Housing (Decontrol) Ordinance (Amendment) Act, 2018
Act XXVII of 2018 entitled Housing (Decontrol) Ordinance (Amendment) Act, 2018 has recently been enacted introducing amendments to the Housing (Decontrol) Ordinance (Chapter 158). The amendments concern residential leases, precisely dwelling houses occupied by Maltese citizens as their ordinary residence under title of lease created by a previous title of emphyteusis which had commenced prior to 1995. As with recent amendments such as those concerning sub-leases of commercial properties, this enactment does little to improve the burden carried by owners of controlled properties over the years. While they may appear to better their chances at obtaining more favourable lease conditions, these amendments actually set them back in more ways than one.
Limitation of rental increases in residential properties
Owners of residential properties may now seek permission to revise the rent by applying to the Rent Regulation Board. Any increase in rent so approved will however be capped since the new provision limits such an increase to 2% of the open market value of the property. The Board may therefore authorise an increase but only up to 2% of “the open market freehold value of the dwelling house on the 1st January of the year during which the application is filed”. The approved increase may still be less than 2%, as will be explained below. Maltese residential rentals currently bring a return of 4-5%. This amendment will deny landlords the benefits they would otherwise reap from the open market, all in the name of social housing.
Means Test on Tenants – increase in rent based on lessee’s means
Before approving such a rental increase the Board must conduct a means test on the occupant in accordance with the Continuation of Tenancies (Means Testing Criteria) Regulations. Such a test is to be based on the income of the tenant between the 1st January and the 31st December of the year preceding the year the application is filed, and on the capital of the tenant on the 31st December of such preceding year.
Where the tenant does not meet these criteria, the Board shall not approve an increase as mentioned above. Instead it shall authorise a slight increase in rent equivalent to double the rent payable at the time. In so doing the Board shall also allow tenant to stay on for a maximum of 5 years, at the end of which he shall vacate the property. On the other hand where the tenant meets the means test criteria the Board shall approve an increase. This increase cannot exceed 2% of the open market value of the property, and may still be less than that. In establishing the rental increase the Board shall consider the age and means of the tenant. It may order a gradual increase of the rent, and may even order an interim increase while the case is pending. The rent so increased shall remain fixed for a period of 6 years (unless the lease is terminated beforehand, or the parties agree otherwise), and thereafter the owner may again demand an increase in the same manner.
Change in Lease conditions
The same law affords a landlord the possibility of seeking a revision of the lease conditions in the event of a material change in circumstances during the continuance of the lease. If such changes cause a disproportionate burden on him, the owner may proceed before the Rent Regulation Board asking it to establish new conditions aimed at removing or alleviating such added burden, and/or possibly compensating him for it.
Dissolution of lease and eviction from property
Termination of lease where no social purpose remains
These social housing amendments also provide the landlord the opportunity to seek the termination of the lease if he can furnish “unequivocal evidence that the tenant is not a person in need of social protection provided for by articles 5, 12, or 12A and by this article”. Where the Housing Authority or the landlord himself offers suitable alternative accommodation, and guarantees such occupancy for at least 10 years at a controlled and low rent under the criteria of the Housing Decontrol Act in force prior to this amendment, the tenant shall not be deemed in need of social protection any longer. Such a request cannot be made while an application for rental increase is pending or within 3 years from a decision on the subject.
Court eviction orders placed in suspended animation
Perhaps the most significant and controversial provision of this amendment lies in sub-article 11 which states that “The provisions of this article shall also apply in all cases where any emphyteusis, sub-emphyteusis or tenancy in respect of a dwelling house regulated under articles 5, 12, or 12A has lapsed due to a court judgment based on the lack of proportionality between the value of the property and the amount receivable by the landlord and the person who was the emphyteuta or the sub-emphyteuta or the tenant still occupies the house as his ordinary residence on the 10th April 2018. In such cases it shall not be lawful for the owner to proceed to request the eviction of the occupier without first availing himself of the provisions of this article.“. With this amendment tenants who were ordered to vacate by a court judgement, and possibly remained in occupation in defiance of such a ruling, have been guaranteed further security of tenure. Despite having obtaining an eviction order, an owner now cannot enforce such order, and shall instead be forced to accept the tenant once again. He is now made to go through the whole motions set out in this amendment before he may attempt to enforce such an eviction order. As explained above this amendment introduces various provisions ranging from rental increases, to changes in lease conditions, to the actual dissolution of the lease. It is yet to be seen what the legislator meant by the words “without first availing himself of the provisions of this article”. It is ironic enough that the owner, having already obtained an eviction order, must take further action before enforcing such a ruling. Yet it would be very absurd indeed if he is made to seek an increase in rent before he can enforce the eviction judgement.
Discrimination between tenants
The newly introduced sub-article 11 will not only be resented by property owners but may also prove unwelcome to tenants. As things now stand, tenants who were previously evicted yet remained in possession of their rented property have been placed in an advantageous position when compared to other tenants, such as tenants who were ordered to vacate and actually complied. Those tenants cannot avail themselves of the extended security of tenure that has now been granted to tenants who instead remained in occupation of their rented property.