The Maltese Government has recently published a white paper intended to lead to the reform of the law governing agricultural leases. In recent years the number of lawsuits filed by owners of farmland against famers leasing such land has increased, ever since the Maltese Constitutional Court declared that such laws are in violation of the landlord’s right to property. This has led to the eviction of farmers from the land they leased, and the consequent increase in value of rural land, given the ever-increasing demand for some space and countryside tranquility. It is feared that this further endangers the agricultural sector, already at risk due to various other factors, and has in turn led to further property speculation in ODZ (outside development zone) areas and abuse of the countryside.
The declared scope of the published white paper is:
“to regulate the agricultural land market in the public interest in a legitimate and proportionate manner so as to make it fair to all parties, reduce speculation, protect rural areas and above all support farming in the focus of its importance in the food supply. Several control measures in the field of agricultural land acquisition and ownership are being proposed. Some of these measures bring about changes in pre-existing mechanisms, while others, such as those directed towards the control of the price of the lease of agricultural land, are being introduced for the first time.”
A public consultation exercise has just been launched and Iuris Advocates has contributed by putting forwarded the following observations and recommendations.
Root cause of recent upheaval over farmland & Maltese countryside
At the heart of the current turmoil is the Agricultural Leases (Reletting) Act (Chapter 199, Laws of Malta). As was the case with urban properties, be they under a residential lease or a commercial lease, Maltese agricultural rent laws have been and remain pro-tenant. Farmers holding fields on agricultural leases enjoy protection in more ways than one – they enjoy security of tenure and very low rents. Such protection has come to the detriment of landowners’ rights. While noting the importance of safeguarding the agriculture sector, (for more reasons than one), one must not lose sight of the primary, indeed sole, reason that has led to this situation – namely the hardship sustained for decades by the owners of agricultural lands that are subjected to protected leases. It is no secret that the current law breaches such landowners’ rights. It is plain for all to see that until this is amended, lawsuits will continue to be instituted, and won, to the detriment of the tenants, the Government, and indeed of the public in general (since compensation is paid from public coffers). Hence the importance of reviewing the law effectively by eliminating all its abusive provisions to put an end to the violations sustained by property owners, replacing them instead with others that safeguard their right to property by, inter alia, ensuring the recovery of the property by the owner and/or his enjoyment of the property, guaranteeing a fair return, and compensating for past grievances. Short of that, these lawsuits are expected to continue.
Iuris’ recommendations for review of agricultural rent laws
- It was proposed that the annual rent must be increased, and if need be subsidized by the Government. Agricultural rents may be increased in the same manner as in urban leases, where recent amendments introduced the possibility of increasing the rent to a maximum of 2% of the property value. While 2% is a lower return that what one ought to expect, this loss can and should be compensated for by fiscal incentives offered to owners, such as a blanket exemption from income tax on rent received from agricultural leases, as well as a stamp duty exemption (below).
- Furthermore, just as the Housing Authority may step in to assist the tenant to pay the revised rent in residential leases, here too the Government should also assist tenant farmers by contributing to the revised rent.
- Moreover, where tenants benefit from other funding or assistance in relation to the agricultural activity carried out on the land, or are allowed improvements on the land, a rent increase is warranted.
- The vast majority of owners have inherited these properties, and thereby paid 5% stamp duty on the value thereof upon the causa mortis This duty by far exceeds any return which such landowners may ever receive while their land remains subject to such leases. The remedy to this should be twofold :
- Those who paid such stamp duty and whose land is still subject to an agricultural lease as a result of the current law, ought to be compensated. Similarly, those who paid such stamp duty and have not received an equivalent sum in rent, even if the lease has since been terminated, ought to be compensated. Current owners who paid such stamp duty should be refunded the sum paid in stamp duty.
- Causa mortis transfers of leased agricultural land should from now on be exempt from any stamp duty or other tax.
Removal of automatic acquisition of tenancy rights by family members
- One of the main grievances suffered by owners is caused by the automatic acquisition of the lease which the current law affords to family members of tenants. This has given rise to much abuse, and should be removed. Besides, if the aim of this review is to be partially achieved by capping the duration of the lease and limiting protection to genuine farmers, there will no longer remain any scope in granting protection to family members.
- Where a farmer passes away the lease should terminate unless his heir/s are themselves full-time farmers who are willing to carry on the lease. Only in such an event should the lease be allowed to continue for the remainder of the agreed duration.
Capping of lease duration
- The White Paper proposes a minimum of 8 years and a maximum of 16 years. This would be reasonable provided the other recommendations are adopted.
Limiting protection to purely agricultural reasons
- Protection should be allowed only for agricultural purposes. Therefore,
- only leases of land that is continuously used for agricultural purposes by full-time farmers ought to be protected.
- land that is merely sown for fodder should not be protected since this is not an agricultural purpose. It is no secret that tenants cling on to such leases by merely sowing the land in this way, doing nothing until harvest-time, and on top of that enjoying grants. Such land is to be released to the owner.
- where the leased land includes parts that have not been utilized over the past year, will not be utilized, or which cannot be utilized, either because they are inaccessible, rocky, garigue, dangerous etc, these must be released to the owner.
Distinction Amongst Farmers
- The White Paper talks of making distinctions amongst farmers. Reference to hobby famers in particular is worrying as it will no doubt lead to abuse. Regardless of whether one is long established or starting off, protection ought to be afforded only to full-time farmers.
Right to Property
- While there is nothing wrong in allowing tenants a right of first refusal, this should be offered only to those full-time farmers who are, and have been truly using the land for purely agricultural purposes.
- The right to ownership remains paramount, and thus safeguards must be in place to ensure that such a right of first refusal does not limit or hamper this right, nor cause any duress on owners to sell.
- For the same reason the proposal of a “Tax on agricultural land that requires to be cultivated and which is not being used for agricultural purposes” is abhorrent and should be scrapped.
No Need for Authority
- There is no need for the creation of yet another Authority. All the shortcomings that have led to the current situation would be properly addressed with the introduction of the above proposals, while retaining the current administrative and judicial set-up. After all, most of the purposes listed as a basis for the establishment of this Authority are already adequately catered for by other offices/institutions/authorities.
For further information, do not hesitate to contact Dr. Simon Galea Testaferrata or any other member of IURIS Advocates.