Landlords receive close to €1M in compensation for violation of their right to property

In a recent judgement concerning a property leased as a club to the Labour Party under old protective rent laws, a Maltese Court declared the lease to have infringed the landlords’ proprietary rights when they were made to endure a long, indefinite open-ended lease at a nominal rent against their will, consequently declaring the relevant laws no longer applicable to the lease, and furthermore awarding compensation for such breach. This was the outcome of the lawsuit in the names Patricia Ellul Sullivan et vs. Avukat tal-Istat et, decided recently by the First Hall, Civil Court (Constitutional Jurisdiction). Apart from a declaration that their proprietary rights have been infringed, the owners had sought an adequate remedy for such violation, requesting the Court to grant those remedies it deems fit. More specifically, they demanded compensation and damages, including both pecuniary and non-pecuniary damages.

Breach of Fundamental Rights – Full Restitution

The landlords’ request for damages was made on the basis of article 41 of the European Convention on Human Rights, which essentially warrants full compensation to whosoever suffers a breach of his fundamental rights and freedoms. Yet the court observed that this article was never incorporated into Maltese law, quoting local case-law in support (Maria Stella sive Estelle Azzopardi et vs. Avukat Generali et). The Court therefore rejected the plaintiff’s complaint on the basis of said provision. However, the Court was quick to note that this notwithstanding, the plaintiffs were nevertheless entitled to adequate compensation for the violation sustained. It maintained that “Ma hemm l-ebda dubju pero’ li la darba hemm sejbin ta’ ksur tad-dritt fundamentali tar-rikorrenti, huma ghandhom jinghataw rimedju xieraq ghall-vjolazzjoni tad-drittijiet fundamentali taghhom, inkluz danni pekunjarji u non-pekunjarji”.

Termination of security of tenure and low rent

Part of the remedy granted by the Court consisted in plugging the source of the violation, namely rendering the laws in question no longer applicable. Indeed, it would be absurd if the provisions violating one’s constitutional rights were left to apply. The Court therefore declared that the tenants may no longer benefit from the protection afforded to them by the relevant provisions of Chapter 69, this being the law which guaranteed the tenant security of tenure and an unrealistically low rent.

Constitutional Remedies – Damages vs. Compensation

In addition to this, as indicated above, the Court also awarded compensation. It began by pointing out, again quoting various judgements on the matter, that the compensation awarded ought not to replace civil damages, insisting that such compensation is awarded purely to make good for the violation sustained (“ir-rimedju li taghti din il-Qorti huwa kumpens ghall-ksur tad-dritt fundamentali u mhux danni civili ghall-opportunita’ mitlufa”). In this regard the Court cited Zammit vs. Avukat tal-Istat et which in turn quoted from Herbert Brincat et vs. Avukat Generali et, which maintained that constitutional compensation is different to and does not amount to civil damages. It was held that while the Constitutional Court may in its discretion grant any adequate remedy (which may include monetary and non-monetary damages), the monetary compensation granted in constitutional claims such as these is limited and awarded for the mere declaration of the violation. It is not equivalent to and is not intended to compensate for civil damages. This effectively means that following such an award, there remains the possibility for one to seek (in a different forum) civil damages for the losses sustained.

Computation of compensation awarded

Prior to calculating the compensation, the Court declared that it shall not limit its consideration to the discrepancy between the actual rent paid, and the rental value of the property on the free market as established by the court appointed expert. Therefore, while the Court stressed the difference between compensation and civil damages, and that the compensation is not to be awarded to make good for the losses suffered as a result of such violation, it nevertheless did take into account the losses sustained. In fact, it listed amongst the criteria to determine the amount of compensation, the discrepancy between the actual rent received by the owners and the rental return they could have received on the open market (had their property not been shackled by this lease).

As for the factors determining the compensation, the Court cited Benjamin Testa et vs. L-Awtorita tad-Djar et which referred to criteria listed in Cauchi vs. Malta delivered by the European Court of Human Rights (ECHR). These included the estimates of the rental value, the legitimate purpose of the restriction suffered, ‘bearing in mind the legitimate objectives in the public interest’, and the rent already received. Moreover, in its judgement the ECHR established a percentage value to some of these factors. Thus, for example it assumed the possibility of the property not being rented freely on the open market for the entire time, thereby allocating a 20% deduction from the losses sustained. Similarly, it held that in view of the general interest a further 30% ought to be deducted.

The Court applied this methodology and set, as a basis for calculating the compensation, the overall damages sustained, namely the rents lost throughout the duration of the lease, based on the rental value of the property on the open market, amounting to a total of over €1.8M. It then applied a 30% deduction in view of the ‘general interest’, and a further 20% deduction to cater for a potential lack of rental, and finally deducted the rents actually received throughout the lease, leaving a balance of €978,462.00 in monetary damages. On top of that it also awarded a further €15,000 in non-pecuniary damages.

This judgement gives an example of how the effective the Constitutional Courts can be in meting out justice to aggrieved property owners.  For more information on the matter contact Dr. Simon Galea Testaferrata or any other member of Iuris Advocates.