,000.  A tenant will now also be able to go to the Housing Authority should they be concerned over the contract's registration.

An independent Housing Authority investigation can be launched, while the case may also be referred to the courts. The Housing Authority will also be able to take the case before the Rent Regulation Board on behalf of the tenant and demand an imposition of three-year leases at 75% of the property's market value.

This will hopefully stop black market practices.

The planned reform seeks to incentivise long-term rentals for landlords directly. As it stands, the reform will introduce a mandatory one-year minimum contract for long lets, with the fiscal incentives applying for those who provide a two-year and a three-year-or-more agreement.

The rates, which are annual incentives, are as follows:

One bedroom: €200 for two years, €300 for three or more years

Two bedrooms: €300 for two years, €400 for three or more years

Three bedrooms: €400 for two years, €500 for three or more years

While the initial rate will remain up to the landlord's discretion, they will remain bound to provide their tenants with at least three months' notice should they wish to evict them, or face seeing the contract automatically extended by the same duration.

For example, if the property is under a three-year contract, and the landlord fails to provide the three-month notice, the contract will extend for another three years.

Meanwhile, the tenant will be subject to a mandatory minimum period of rental (for one year - two months, for two years - four months, for three years - six months) and will also provide a notice period should they wish to vacate the property before the termination of the contract (for one year, one month, for two years - two months, for three years - three months).

Short let contracts, which will be set at a six-month maximum duration, can only be provided to non-resident workers, non-resident students, and non-residents who are seeking to establish a long term residence.

No fiscal incentives will be available, while the tenant would have to provide a minimum seven-day notice.

The law itself does not cover the holiday rental market and tourism rentals such as Airbnb, which will be included in a separate bill that will be regulated by the Malta Tourism Authority.

A new adjudicating panel for private residential rentals will be created through the reform.  Composed of legal and technical experts, the panel will be able to hear claims relating to deposits or maintenance fees that amount to up to €5,000.

The claims can be submitted in writing and will be decided by the panel there and then unless it deems it necessary to summon specific individuals. Should this be the case, the claim will be resolved within five working days from the last submission of evidence.

The landlord will now be duty bound to provide tenants with access to the billing account, with the tenant now able to recover additional expenses and deduct them from the rent payment.

ARMS will also be no longer allowed to interrupt the provision of water and electricity where residents are shown to be living.

The court will now be given the power to announce an eviction on its first hearing, removing the long delays landlords sometimes have to go through to get their property back.

The landlord will also have the right to demand compensation for any additional months the tenant might stay beyond the contract.

As we said, the bill is being discussed in Parliament so we do not know the final outcome. However, if preliminarily, some points need to be made:

-       The 'jungle ' came about because people - officials and politicians - did not do their duty. It is thus very unfair that a transitory amnesty will be given.

-       The registration of rents is very much related to the payment of taxes and the easiest way of tax evasion. This has again become rampant in our society and must be tackled at root and comprehensively. 

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