Private residential leases act enacted

The much debated residential lease bill has finally been passed by Parliament through Act XXVIII of 2019. The Private Residential Leases Act addresses current housing realities and aims to protect tenants from abusive practices, low standards, and unpredictable evictions as has been recently reported.

The Act applies to ‘private residential leases’ which include long and short private residential leases, and the letting of shared residential spaces entered into after 1 January 2020. The Act shall apply also to leases for residential purposes entered into before 1 January 2020, which would still be in force in January 2021, either in their original or renewed period.

However, it will not apply to tenements leased before 1995, nor to government tenements, or to tenements leased for tourism purposes. Neither shall the Act apply to those tenements which are not let for a primary residential purpose; save for those tenements in Malta occupied by residents of Gozo for employment or education purposes and vice versa, which for the purposes of this Act shall be deemed primary residences.

Any tenement covered by this Act must necessarily be fit for habitation.

‘long leases’ – private residential lease is to be of a minimum 1 year period

A long private residential lease is a lease negotiated for a period of 1 year or more. This is to secure tenants and ensure they have a primary residence for a fixed time. By default, any lease entered into for a lesser period is considered to have been agreed for 1 year.

A long lease does not terminate ipso jure, as the lessor needs to send a registered letter at least 3 months in advance. In cases of dispute, the lessor is only bound to show that the letter was sent in time to the correct address. Absence of such letter automatically renews the lease for 1 year.

The lessee cannot withdraw before six months if the lease is for a period of less than 2 years, 9 months if the lease is more than 2 years but less than 3 years, and 12 months if the lease is for an agreed period of 3 years or more.

If the lessee withdraws from the lease before the period fixed by law, the lessor can keep the one-month deposit given by the lessee by way of security. This does would not bar the lessor from suing the lessee on other grounds.

‘short leases’ – six-month leases for certain tenants

Catering for specific tenants, the law provides an exception to the 1 year rule by recognising short private residential leases. The tenants have to necessarily be non-resident workers or students who need to lease for six months, or else non-residents who need a tenement for that time, provided that they are not seeking to establish their long residence in Malta. It also applies to residents who need an alternative primary residence for six months. Such lease agreements must have attached documentation identifying the specific category within which the tenant falls under. In the absence of such document, the lease shall be considered a long private residential lease, and thus with a minimum duration of 1 year.

The lessee cannot withdraw from a short residential lease before the lapse of 1 month. Such lease terminates ipso jure and cannot be extended.

Unregistered leases are null and void

Both long and short private residential leases must now be registered with the Housing Authority within 10 days of the commencement of the lease. The lessee may proceed to register the lease himself if the lessor does not do so. The lease agreement must mention the tenement to be leased, its agreed use, the period for which that tenement shall be let, whether such lease may be extended and in what manner, any amount deposited as a security, and an inventory of the tenement. If the lease lacks any one of these requisites, the lease cannot be registered, and is null and void. This notwithstanding, the lessor may still be subject to enforcement as explained below.

The Housing Authority can issue enforcement notices if it appears that the lessor has not registered the lease, and even where the lease does not satisfy the mandatory requirements listed above. In these instances the Authority may order the lessor to either register the lease, or to force on him a 1-year lease with a rent fixed at 75% of the rental value of the tenement. If the lessor fails to abide by this, the Authority may proceed in front of the Board asking it to bind the lessor to a 3-year lease at a rent not exceeding 75% of the rental value.

Lessors who failing to register such lease, or to provide a ‘fit for habitation’ tenant, or to abide by the provisions of the Act, shall also be guilty of an offence and shall be liable to a fine ranging from € 2,500 to €10,000.

Forbidden clauses

A private residential lease cannot contain the following clauses:

  • clauses providing for automatic termination other than non-fulfilment of lessee’s obligations (no clause that automatically terminates lease if lessee is in default of payment),
  • clauses which authorise lessor to reduce, without equivalent consideration, any benefits stipulated in the contract,
  • clauses that exempt lessor from any of the responsibilities to which he is bound by law
  • clauses which impose the payment of additional considerations other than the rent, the deposit, the insurance on contents and contributions in accordance with Condominium Act,
  • clauses which impose on lessee any additional consideration for the use of the movables, beyond the payment of rent for use of dwelling,
  • clauses which stipulate the payment of a fixed amount, separate from rent, for the consumption of water/electricity/other utility service if such amount does not reflect the actual consumption of such utility services by the lessee calculated at the rate reflecting the primary residential use of the tenement and the total number of occupants residing therein,
  • clauses which limit the use which one is expected to make of a residence.

No control over rent

Lessors are not limited to the amount of rent that they charge. The general rule is that the lessor is entitled to the advanced payment of 1 month’s rent. Rent can only be revised if there is agreement beforehand, provided that any rental increase may not exceed 5% every year.

Remedy for landlords in default of payment

The Act endorses the remedy made available to the landlord in terms of article 1570 of the Civil Code. Therefore where the lessee of a private residential lease fails to pay rentthe lessor must send a judicial letter, and if after 15 days from notification the lessee still fails to pay, then the lessor shall be entitled to terminate the lease.

It shall therefore no longer be permissible for a lessor to automatically terminate the lease without first calling upon the lessee to pay his rent.

Letting of shared residential space

Defined as the letting of any separate space in a flat or building, and including shared amenities such as kitchen and bathroom facilities, these leases are also limited to a period of 6 months. Similar to the short residential leases, they terminate ipso jure and cannot be renewed. The lessee can withdraw at any time, provided he gives 1 weeks notice.

As with long and short private leases, shared residential spaces must be registered and must comply with the provisions of this act.

Habitation standards to be introduced

The Authority shall also have the power to introduce and enforce minimum standards of habitability for private residential leases as well as shared residential spaces. It may, in the case of share residential spaces cap the number of persons that can occupy the tenement at once if there is more than 1 household.

Housing authority needs court approval to enter households

The draft bill had introduced the right of the Housing Authority to enter private tenements, at all reasonable times to examine the tenement or demand information from the lessee. However, following heavy criticism, this right is now subject to a warrant issued by a magistrate.

Eviction is punishable up to €4,000

Forcefully evicting tenants from their primary residence is now punishable by law, and the landlord shall be subject to a fine ranging from €1,500 to €4,000. The same punishment applies if there is unpermitted entry, removal of furniture or personal belongings from the property, and the suspension or interruption of water and electricity services.

However, such protection is not extended to tenants letting a shared residential space.

Adjudicating panel

The Act sets up an adjudicating panel with exclusive jurisdiction to decide disputes relating to registered private residential leases in so far as the claim does not exceed the value of €5000. Other disputes such as those demanding the termination of a lease shall remain the  competence of the Rent Regulation Board.

For further information on Property Law, do not hesitate to contact Dr. Simon Galea Testaferrata or any other member of IURIS Advocates.